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How to Negotiate With a Tough Landlord

Published: 08-29-24 Category: Leasing/Renting

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If you'll soon be looking for commercial real estate (CRE) space to rent—whether it's office, retail, warehouse, or industrial—you're probably already aware of some of the potential challenges ahead…like dealing with landlords.

However, it's difficult to predict if you'll end up negotiating your lease rates with a landlord who's simply inflexible or downright tough.

With the right approach and preparation, you can negotiate your lease terms so that it's a win-win for the both of you.

Here, we'll walk you through five practical strategies for making the best out of a difficult situation while reducing everyone's stress.

The first one is as important as the following four: looking closely at the landlord's situation and priorities.

#1 – Research the Landlord

After arranging to view commercial space, the first steps you should take include researching the property's rental history, especially during the last four years. This can provide you valuable insight as to the landlord's situation.

It may be contributing to the landlord's stress levels if it's less than ideal. This, in turn, may be causing the landlord to appear initially unfriendly to potential tenants.

Use online resources, network with other tenants, or consult with a commercial real estate broker to gather this information.

Your research should include:

Vacancy Rates. Researching the history of the landlord and the properties managed can give you leverage. If vacancy rates are rising, this may be used as leverage for negotiating favorable terms since the landlord may be under pressure to put new tenants under contract.
Recent Lease Contracts. If possible, find out about recent leases signed in the building or similar properties owned by the landlord. This information can provide you with a preview of a landlord's priorities.
Market Trends. Research the local commercial real estate market by talking to CRE agents and brokers and searching for data online. Knowledge of current trends may strengthen your position during negotiations.

Next, let's discuss how you can identify your prospective landlord's priorities.

#2 – Identify the Landlord's Priorities

Understanding what matters most to the landlord can help you tailor your approach.

This enables you to be the type of tenant they like…if it suits your overall goals, of course.

Consider the following three topics and be ready to talk about them with a potential landlord.

Financial Stability. Most landlords prioritize tenants with strong financial backgrounds. If this is your strength, be sure to locate documents that prove this.
Lease Length. Some landlords prefer long-term leases for stability. Others may value flexibility, especially if there are future plans to remodel the building or apply for a change in zoning.
Property Improvements. If the landlord plans to upgrade or renovate the property, your willingness to support these improvements would be welcome.

Read More: How to Renegotiate a Commercial Lease

Next, we'll consider how doing research ahead of time can result in a better lease deal.

#3 – Prepare Strong Counter-Offers Backed by Data

When dealing with a tough landlord, it's crucial to back up your requests with solid data:

Comparable Rents. Research rent pricing per square foot for similar properties in the area. Be sure to check if pricing includes taxes and other costs that may be passed on to tenants. Present this data when discussing rent rates.
Market Trends. Use the information you've located regarding local market trends to support your position when negotiating rent pricing, especially items that landlords often pass on to tenants.
Impressive Business Projections. If appropriate, share business growth data that proves your potential as a long-term, stable tenant. Be sure to condense these to present them to a landlord as a compact, easily understood document.

Up next, we'll discuss prioritizing the marathon over the spring.

#4 – Focus on Building a Long-Term Relationship

Even if you eventually realize that your landlord won't win any Miss Congeniality contests, it's important to approach your negotiations with a long-term perspective.

Emphasize Mutual Benefits. Frame your requests in terms of how they may benefit both parties. For example, your business growth could result in more potential tenants and leasing for the landlord and property owner in the years ahead.
Be Professional and Respectful. Keep calm, and don't lose your temper, even if negotiations become tense. This can help build trust and respect.
Propose Win-Win Solutions. Look for compromises that address both your needs and the landlord's concerns.

Now you're ready to begin viewing commercial spaces…but there's one last thing to keep in mind.

#5 – Know When to Walk Away

While it's essential to be quietly persistent when discussing your rental, you must recognize when a deal isn't in your best interest.

You can do this easily by considering the following before meeting to discuss a lease:

Set Clear Limits. Before negotiations begin, determine your "walk away" points on key issues like rent, lease length, and essential clauses. Getting into a lease you can't afford can be potentially disastrous.
Consider the Total Package. Evaluate the entire lease offer, not just individual elements. A concession in one area might create an overall deal where you can allow a landlord to retain some original clauses.
Trust Your Instincts. If you feel the landlord isn't ready to listen to your suggestions or the relationship starts negatively, it might be best to be straightforward. If you're not getting anywhere, be ready to move on to another property.

Walking away is always better than committing to terms that could harm your business in the long run, even if this causes temporary delays in opening or moving.