Lease negotiations. How to bring rents down?
24 july 2019
Securing the most favourable financial terms in lease agreements depends on a combination of many factors such as available warehouse space, demand and development dynamics in individual regions, a tenant’s market position and bargaining power, and - last but not least - the lease length as the longer the lease, the better the financial conditions the tenant can get.
In addition to the above factors, making appropriate preparations for lease negotiations is another critical aspect. Cushman & Wakefield and our industrial team provide professional guidance to our clients and occupiers of logistics parks.
Drawing on their in-depth regional market expertise, our professionals help a tenant whose lease is nearing expiry to secure better lease terms in the current location and to explore relocation opportunities. In some cases, the warehouse space and location selected by a tenant five years earlier may no longer meet the tenant’s present requirements or fit in with its distribution chain growth strategy.
How to bring warehouse rents down?
As negotiations take time, it is advisable to begin working with an adviser two years before the existing lease is due to expire. The key to success is the adviser’s experience and knowledge. To navigate through the twists and turns of lease negotiations and achieve the desired goals, everyone should know what their duties are.
Based on a review of responses to a request for proposals, the adviser prepares a short list of developers whilst still working with the landlord of the tenant’s current warehouse.
A thorough apple-to-apple comparison will help identify standard and above-standard features of all facilities. This comparative knowledge will help negotiate a successful outcome and compare bidders’ proposals using precise criteria. Strong developer competition and activity still influence effective rental rates.
To retain or attract tenants, developers offer a wide range of concessions and financial incentives. This is exactly why it is worth making decisions to optimize costs and drive business forward when a lease expiry is in prospect. Collaboration with experienced experts and a carefully selected team of technical specialists and negotiators is undoubtedly a guarantee of successful negotiations – always.