Negotiators today best advised to do homework, know market - Kansas City Business Journal:

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Both the and the predict the economic downturn in commercialk real estate markets may lastinto 2010. “The commerciak mortgage-backed securities market is allbut frozen, makiny it very difficult to roll-over existing debt that is cominyg due,” says Lawrence Yun, NAR’s chief John Blumer, a commercial real estate consultanf and member of the , says commercial property, just like is driven by supply and demand. He believess builders didn’t overbuild causing the currentsoft rather, demand is just weaker. “Ths economy has simply caused vacancy rates to go he says. “Businesses aren’t doing as well and can’t afford their leases.
” Since business has slowed, many tenantsa have contacted landlords to ask for a varietuof concessions, says Richards Buxbaum, a commercial broker with Bakerf Katz in Houston. “A struggling tenant might reasonably expect the landlordx to make short term adjustmentsin rent, but a landlord shouldn’t be expected to make long term concessions,” he “If a landlord provides some type of rent reliet to its tenant, then the landlord will likely request something in return.
” A term making its way into the vocabularh of the industry today is “mosrt favored-nation provision,” a clause incorporated into leases that requiresz a potential tenant to receive no less favorablw treatment than any current or future tenan with regard to a specifif lease or terms. “If the landlors charges less rent or makes other concessionds in order to attract new tenanta or to maintainold tenants, then the same concessions shouldf be granted to the potential explains attorney Brett Slobin of Slobihn & Slobin PC.
“Landlords will likely be very much against the idea ofa ‘mostr favored-nation’ provision, but if the real estated market continues its negative trending, such provisions may becomew more in vogue.” The current state of commercial real many say, makes any negotiations in today’s market that much more important. Greg Schenk, a member of the SIOR who teachesnegotiation skills, said the first step is to have a “A lot of executives don’t — and it can kill a company’xs bottom line,” Schenk says. “Youh have to know where the companyhas been, wherse it is now and where it wants to go.
” He addede a plan usually focuses on one of four scenarios: A leasd renewal — which he said is the case about 70 percent of the time a new lease, a purchase or putting up a new Negotiations typically include a landlord, a broker, a tenant and representativer for the tenant. “And each principal may hire an plus you have toconsidedr lenders; they often like to see the leasess or they’ll have lease forms they like to Blumer says. Schenk also recommends a certifiedpublif accountant, a good commercial insurance agent and finally a good space planner and architecg to ensure the company gets the spacwe needed.
Blumer and Schenk warned of landminea in negotiations that can blowup “Some go in trying to win at the expense of opponente and end up losing all Blumer said. “The key point of a negotiation is a businessa arrangement and the tenantsx are at the table because they want to operatew theirbusiness profitably. If after six monthw they can’t do that becaus e of unfair terms, that doesn’t help Schenk added that another mistake is failingh to planearly enough. “We like 18 monthsx to two years with most of our he says.
“There’s a lot to Rental rates, operating expenses, concessions available like free moving allowances, over standard tenant improvement tax credits, etc.”