How A Tenant Can Get Leverage In A Landlord's Market

It’s tough to be a commercial tenant in Los Angeles. In the 40 years I’ve been a commercial broker here, I’ve seen my clients face ever-increasing rents, and most leases are designed by landlords, for landlords. As just one example — recently most leases have changed the way space is measured, so that they charge tenants for your elevator shafts and stairwells, even lobbies.

But I have a few tips to reverse the leverage.

Negotiate with two or three potential sites at the same time.

What I mean by negotiate is really going past the proposal stage of back and forth and into the details. This will strengthen your hand when dealing with each one, and not leave you waiting for the one landlord to agree to the terms you need.

The only way to negotiate from a position of strength as a tenant is to be prepared. I tell my clients to have detailed space plans and a hard construction budget before they meet with the landlord. Often times my clients are more prepared than the landlord or their representatives.

Being prepared with detailed plans submitted to multiple potential sites is the best way to create the necessary leverage to maximize your negotiating strength at the table. Fortunately, in my experience, my clients want to go through a detailed process with me before we begin to speak with potential landlords.

Create flexibility in your lease during negotiations.

This too requires planning; really understanding who you are, where you are today and where you will be in your best estimate for the future.

One way to think about flexibility is the ability to expand or even contract your space needs in the lease terms. It is much better to have plans built into the lease at the beginning than to have to go hat in hand to your landlord when your needs change.

Another way to plan for future flexibility is to have a lease with rights to cancel or break clauses along the way. In this way you can preserve your long-term goals while allowing for the fact that there are some things we just can’t predict. Remember that by working on several potential deals at once you can give yourself the best chance to create a lease you can live with for now and the future.

Don’t follow current trends.

I have noticed a major change in the past few years in Los Angeles real estate which you can use to your advantage. Until recently, most of my clients wanted to be in a high rise with all the bells and whistles. But now I’m seeing much more demand for renovated old industrial buildings, with their large, open spaces, and the rents are reflecting that. Tenants are paying more to be in a retrofitted warehouse in an industrial district than in a downtown high rise.

It’s a massive shift, but it also means that those high rises that used to be considered the most desirable are struggling to keep tenants, which means that there are opportunities to be had to get in with better terms and rents than in the past. Do your research and maybe you will find a willing landlord who will work with you to give you far more than just a few years ago.

Jim Travers is founding principal of Travers Cresa.