The Importance of Forward operations planning in negotiations

As a "Tenant Rep" broker working throughout the United States for various major firms, I have learned the importance of my Client's facility approval and planning process in strengthening the negotiating position for property acquisitions. Many of us know of the delays and paperwork required under Sarbannes Oxley but what I am talking about is the need for forward planning and agreement within the Client/Company prior to launching a property search. Client/Companies need to know precisely what space and specs are needed, and have the necessary financial and operational approval of the industrial requirement prior to entering the market. We are not talking about a rigid, "set in concrete" type approval but an approval and agreement that is in place so that once the property search is started, there will be no delays in finishing the deal. This is important because any approval delay or reconsideration can be costly in terms of losing leverage and concessions from future landlords and developers.



When there is a delay, the strength of the tenant's negotiating position is weakened significantly. The broker is left trying to explain the delay and this causes two problems. First, the potential landlord realizes during the delay that the Client has selected the property under negotiation. The longer the delay, without action or change, the more the potential landlord realizes he is in the driver seat and there is little risk from another property. Second, any tenant delay allows the potential landlord to declare other firms with interest in the property. The tenant loses negotiating position because of the potential loss of the property due to other interested parties. The tenant cannot realistically negotiate further concessions, and is forced to move forward to secure the property.



The broker's job in my opinion is the set up alternative properties for consideration by the client. The purpose of this is to "build" a competitive environment for the client's leasing business. This competitive environment is to be maintained throughout the process. Tenant delays during the property search can and will "kill" this business process and cause a higher occupancy cost to the tenant.



Rodger M. West, SIOR, BCCR, SLCR

June 4, 2007