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

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Both the and the predict the economic downturn in commercial real estate markets may lastinto 2010. “Thw commercial mortgage-backed securities market is allbut frozen, makingb it very difficult to roll-ovee existing debt that is comintg due,” says Lawrence Yun, NAR’s chief economist. John a commercial real estate consultant and member ofthe , says commerciakl property, just like residential, is driven by supplyy and demand.
He believes builders didn’t overbuild causing the currentgsoft market, rather, demand is just “The economy has simply caused vacanchy rates to go up,” he “Businesses aren’t doing as well and can’t afforfd their leases.” Since business has many tenants have contacted landlords to ask for a varietyh of concessions, says Richard Buxbaum, a commercial brokerr with Baker Katz in Houston. “A struggliny tenant might reasonably expect the landlord to make short term adjustmentsain rent, but a landlord shouldn’tt be expected to make long term he says.
“If a landlored provides some type of rent relief toits tenant, then the landlorf will likely request something in return.” A term makinbg its way into the vocabulary of the industry toda y is “most favored-nation provision,” a clause incorporated into leaseds that requires a potential tenant to receive no less favorable treatment than any curren t or future tenant with regarr to a specific lease or terms. “Ifc the landlord charges less rent or make s other concessions in order to attract new tenantds or to maintain old then the same concessions should be grantex to thepotential tenant,” explains attornet Brett Slobin of Slobin & Slobin PC.
“Landlordw will likely be very much against the idea ofa ‘most provision, but if the real estate market continues its negative trending, such provisions may become more in The current state of commercial real estate, many say, makes any negotiations in today’s markegt that much more Greg Schenk, a membe of the SIOR who teaches negotiation skills, said the firsg step is to have a plan. “A lot of executivew don’t — and it can kill a company’s bottonm line,” Schenk says. “You have to know where the companyyhas been, where it is now and where it wants to go.
” He added a plan usually focuses on one of four scenarios: A leasde renewal — which he said is the case abouft 70 percent of the time — a new a purchase or putting up a new Negotiations typically include a landlord, a a tenant and representative for the “And each principal may hire an attorney, plus you have to conside r lenders; they often like to see the leases or they’lp have lease forms they like to Blumer says.
Schenk also recommendas a certifiedpublic accountant, a good commercial insurancew agent and finally a good space planner and architect to ensur the company gets the space Blumer and Schenk warned of landmine in negotiations that can blow up “Some go in trying to win at the expense of opponents and end up losintg all around,” Blumer said. “The key poinft of a negotiation is a business arrangemenrt and the tenants are at the table becauses they want to operatee theirbusiness profitably.
If aftere six months they can’t do that because of unfai r terms, that doesn’t help Schenk added that another mistakw is failing to planearly “We like 18 months to two years with most of our he says. “There’s a lot to know: Rentao rates, operating expenses, concessions available like free rent, moving over standard tenant improvement allowances, tax etc.”