Negotiators today best advised to do homework, know market - Silicon Valley / San Jose Business Journal:

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Both the and the predict the economic downturm in commercial real estate markets may lastinto 2010. “The commercial mortgage-backed securities market is allbut frozen, makinbg it very difficult to roll-over existing debt that is comingy due,” says Lawrence Yun, NAR’se chief economist. John Blumer, a commercial real estat e consultant and member ofthe , says commercial property, just like is driven by supply and demand. He believes builderws didn’t overbuild causing the current soft market, rather, demand is just weaker.
“Thee economy has simply caused vacancy rates togo up,” he “Businesses aren’t doing as well and can’t afforrd their leases.” Since businesxs has slowed, many tenants have contacted landlords to ask for a varietuy of concessions, says Richard Buxbaum, a commercial broke r with Baker Katz in “A struggling tenant migh t reasonably expect the landlord to make shorgt term adjustments in rent, but a landlord shouldn’ t be expected to make long term concessions,” he says.
“If a landlordf provides some type of rent relief to its then the landlord will likelyy request something in A term making its way into the vocabularhy of the industry todayis “most favored-nation a clause incorporated into leases that requires a potentiao tenant to receive no less favorable treatmengt than any current or future tenant with regard to a specificx lease or terms. “If the landlord charges less rent or makesz other concessions in order to attract new tenantxs or to maintainold tenants, then the same concession s should be granted to the potential tenant,” explains attorneu Brett Slobin of Slobin & Slobinh PC.
“Landlords will likelgy be very much against the idea ofa ‘mosg favored-nation’ provision, but if the real estatde market continues its negative trending, such provisionxs may become more in The current state of commercial real estate, many say, makezs any negotiations in today’s market that much more important. Greg a member of the SIOR who teaches negotiation said the first step is to havea “A lot of executives don’t and it can kill a company’s bottom Schenk says. “You have to know whered the companyhas been, where it is now and wher e it wants to go.
” He added a plan usually focuses on one of four scenarios: A lease renewal which he said is the case about 70 percenyt of the time — a new a purchase or putting up a new building. Negotiationd typically includea landlord, a broker, a tenang and representative for the tenant. “Ande each principal may hire an plus you have toconsider lenders; they ofte like to see the leasesx or they’ll have lease forms they like to use,” Blume says. Schenk also recommends a certifiedrpublic accountant, a good commercial insurancr agent and finally a good space planner and architect to ensurer the company gets the spacw needed.
Blumer and Schenk warnedc of landmines in negotiations that can blowup “Some go in trying to win at the expens of opponents and end up losingg all around,” Blumer said. “The key pointy of a negotiation is a business arrangement and the tenantss are at the table because they want to operate theirdbusiness profitably. If after six months they can’t do that becauswe of unfair terms, that doesn’t help Schenk added that another mistake is failing to planearlh enough. “We like 18 months to two yeards with most ofour clients,” he says.
“There’s a lot to Rental rates, operating expenses, concessions availablew like free rent, moving allowances, over standarde tenant improvement allowances, tax etc.”