For many healthcare tenants, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While a doctor focuses on proper patient care, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
As explained in our new book, Negotiating Commercial Leases & Renewals FOR DUMMIES, tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for a doctor as the amount of rent he pays will directly affect the practice’s financial bottom line.
Whether you are leasing a new location for the first time or negotiating a lease renewal for your practice, these are some money-saving tips for healthcare tenants:
Negotiate the Lease Terms Collectively: In other words, don’t agree to the rental rate until you’ve negotiated the tenant allowance and don’t agree to the term (lease length) until you’ve negotiated the Use clause. All lease terms are interconnected and you should be negotiating with the best collective deal in mind.
Leverage the Lease Term into Incentives: Since most lease deals are negotiated through commercial brokers or commissioned leasing agents, the lease term (or length) is a big negotiating chip for the tenant (as, typically, the agent’s bonus paid by the landlord will increase based on tenants signing longer lease terms). Even if you want a five-year lease, start negotiating for three years. Since the agent’s commission is generally five percent of the tenant’s base rent calculated on the first five years of tenancy, you can now control his paycheck. After the first or second round of negotiations, you may be able to leverage a lower rental rate, more free rent, and other incentives by “agreeing” to take a five-year lease term instead of three. It should be noted that most agents will get paid a 2% commission of years 6 – 10 and sometimes on lease renewals as well.
Don’t Telegraph Your Plans: A good football quarterback can take the snap, fake the pass, and then hand the ball off to his running back, thereby not telegraphing his intentions. As a healthcare tenant, try not to speak in terms such as “when I move in … I would like the carpet replaced … this area would make for an excellent waiting room for my patients” and so on. These are called buying signals and they always serve to weaken your bargaining position. Don’t let what you say and the words you choose work against you.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail request to JeffGrandfield@TheLeaseCoach.com.
Jeff Grandfield and Dale Willerton – The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.