High vacancy rates make landlords nervous about losing their tenants. And that means an opportunity for businesses to renegotiate leases and cut their payments. But if you're going to approach your landlord about lowering your rent, there are strategies you can use to increase your chance of success. Here are some tips:
Start Early
All negotiations are about leverage. Obviously, whichever side has the upper hand has a better chance of getting what it wants. Landlords know it takes time for a business to shift to a new space, so they'll wait as long as possible before they approach you to discuss renewal.
Let's say you have a small apparel shop and you figure it would take six months for you to find another space that's suitable, come to terms with the landlord there, prepare that space, pack up, and move. Your current landlord can estimate your six-month move time and will wait until there are less than six months remaining on your current lease before approaching you about renegotiation.
So beat your landlord to the punch. Six months or a year before your lease is due to expire, send your landlord a request for proposal. Because you've given yourself plenty of time to find a new space and move, should it come to that, your landlord will know that your implied message -- you want a better deal -- is not an empty one. You'll have leverage.
Shop Around
Before you send a request for proposal to your current landlord, look around and find at least three other vacant spaces that would be a good fit for your business. Then, at the same time you send your request for proposal to your current landlord, also send requests for proposal to the landlords of those other spaces.
Your proposals to the other landlords should not be paper tigers. Take them seriously. Even if you really prefer to stay in your current space, your other proposals may become important if negotiations with your current landlord get ugly.
And don't keep your maneuvering secret. Tell the landlords that you're considering all of your options. Then all of them will know they're in competition for your business. Negotiate with all of them seriously until you sign on the dotted line of your new lease. And tell them that the first one to deliver a lease you like will get your business. This will move the process along more quickly.
Do Your Homework
If you own a small business, it's a near certainty you don't have a lot of spare hours on your hands. But spending some time on research could save you money in the long term. So before you approach your landlord about renegotiation, do some investigation and documentation.
How's the traffic in your area? You don't have to count it yourself. A lot of local business associations count foot and car traffic to measure the vitality of various districts. Ask your local association if it has any numbers on your location. If not, survey your neighbors. Ask for their assessment of traffic over the past year or so.
How's the vacancy rate in your area? No doubt you have a rough idea already. But before you negotiate with your landlord, you'll need details. Get a notepad and take a walk around your neighborhood and write down the number of vacant spaces, their addresses, and how long they've been empty. (Don't know for sure? Ask the businesses next door.)
How are rents in your area? If they're up, you may want to rethink your approach to negotiations with your landlord. But if they're down, that's good leverage for you.
How are your sales? Business owners don't like to discuss sales in detail, for many reasons. But if your sales are down and you're open about it with your landlord, depending on the overall vitality of your area, your landlord could very well work with you to keep you in your space.
By Tim Devaney and Tom Stein
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