Have you ever watched the reality show ‘Hardcore Pawn‘ on cable TV? It’s all about American Jewellery and Loan, “the biggest, baddest, pawn shop in Detroit’s Nine Mile”. People come in with their second-hand treasures and odd-ball possessions, and try to sell them to Les Gold and his staff.
Please bear with me. This is relevant.
After the handshaking, and a bit of dancing around the point, the seller says he wants $100 for his item.
Then Les hits the seller with the killer question: “How did you come up with that number?”
Invariably, the seller is stumped.
Once Les has kicked the seller’s feet out from under him, it’s all downhill from there. Soon, the seller has given up on $100 and finally settled for $10.
I always ask myself, “Why didn’t they come better prepared, and get $90?”
Commercial estate agents use exactly the same strategy when dealing with a prospective tenant who wants to rent a property and is trying to reduce the rent they are quoting. Like Les, they know that the member of the public they are dealing with doesn’t have the necessary information to support the rent figure they are asking for.
The situations are different, of course. Les is trying to knock a price down, while the estate agents are trying to keep a price up.
But exactly the same tried and trusted negotiating tactic applies – Kick the legs out from under the opposition.
So, back now to our world and your situation – trying to negotiate the lowest rent you can.
The landlords’ agents have quoted £50,000 per annum. You go back offering £48,000 per annum. You then run into the killer question: “How did you come up with that number?”
When you can’t provide any good answer to that question, the agents simply sticks to his number.
If I was acting for you, my answer to the “How did you come up with that number?” question would be something like this.
“I’ve measured the premises and they are not 2,000 ft² like you say in the brochure. I have re-measured, using the RICS Code of Measuring Practice, and the gross internal area is 1930 ft². Here are my calculations. You told me the rent is calculated at a rate of £20 per square foot. That’s appropriate, at most, for the window area. The darker awkward space at the back should be 75%. The basement should be charged at a much lower rate. You’ve also included the toilet which should not be ‘rentalised’ at all. I have checked with the commercial agents who let No. 22, which is very similar space, and it was rented three months ago at £17 per square foot for the prime area. And No. 54, which is arguably better space and closer to the Tube station, is on the market at £19 per square foot. The rent of these premises should actually be £46,000.”
That’s fictional of course. And sometimes, the landlords might genuinely quote a low rent – but human nature being what it is (and tenants’ access to information being what that is), landlords are much more likely to go for a high number. It can still be negotiated down – but only if you have the right information.
Smart and informed negotiation is always worth doing.
As a commercial property agents, I have a few advantages over someone who is coming to business rent negotiation for the first time.
- long experience of how rents are chosen, based on the space in question and all the other factors.
- access to information on lettings from all the other commercial agents – We operate like a secret society, sharing information, because we all need it for rent reviews. “You scratch my back, I scratch your back”, is the motto of our profession.
- familiarity with the correct methods of valuation for different areas of a property, and different zones of those areas.
If you instruct me before you start negotiating, I can take advantage of all the opportunities for reducing the asking rent which you might not be able to see. Remember that any advantage we obtain is multiplied by the length of the term, or at least until the next rent review.