Negotiating Amenities in CRE Leases: How Do You Do It?

As a seasoned commercial real estate professional with over 18 years of experience representing tenants and landlords, I’ve negotiated countless office and retail leases. And in all those deals, the conversation inevitably turns to one critical area – amenities. While amenities are often treated as optional perks, I’ve learned they can provide huge strategic value for tenants. In this article, I’ll provide an insider’s perspective on expert negotiation tactics to achieve favorable amenity concessions from landlords.

Key Takeaways

• Amenities are more than perks – they can provide strategic value by attracting top talent, enabling operations, and supporting business continuity.
• Conduct thorough research into market comps and assess business needs to identify must-have amenities.
• Perform cost-benefit analyses to negotiate optimal concessions like free rent and tenant improvement (TI) allowances.

The Art of Negotiating Amenities: An Expert Guide for CRE Tenants

The Strategic Value of Amenities

Too often, tenants just look at amenities as nice-to-haves. But in reality, high-quality amenities directly enable and enhance business operations.

For example, reliable high-speed Internet keeps e-commerce stores humming. Onsite power generators ensure continuity during outages. Ergonomic furniture boosts employee health and productivity. Electric vehicle charging stations support corporate sustainability initiatives. And so on.

Beyond direct operations, amenities also provide competitive differentiation in attracting top talent. In-office gyms, game rooms, massage therapy, and free snacks/meals have become commonplace at tech company campuses.

Tenants essentially gain leverage to negotiate favorable rental rates by agreeing to longer lease terms. Landlords in turn may offer more generous amenities to secure these stable tenants.

It’s a strategic win-win when properly structured.

Researching Local Market Conditions

The first step is gathering critical data points through tenant brokers to build a custom market analysis.

Relevant details include:

• Average rental rates per square foot
• Typical concessions like months of free rent
• Lists of standard and premium amenities across buildings
• Comps for similar spaces and deals recently signed

Online sites like LoopNet, CoStar, and Zillow provide some visibility. However, the best data requires tapping specialized commercial listing services and a broker’s internal comparables database.

This market intelligence arms tenants with benchmarks to assess deal quality. You gain visibility into prevailing standards to anchor expectations.

Assessing Your Business Needs

With market context established, next conduct an objective needs assessment.

• What is current and projected headcount growth? How might amenity needs shift over time as a result?
• What types of positions and teams will occupy the space? Tech engineers may require advanced AV equipment, programmers want multiple monitors, and executives need private offices. White-collar desk workers have very different needs than manufacturing warehouse staff as well.
• Which amenities enable business-critical applications? Are reliable electrical backups or high-capacity freight elevators must-haves?
• What employee wellness amenities like gyms or mother’s rooms provide recruiting and retention advantages? How about EV charging stations or bike storage for green commuters?

Distill the list down into need-to-have amenities versus nice-to-haves.

Cost-Benefit Analysis

Armed with your prioritized wish list, conduct an objective cost-benefit analysis on top amenity items.

Crunch the numbers on associated costs over the full lease term – don’t just look at monthly rents in isolation. Carefully account for:

• Base rents: Square footage multiplied by $ per foot
• Operating expenses: Prorated share of taxes, insurance, maintenance, and other fees
• Capital costs: Potential investments into space build-outs, cabling, furniture and equipment
• Management costs: Ongoing repairs, utility bills, and administration

Next tally projected savings or revenue gains from those amenities over time against expenses.

High-speed Internet may carry a premium but also unlocks e-commerce revenue. Daylight factory spaces improve output but add HVAC complexity. On-site daycare, while pricey to equip, delivers immense workforce productivity dividends.

Crunch the numbers to quantify total value over both short and long-term horizons. This analysis clarifies which amenities warrant negotiating focus.

Negotiation Tactics for Favorable Terms

Now we get to the actual negotiations.

I typically negotiate amenities in two major areas – concessions and lease clauses.

Concessions refer to various incentives the landlord offers that provide financial value, including:

• Free rent – 1-3 months typically
• Cash allowances – for space improvements
• Moving stipends – offsets relocation expenses
• Discounted parking – for prime spaces

Lease clauses cover guarantees around amenity delivery and accountability:

• Exclusivity clauses – restricting competitor business types
• Co-tenancy clauses – guarantee occupancy rates to support amenities
• Performance clauses – SLAs (service level agreements) around amenities like uptime guarantees for elevators. Penalties kick in for underperformance

Get creative leveraging these mechanisms to secure amenities aligned with business needs.

For example, negotiate discounted parking in exchange for marketing the property in corporate real estate blogs. Structure free rent alongside space improvement allowances to minimize capital outlays. Prioritize concessions around the most pressing pain points.

Timing Your Negotiation Strategy

Master negotiators also carefully orchestrate the cadence of concessions sought throughout the deal cycle.

Generally, I advise clients to float reasonable asks upfront around must-have amenities critical for approval. Think core asks like janitorial services and adequate electrical capacity. Start anchoring expectations here.

Next, proceed through successive rounds steadily increasing requests after building rapport and trust with the landlord representatives. Introduce bigger asks like months of free rent later once emotional equity strengthens in the relationships.

Save optional items like discounted parking as bargaining chips until the final stretch. Throwing everything out initially leaves minimal leverage for the home stretch when outstanding deal points often require creativity.

Alternative Deal Sweeteners

Sometimes landlords simply cannot accommodate all amenity requests – properties face hard constraints around age or design for example.

In these scenarios, shift discussions towards alternative concessions. Explore creative deal sweeteners like:

• Rent discounts or abatements
• Accelerated free rent periods
• Landlord TI (tenant improvement) allowances
• Moving stipends
• Graduated rental structures

The overarching goal is aligning amenities to genuine business requirements. Various pathways exist to achieve those ends through flexibility and partnerships grounded in trust.

Ensuring Ongoing Accountability

Too often leases overlook accountability once the documents get signed. Make sure to avoid this downfall.

Agree upfront with the landlord on clear mechanisms that continue enforcing amenity delivery such as:

• Regular walkthroughs and amenity audits
• Anonymous tenant surveys to surface issues
• Reporting procedures for complaints
• SLA violation penalties – free parking credits for recurring elevator failures for example

Ongoing coordination ensures tenants receive promised value without defection risks if areas degrade later. Both sides must uphold leases as living documents centered around win-win partnerships with ongoing dialogue, transparency, and accountability.

FAQs

What tradeoffs can tenants propose if landlords won’t budget on asking rent?

Consider concessions like accelerated free rent, moving allowances or post-occupancy TI funding in exchange for locking in higher rents longer-term. Landlords securing lease extensions often reciprocate with amenities as value offsets.

Should tenants push for amenities upfront or later during renewals?

Anchor must-haves like sufficient power early. Nice-to-haves like lounges offer later negotiation leverage to win extensions. Landlords lacking available concessions on initial terms often bend easier on subsequent rounds.

When’s the best time during negotiations to play your strongest cards around deal-breaking amenities?

Float core business requirements early to anchor expectations. Next slowly layer on bigger asks over successive rounds to test limits after building rapport and trust. Save optional bargaining chips for the final stretch when creativity becomes essential.

How can a real estate broker assist in the lease negotiation process?

A real estate broker specializing in commercial leases can provide valuable market insights, negotiate on your behalf, help draft lease agreements, and ensure you secure the best deal possible.

What are some common types of commercial lease agreements?

Common types of commercial lease agreements include gross leases, net leases, percentage leases, triple net leases, and modified gross leases – each with its own terms and conditions for rent payments and property maintenance responsibilities.

Why is it important to renegotiate a lease when necessary?

Renegotiating a lease can be beneficial when addressing changes in business needs, market conditions, or property requirements, allowing you to secure a more favorable lease agreement or address any existing lease challenges.

Conclusion

Amenities represent much more than mere perks in commercial leases – they provide strategic advantages that directly advance business goals while delivering recruiting, retention, and operational gains.

Assess target markets, solidify space needs, run cost-benefit analyses, get creative with terms, sequence negotiations carefully, and ensure accountability. Through meticulous preparation and savvy negotiating grounded in partnerships, tenants can achieve optimal CRE amenities supporting enduring success in commercial leases.

To further discuss your unique situation, schedule a consultation with me directly to craft a customized amenity negotiation strategy tailored to your distinct objectives. With over 18 years of tenant representation experience, I’m confident we can collaborate to structure a deal actualizing your real estate ambitions.