While negotiations can be rather overwhelming and intimidating, if you want to get a good deal on your commercial property investment, you need to learn the ins and outs and prepare to develop your people skills and negotiating skills, below are some great tips on how to negotiate and keep things in your favor. Remember, when negotiating your commercial property, it's not you vs. them, it's more of a collaborative experience where both parties find win-win situations and compromise. 

You must be meticulous in your observations. Understand absolutely everything there is to know about the property you want, how the sellers operate, any facts and figures, and if you can, the owners themselves. Understand the market that you're in and find out historical data for the area that your property is in. A commercial real estate agent would do wonders in getting you this info, but you can find some of that information on the Internet. It would be also good to prepare to rebuttal some of their own points and observations and try and make a counter case for what they do, just to cover all your bases.

Even if you hire someone to handle negotiations for you, you might end up leaving money on the table, including the fact that you'll be paying someone to negotiate for you, which will definitely eat into your deal. Negotiating skills are skills that are applicable to a lot of areas of one's life and it's the perfect opportunity to work on your people skills and to learn how to listen intently, not take no for an answer, and be firm but fair in asking for what you want. 

If you do want to work with someone, you'll want someone who's just as motivated as you to get a good deal, and if you don't already have someone on your team who you know and respect, it might be better to go at it alone. A team works better in these situations since both know what exactly it is that they want and how they both operate. 

You'll want to have a specific, detailed game plan coming into this. Remember: 80% of the work is done before you step into that room. You'll want facts, figures, paperwork, everything set up. Powerpoints are probably too much, so don't over do it. However, know specifically how much you are willing to negotiate in terms of price and whatever terms you specifically want to settle for. How much wiggle room will you give yourself? What are some terms that aren't so important that you're willing to compromise with, and how can you frame that in a way that will possibly benefit the other party? Did you want to make changes in what you offered initially? 

Be as specific as you can and try and put a number value when you can (i.e. How much money you can save over the long run, etc.). You want to be upfront with them specifically on what you want. Are you willing to negotiate a lower price with a longer lease? What are some renewal options? Understand what they offer and if you want more, be sure to ask them if you can work something out with them. Some things to consider during negotiation include:

First, remember to leave your emotions at the door. Practice letting them finish before you speak and listen intently. A good thing to do is to paraphrase and clarify specifically it is what they said, just so you can really understand what it is they want. 

Be sure to always be encouraging, emphasizing, and accommodating regardless of the situation. Remember, it isn't supposed to be a you vs. me situation, you both want to get a good deal. When in doubt, take a step back, and if it gets extremely heated, ask for the opportunity to take a break to keep things cool in the room. Make it easier for them while standing your ground. 

As stated earlier, both parties are interested in getting the best deal, and it's important to understand that both sides will probably compromise. While you will know exactly what it is you want from doing your homework and research, it will be tough to know specifically what it is they want. You'll most likely have to think of multiple scenarios and have responses and compromises for specific situations, but even in that case it's still hard to anticipate what it is they want in a deal. 

You'll want to pay close attention to what it is exactly the seller wants and feel him or her out during negotiations. You can infer based on their agreement and see how you can give them what they want while still retaining what it is you want. If they end up being extremely closed off or they aren't exactly giving you much to work with, you can always ask politely what it is they are looking for in this agreement.

Ask what is permitted by law. Be sure to double check specifically what you can use your commercial property for and also ask if there are any zoning laws or regulations that could potentially affect or damage your business.

Its important to get every single expense and fee down on paper and accounted for. While most commercial landlords tag on various fees including upkeep, maintenance and Common Area Maintenance (CAM) fees, it's also important to check the rates for things like utilities, property tax, insurance, repairs, trash collection, etc. 

Ask which fees are covered and which ones the tenants need to pay. Ask specifically how the utility charges are measured(metered vs square footage) and also look if these fees are shown to the tenant or "hidden".

This can vary from landlord to landlord, and it's important to clarify who is responsible for what. Some landlords have the tenant responsible for any upkeep or repairs while other landlords can sometimes give only specific issues to be taken care of by the landlord (plumbing, air conditioning, etc.).

Be sure to read your lease and check if there is a specific dollar limit on the amount a potential tenant has to pay for repair and maintenance. An attorney will help you in terms of clarifying what your legal rights are. 

If you're thinking of upgrading or building out your commercial property, it would be best to understand specifically what improvements you can make. It's also important to understand who will be overseeing the work that you will be doing, who exactly will pay for it, and if for any reason that you move, will have to restore it back to its original condition.

Understanding your rights when it comes to subleasing is very important as it can help save you money in case you are expecting to grow your business in the long run and it also removes some liability in case you have to move out unexpectedly.

This is important to know because in the unfortunate event of getting closed down, most businesses are never even contacted, leaving them looking from the outside of what used to be their business. You should know specifically what the process is, as it helps protect both your interests and also your customers can understand. Is it an immediate lockout or will you have a few days prior? Will you be notified? Can you get more time in case you default? If you can't afford the whole thing can you pay just the month's rent? This is definitely worth looking into.

You can get a much cheaper price and more bargaining power if you plan to sign a longer lease. If your business does end up growing much faster than you expected and you have to move to a bigger space before your lease is expired, it would be best to get a short lease term with specific options to a cap on any future increases on rent and the option to renew your lease. This provides the most flexibility, especially if you do anticipate growth. 

Whatever questions or concerns you think you might have, remember them and write them down for the negotiation. It may be obvious, but you should never negotiate on strictly verbal terms. Get it in writing, and get the signature. Have an attorney look over the writing and if you offer a counter-offer, commercial property landlords would definitely want that in writing.

This might be obvious, but you should be as meticulous as you can with the lease. Get a copy and circle or annotate whatever you have questions about to bring to the negotiating table. Just for a set of extra eyes, have a commercial real estate attorney look over the fine print and clauses.

This is definitely worth looking into, as it can help protect your business in the long run. Here are some add-on clauses that may be of interest to you:

Negotiating on your commercial property may be a bit of an arduous task, but it is definitely worth it and can save you thousands of dollars in the long run. This article is mainly meant as a guideline for understanding the negotiating process and getting you started. It would be best to consult with a professional to anticipate specifically how to work with commercial property owners and landlords. Feel free to look back at this article for reference.

While this may be overwhelming, it's very important as an investor and as a management company to, at the very least, track these metrics and get a sense of what's working and what isn't. 

What this entails is basically that you need to look at all recent sales of buildings that are similar in size and in the same area as the building you are currently looking at. You can look at great commercial property websites to check for these recent listings. Info from these sites are publicly available and are aggregated via public records and past sales. These should be seen as estimates, as values can change due to things like neighborhood changes, reservations, and the listing and public record not being updated yet. When searching for this information, what you should do is look at these important metrics:

These two should aid you in determining an estimate of the worth of these properties. Take at least 5-10 of the most recent sales (similarly-sized, same area) and determine the average selling range for your market. 

What you need when calculating this number consists of the annual gross rental income multiplied by # of  years the buyer estimates it will take to pay off the price. The formula is basically this: 

Let's take a look at some of the big-money deals that took place this past week. 

Here are the top 5: 

1. Met-Life Closes on the Constitution Building in Washington, D.C.

In a deal worth an astounding $744 million, the Constitution Building, the only privately-owned office building in Washington, D.C., was sold to a venture group led by MetLife Real Estate Investors. Consisting of primarily government offices, the asset recently received a $250 million make-over and has achieved LEED Gold Certification.

In a prepared statement, Robert Merck, head of MetLife Real Estate Investors, said that the asset is positioned to provide "attractive returns over a long-term investment horizon,” adding that the deal is the result of "intense effort by our Washington, D.C.-based team and demonstrates our ability to source some of the best core investments in the country.” The seller was privately-based David Nassif and Associates.

Offering more than 1.4 million square feet of office space, the 10-story Washington D.C. building also offers its tenants an auditorium, conference center, fitness facility and courtyard gardens.

2. Berkley Properties Acquires Former Chicago Bank Building

The former Illinois Merchant Bank Building in Chicago has been acquired by Brooklyn-based Berkley Properties for a reported $97 million. The building was sold by a group consisting of Grammercy Capital Corporation and Garrison Investment Group.

Located at 231 South LaSalle, the 23-story office building offers more than one million square feet of class-A office and retail space. At the time of the sale, the building was over 96% occupied.










3. Golub and Investcorp Acquire Illinois Office Portfolio

In deal brokered by Transwestern, KBS Realty Advisors have sold the Oak Creek Center, an 11-building, 427,161-square-foot portfolio of class-A office space in Lombard, a suburban area outside of Chicago, Illinois. Described in a statement by Transwestern as an "institutional-quality portfolio," the asset consists of nine single-story buildings and two multi-level complexes. Combined, they are 87% leased. The deal is reported to be worth $40 million.

In a prepared statement, Gary Nussbaum, managing director of Transwestern, stated that investors are beginning to "recognize the value in stable, suburban-Chicago, Class B office investments,” adding that the nature of the asset can produce "healthy levered returns in the current low interest rate environment." He also notes that the sale of the portfolio marks the third time in 2012 that a Chicago office property traded to foreign investor.



4. Manhattan Residential Tower Receives $130 Refinance

A group of institutionalized investors, advised by J.P Morgan and Associates, along with HFF, have received a $130 million refinance loan for the Capital at Chelsea, a 387-unit residential tower in Manhattan. The refinance agreement with HSBC Bank USA is reported to be a seven-year term loan.

The 38-story building offers more than 67,000 square feet of residential space and offers residents full-time concierge service and a fitness facility. The building, which was constructed in 2001, also features Starbucks, Valley National Bank, and a branch of Beth Israel Hospital.







5. Investment Group Acquires the Beekman Tower in New York City

Beekman Tower, a 26-story building in New York City, has been purchased by an investment group consisting of Capstone Equities, Silverstein Properties and Fisher Brothers for a reported $85 million. A planned $20 million renovation will turn the historic building, once known as a hangout for Frank Sinatra, into upscale corporate housing suites.

The seller is Hudson Advisors, who acquired the building after assuming the debt from Peninsula Real Estate. The tower is located on the corner of 1st Avenue and East 49st and the 170-unit art-deco building features a popular restaurant which occupies the top two floors of the tower, with deck encircling the top perimeter, offering sweeping views of the city.