How tenant rep brokers use commercial lease comps to win, negotiate, and close business##
*From prospecting to pitching to negotiating the deal, lease comps are integral to everything tenant reps do. As clients expect brokers to be experts and use all available tools, brokers increasingly act as consultants as well as deal negotiators. CRE brokers now use commercial lease comps creatively to put themselves ahead of the competition and exceed their clients’ expectations. CompStak interviewed 20 brokers in Atlanta, Chicago, Los Angeles, New York, San Francisco and Washington DC outlining best practices for using commercial lease comps to win, negotiate and close deals. In part one of the series, we covered the use of lease comps in the prospecting process. In Part two, we studied the ways tenant reps use comps when working with clients. This week, we look at closing the deal and other uses of lease comps.
Go to Part I
Go to Part II
Download a PDF of the full guide*
Part Three: Negotiating the deal, and other uses of comps##
Preparing the LOI##
After you and your client toured several spaces, you have a shortlist of locations you want to target. You’ve probably submitted RFP’s to the different landlords and received several proposals. Now it’s time to reply to the proposal with the tenant offer, also known as the Letter of Intent (LOI). At this point, you and the tenant will review lease comps and decide, based on the current trends, what terms you want to offer. The comp-review serves a double purpose: one, to put together a realistic offer, while still trying to secure the best deal for the client; two, to ensure your client understands the market nuances the offer was based on. Both purposes call for accurate lease comps. “If I have accurate comps and I’m working on a deal, I would get the concession data for this particular landlord and I know how aggressive I can be in my offer,“ said a DC broker. On the other hand, staying within a reasonable range is important. “I don’t want to lowball the landlord too much - I need to get close to what the market is,” said a New York City broker.
Counter offers and closing the deal##
If the first offer was accepted, the deal is nearly done. More often than not, however, the landlord will not accept the terms, and instead, will present a counter offer.
At this point, you have the option to share lease comps with the landlord or landlord rep in support of a better deal for your client. Some brokers share lease comps, and others don’t. “I usually do not mention to the landlord rep that I have comps for deals in their building, unless I want to be very aggressive,” said a New York City tenant rep. An alternative method is to share competing proposals from other landlords, as opposed to comps. “If we did a good job, the tenant already has several good proposals from different landlords and this is what helps the best deal,” said a DC broker.
If you decide to share comps with the landlord, you’re in good company. Many of the tenant reps we spoke with will use lease comps to make the case for their clients. Those can be comps for recent deals in the same building, where you will try to secure the same favorable terms that were given to other tenants recently. “The landlord reps will respect you more if you show them that you know the market and where the deal should be done’” said another New York City broker. “If a landlord rep said ‘I can’t do it,’ we tell them that our records show they just did a lower deal,” said a Chicago broker.
Other ways comps can help##
So far, we’ve covered the best practices for the use of lease comps for prospecting, pitching, working with clients, and negotiating deals. Here are a few additional ways creative brokers use lease comps to stay competitive:
You can use lease comps to trade with other brokers. In fact, establishing comp-trading groups is popular in many markets. “I trade with friends from former companies, or brokers I dealt with” said a New York City tenant rep. A Chicago - based broker said he uses lease comps and trades them for either other comps or Tenants in the Market (TIM) lists.
Staying in touch with prospects:####
Many brokers send their prospects relevant lease comps to keep in touch and stay top of mind, and you can do the same. The best items to send contain valuable market information. “Are concessions going up or down? Which submarkets are getting pricey? Clients always find these helpful,” said a Chicago broker. “If I have a hedge fund client, I may send them a recent comp from another hedge fund,” a New York City broker said.
Using comps for marketing:
Market reports, deal sheets, and infographics are produced to drive incoming leads. If you put in the effort, you’ll reap the rewards. A San Francisco-based brokerage used lease comps to prepare an interactive map of tech tenant deals. In another example, several Colliers brokers have created techworkspaces, a technology leasing news publication based on lease comps for recent deals. Even without the help of dedicated research departments, these brokers used comps creatively to produce interesting content.
Using comps to brag:####
“When the all is said and done, we sometimes show the client comps to prove we got them a great deal,” said a Chicago broker.
This third part concludes our series about best practices for tenant rep brokers using commercial lease comps. We hope you found this information helpful. You can read Part I here and Part II here, or get the full guide here.
CompStak Exchange is a free platform for CRE brokers, appraisers and researchers to exchange verified commercial lease comps anonymously. CompStak Enterprise offers unlimited fee-based access to comp information to CRE landlords, lenders and investors.