Many people believe that a negotiation must arrive at a Win/Win conclusion. The concept of attempting to reach that position is misplaced and can actually hurt the process. Let me explain as it applies to real estate leasing, without meaning to simplify the process in attempting to address this in just a few words.
After the basic financial terms have been agreed the lease negotiation is all about the transfer of the business risk from either the landlord to the occupier or vice versa. One party wants the other to assume some portion – or all – the risk associated with the lease. The negotiation concludes only when both parties have become comfortable with the amount of risk they are willing to assume. This involves compromise and a certain amount of ‘betting’ that the risks assumed don’t play out or outweigh the potential benefits. In short, to reach agreement each side has to give something.
Giving something up isn’t synonymous with a WIN, as both parties to the negotiation start with their ideal position of wanting the other party to assume the risk. In essence, both leave the negotiating table in a position less than their ideal. Hardly a “Win/Win” concept.
However, here is the real “Win/Win” in a lease negotiation. It isn’t the conclusion that should be the “Win/Win” – because it can’t be as we’ve just learned. It is in the negotiating process itself that the two sides should strive for a “Win/Win”.
In our lease training programs for landlords and occupiers, we note that every successful lease negotiation has to have 5 criteria. The first is a positive experience. Both parties will remember the negotiating experience long after they have forgotten the financial fine points of the deal. They will remember the feeling that it was fair, or pleasant, or that they were taken advantage of, bullied or generally negative.
As a case in point, many car dealers have switched to a no-haggle pricing strategy. Why? Because car buyers typically felt mistreated in the price negotiating process and that left such a bad taste in their mouth that it may affect where they buy their next car.
A person who is having a positive negotiating experience will tend to be more open to sharing information and really listening to counter points to a discussion. Conversely, a person who is having a more negative experience may tend to dig in their heals, be closed to offering information for fear it will further erode their position, etc.
The impact will be a longer more adversarial negotiation as well as the potential of the lease only lasting the one term, if it is completed at all.
As a person seeking the best outcome in the lease negotiation, you need to mitigate risk. How you accomplish that through the experience will determine how successful you are.
To learn more about how to create a positive negotiating experience while still controlling the negotiation, or the other four essential criteria needed for a successful lease negotiation, contact me at email@example.com