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Case study: Knowing motivations key to good deals

Wednesday, 2nd Aug 2017

When it comes to buying or leasing commercial property, it can be highly advantageous to understand the motivations of the seller or lessor.

Once you understand these motivations, you can use this knowledge to negotiate harder on these specific points to secure a better outcome.

This worked particularly well in one instance with a Momentum Wealth client, who was seeking a commercial space to lease.

The client, a financial services firm, had been leasing in East Perth for several years but with their lease due to expire, and an unreasonable landlord who was unrealistic during new contract negotiations, the client engaged us to find them a new space.

The brief included:

– Circa 1,500sqm of open-plan office space with 30-50 car bays
– Ready to go with existing systems (such as AV, high-speed internet, furniture in breakout rooms, desk and chairs etc.)
– Preferably in West Perth (or close to but not in the Perth CBD)
– Scalable floor plan allowing room for expansion

Armed with the brief and a 6-month deadline, our commercial property consultant began the search and issued a request for proposals.

After shortlisting several properties and showing them to the client, our consultant began initial negotiations with a handful of potential landlords and leasing agents.

During the process our commercial consultant learned that one of the shortlisted premises would be negotiated under a sublease agreement.

The existing tenant in the premise had several years remaining on their contract but had recently consolidated their office premises to another location amid financial pressures. The tenant was also dealing with some major and very public disruptions to their operations, which proved to be a large distraction to the company as a whole.

In short, the existing tenant wanted a quick resolution to subleasing the office space that they had recently vacated. Understanding this, our commercial property consultant was able to negotiate hard on price and incentives.

The A-grade office space was a perfect fit for our client and included 40+ car bays, circa 1,800sqm of space and included a high-specification fitout, including reception space, tables and chairs, AV equipment and breakout amenities.

Although negotiations for the space proved complicated, having to deal with the existing lessee and the lessor, our commercial property consultant knew the outcome would be very beneficial for the client.

Understanding that the existing lessee was motivated to sublease the space immediately, our consultant was able to secure a highly favourable agreement at a significant market discount with favourable incentives for up to a 9-year term.

Subsequently, the client was able to move into a larger, more modern office space on much more competitive terms.

Every commercial property seller or lessor has a problem to solve, and by gaining a more in-depth understanding of this problem, you can help resolve the issue faster and secure a more favourable deal.