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Darren Krakowiak: 9 keys to smart commercial real estate negotiation

Strong negotiation skills can significantly enhance your commercial real estate success

Mastering effective negotiation techniques not only helps you close deals faster โ€“ it also builds stronger client relationships and enhances your reputation as a trusted advisor. 

Here are nine essential strategies to elevate your negotiation game.

1. Preparation is key

Before entering any negotiation, thorough preparation is crucial.

Understand the property, the market conditions, and your client’s needs and motivations

Gather relevant data, such as recent comparable sales, market trends, and financial analyses.

This information arms you with the knowledge to justify your position and make informed decisions.

Additionally, anticipate the other party’s needs and concerns.

Consider their perspective and prepare responses to potential objections. 

The more prepared you are, the more confident and credible you will appear.

2. Establish clear objectives

Set clear, realistic goals for what you want to achieve in the negotiation. 

Determine your ideal outcome, your minimum acceptable terms, and what concessions you are willing to make. 

Having defined objectives helps you stay focused and prevents you from making impulsive decisions.

It’s equally important to understand the priorities of your client.

Align your negotiation strategy with their goals to ensure you are working towards an agreement that benefits them.

3. Build rapport and trust

Building rapport and trust with the other party can significantly influence the negotiation process. 

Start with establishing a connection and show genuine interest in their needs and concerns.

A respectful and empathetic approach can lead to a more collaborative atmosphere.

Trust is built through transparency and integrity.

Be honest about your intentions and avoid making promises you cannot keep. 

When the other party trusts you, they are more likely to be open to your proposals and concessions.

4. Active listening

Active listening is a critical negotiation skill.

Pay close attention to what the other party is saying, and acknowledge their points. 

This demonstrates respect and allows you to understand their underlying interests and concerns.

Use techniques such as paraphrasing and summarising to confirm your understanding.

For example, “So, what you’re saying is that 24-hour access to the property is crucial for your business operations, correct?” 

This not only clarifies their position but also shows that you are genuinely engaged in finding a solution.

5. Focus on interests, not positions

In negotiations, parties often become entrenched in their positions.

Instead, focus on underlying interests. 

For example, a seller’s position might be a high sale price, but their priority could be financial security for retirement.

Understanding this allows you to explore alternative solutions beyond price.

Encourage the other party to articulate their interests and be open about yours.

This approach can uncover opportunities for creative problem-solving and win-win solutions.

6. Use objective criteria

Basing negotiations on objective criteria can help avoid emotional conflicts and make discussions more rational.  

Use market data, industry standards, and expert opinions to support your positions.

For instance, refer to recent sales data to justify your offer price or lease terms.

Objective criteria provide a neutral ground for discussions and can help both parties reach a fair agreement, faster.

7. Manage emotions

Negotiations can be emotionally charged, especially when large sums of money or significant business interests (or peopleโ€™s egos) are at stake. 

Stay calm and composed, even if the other party becomes aggressive or confrontational.

Keeping your emotions in check helps you think clearly and make rational decisions.

If you sense the negotiation is becoming too heated, suggest a short break.

This allows both parties to cool down and return to the discussion with a clearer mindset.

8. Be willing to walk away

One of the most powerful negotiation tools is the willingness to walk away. 

If the deal does not meet your minimum acceptable terms or if the other party is unreasonable, be prepared to kill the deal. 

This stance can sometimes prompt the other party to reconsider their position and offer more favourable terms.

However, ensure that walking away is a strategic decision, not an impulsive reaction.

Weigh the consequences and be aware of your best alternative to a negotiated agreement (aka BATNA).

9. Close with clarity

Once an agreement is reached, summarise the key points and ensure all parties have a clear understanding of the terms. 

Confirm details in writing to avoid any misunderstandings later; a clear and precise closing reinforces trust and sets the stage for a successful transaction.

Effective negotiation in commercial real estate requires a blend of preparation, strategic thinking, and interpersonal skills. 

By focusing on interests, building trust, and staying composed, you can navigate negotiations successfully and achieve favourable outcomes for your clients. 

Remember, negotiation is not just about winning; it’s about finding solutions that satisfy all parties and pave the way for long-term relationships and future opportunities.

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Darren Krakowiak

Darren Krakowiak is the Founder of CRE Success. He helps commercial real estate leaders to get their businesses growing faster and is the host of Commercial Real Estate Leadership, available as a podcast and on YouTube.