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Negotiating your next lease

The common question we receive from retailers when challenged with the process of negotiating their retail shop lease is “where do I start?”

Retail Shop Leases are complex and require a deep understanding of not only our own needs and outcomes but also those of the landlord as well as the legislative boundaries by State & Territory Leases Acts.

Each lease, and for that matter each lease negotiation, is different and although most seek to achieve a win-win outcome the end results are closer to win-lose (a zero-sum game).

To achieve the holy grail of WIN-WIN (a non-zero-sum game) where the wins and losses for both retailer and landlord don’t cancel each other out, there are five basic stages to consider.

Stage 1 – Prepare

There is no good shortcut to preparation. It is the first stage of any negotiation, though people often don’t give it the time it warrants. They often charge into the Information Exchange Stage, or even directly to Bargaining.

Preparation starts with determining if this is a potential collaborative situation so that you can select the better strategy. Next you spend time researching information, analyzing data and leverage, and identifying interests and positions. Finally, you have to consider the relationship you want to build.

Five Key Elements of Negotiation Preparation

Initial points to consider

  • Should I be negotiating?
  • What I need to know
  • Organise information

Research covers

  • Players and stakeholders
  • The fact base
  • Standards and benchmarks

Analysis includes

  • Reorganising data
  • Anticipating what will happen
  • Assessing strengths and risks

Identification of your and their Interests

  • Positions: Goals, Most Desired Outcomes, and Least Acceptable Agreements
  • Best Alternatives to a Negotiated Agreement
  • Concessions

Know the relationship you want to build

  • Plan to build trust
  • Prepare for emotional reactions
  • Develop Probes to discover “Don’t knows” and test Assumption

Stage 2 – Information Exchange

The Information Exchange Stage occurs when you begin to engage the other side, share information and explore options that address interests – what you each need, as opposed to positions – what you each ask for later in the Bargaining Stage. We will discuss the difference between interests and positions and how critical they are to successful negotiations in depth later, but here is a brief example:

It is critical here to focus on building rapport and trust, without which neither party will feel comfortable sharing interests. One way to build the relationship is to do your “social homework” in this stage by finding out and showing interest in the other party’s business culture, personality, outside interests and values.

Four Critical Assessments are made in the Exchange Stage:

  • Trustworthiness – Are they honest and dependable?
  • Competency – Are they credible and able?
  • Likeability – Can you work well together?
  • Alignment of Interests – Are your interests aligned with theirs?

A Go/No-Go Decision Time in Exchange

If your assessment in this stage of the negotiation process is negative, you make adjustments or implement your Best Alternative to a Negotiated Agreement (BATNA).

If your assessment in this stage of the negotiation process is positive, you move forward. With trust developed, you explore for creative solutions that address interests and see the potential to create real value.

Dive into Bargaining Now?

You will be eager at this point to dive into the Bargaining Stage. Pause to create one critical tool that will guide and protect you for the stages that follow. That is the development of a joint agenda.

Stage 3 – Bargain

Bargaining is where the “give-and-take” happens. If you think success means all take and no give, you won’t capture real value. You make and manage your concessions in bargaining. When you give and take that which satisfies both parties’ interests, you will build a lasting relationship and a fruitful outcome. During the Bargaining Stage, you continue to create value, and with trades, finally capture value.

To be trusted, you must be genuine!

There are two tools you will need from your negotiator’s toolbox in the Bargaining Stage; the Probe and Creativity.

Bargaining is your “face-time” with the other person, even when you are not face-to-face.

Like all interpersonal relations, emotions can help or hinder progress. Specific negotiator’s tools and behavioral skills matter greatly here. Finely tuned communication skills are critical at this juncture as you explore options to create value and execute trades to capture value. You will be most successful when solutions satisfy everyone’s needs.

Stage 4 – Conclude

Stage 4 is the point in the process when you reach agreement. It is important to find out if the other side has the capacity to follow through with the things they said they would do. This is the time to put down in writing the common interests and produce a comprehensive summary of the agreement. Sometimes you have to consider strategies here to lock-in a commitment. Be sure to agree on next steps as well. And never forget to thank the other party for their willingness to negotiate – even when no agreement is reached.

Stage 5 – Execute

Stage 5 is the implementation of the agreement. This stage may also be viewed as preparation for the next negotiation opportunity. You must ensure that you follow through on promises made in order to strengthen the relationship and to build trust. You will learn more in this stage about the other side. This will lead to easier negotiations next time around. And remember that during execution you are likely to apply the total negotiation process and BNPs to unexpected events, failures in performance and the inevitable changes.

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