Expert's advice - How to successfully negotiate a warehouse lease contract and achieve low rates of rent?

The process of negotiating the terms of the warehouse space lease contract is based on several important factors, the most important is the knowledge about the market. In large contracts, negotiations can yield savings of hundreds of thousands of euros per year.

Dynamic changes in ownership and the continued activity of developers contribute to creating new opportunities for rental. However, without being aware of these opportunities, the tenant will not be able to conclude negotiations to their full potential.

Tomasz Mika, Head of Industrial, Poland, JLL gives examples of good practice and shows how to negotiate successfully.

Magazyny.pl: What guarantees effective negotiations of warehouse space lease terms?

Tomasz Mika: Each warehouse lease transaction requires a well- considered and pre-arranged strategy. It is especially relevant when we are talking about large deals of

10 000 sq m upwards. Adopting this approach can result in attaining accurate cost saving projections that can translate into tens and sometimes hundreds of thousands of euros per year.

How does this process work?

TM: The optimal negotiation time on the terms of a warehouse space lease contract is approx. 12 months.

The first two months are devoted to analysing the situation of tenants and to clarify the tenant’s needs. During the analysis, a number of factors are taken into account, such as location and road infrastructure. This period may be considerably reduced when the tenant has clearly defined needs.

After the analysis, an enquiry is prepared and sent to selected developers. The accepted offers are compared to the proposed commercial and technical terms.

The next step is examining the proposed locations, and meetings with owners that will allow tenants to familiarize themselves with the submitted offers, get answers to their questions and explain any inconsistencies.

What's next?

TM: Continue to follow negotiations of the terms of lease and create a short list of the best warehousing solutions. This is the crucial moment in the whole process. It is now time for a detailed analysis of the selected proposals, and the planning of the warehouse, the location of the gates, docks ,the pre-arrangement of the office and social space.

What happens when the tenant together with advisors select an offer and location?

TM: After the selection of the final location the tenant and the landlord work on the content of the lease agreement. The talks are aimed at transferring certain conditions of the agreement onto paper.

The talks often result in a letter of intent confirming all the concluded arrangements.

Is signing a letter of intent an essential element?

TM: No, but it is recommended.

The contract closes the negotiation process?

TM: Yes. The finalization of the lease is the final step. Legal advisors then work towards ensuring the negotiated terms.

This is an extremely important moment, because the signed agreement must leave nothing open to interpretation.

Can a negotiation process succeed without the help of advisors?

TM: The tenant who wishes to rent a warehouse or industrial space should be aware of the complexity of the process. Negotiations, as part of a strategy is developed and run in stages However, these stages can quickly change in content or become more urgent and so it is vital for someone who is experienced to control this situation

The outcome of the negotiations depends on whether the lease of the warehouse space will positively influence the business development of the tenants, whether the client optimally uses a planned budget for the project and whether he or she will be satisfied with the use of the property for the duration of the contract.

Consultants have years of experience in the field of warehouse lease transactions and negotiations, allowing them to achieve themost attractive rents. In the negotiation process the key to success is experience and knowledge.

Magazyny.pl