Making An Offer Tenants Can’t Refuse
Landlords—having trouble filling your vacant space? It might not be your space, it might not even be your price…could be you're simply incentivizing the wrong person.
As commercial real estate agents, if there’s one thing we’ve learned from our decades of experience, it’s that landlords far too often offer incentives to the wrong person. Look closely at incentives offered by commercial landlords and you’ll notice they have one thing in common—they are designed to incentivize the commercial real estate agent, not the tenant.
At first glance, you might be thinking, “So? What’s the problem? It’s the agent’s job to fill the space, offering incentives to the agent most likely gets the job done faster. Win-win, right?” Not necessarily. If the tenant in question is eager to move and the space is perfect for their business, there’s little need for incentives; however, consider a landlord with a vacant space perfect for a tenant who absolutely, positively does not want to move. In fact, you don’t need to imagine—we experienced this very situation several years ago and our going to share with you the story of the tenant who absolutely, positively did not want to move…and then did.
Meet ABC Industries
Several years ago, MCRE consulted ABC Industries (name changed for privacy reasons) about potentially relocating. Despite the myriad advantages, the owner was deadset against a move.
At this point in time, ABC Industries was facing some big changes in both their business and the industry at large. Preparing the company to deal with these changes and maintain a competitive advantage would require a significant investment of capital in new equipment. Additionally, ABC’s current space lacked adequate parking which was inhibiting growth.
Despite these compelling arguments, the owner was adamant he was not moving the business. Moving a business is very expensive—not to mention disruptive—and we simply couldn’t convince him the positives outweighed the negatives.
Inverting the Incentive Triangle
Despite our client’s misgivings, we set out to find the perfect space that would accommodate future growth and allow ABC Industries to maintain its competitive advantage in the industry.
We found the perfect spot that even had some of the equipment upgrades ABC Industries would need already on site.
When we first sat down with the landlord to negotiate terms, the incentives offered were clearly meant to incentivize us, the agents, not our client. Even though the space was a perfect fit, we knew we needed a little something extra to make it the offer our client couldn’t refuse.
At MCRE, we are a client-first brokerage. Our business lives and breathes through repeat business and referrals—trying to transact as many deals as possible, like the big brokerages, would quickly put us out of business. As such, we asked the landlord to invert his incentive plan in order to incentivize our client, not our agents.
After all was said and done, the newly tenant-focused incentives made the deal so attractive that it was officially an offer our client couldn’t refuse.
Win-Win Across the Board
In the end, our client excitedly accepted the deal and made the move. Now ABC Industries has an incredible space where it has been able to grow and prosper and the landlord has a great tenant. As for us, we had an extremely happy client who was happy to shout our praises to his friends and colleagues. It’s a win-win-win!
Strategizing Your Incentives
Had the landlord simply stuck to his original strategy of incentivizing the agents, ABC Industries would never have moved and who knows how long it would have taken the landlord to fill the space.
One of the reasons vacancy rates in the GTA remain high is that many landlords are unwilling to divert incentives away from agents towards tenants, but time and time again we’ve seen that agent incentives just don’t work.
If you’re looking for commercial real estate representation that looks out for your best interests, give the MCRE team a call and let’s get the discussion started!