How to build a strong negotiating position for your office lease

Choosing an office is preceded by negotiating lease terms in one building, and often in several. When thinking about talks with landlords and the decision whether to stay or move (Stay vs Go), remember that your negotiating position is built early, before any discussion of detailed terms.

The alternatives you prepare, how you plan the timeline and whether you keep landlords competing will decide how comfortable you are in the negotiations and what you ultimately achieve. The most important advice we give clients here is simple: take control. Below we describe what helps.

The tenant wants to stay. Does the landlord need to know?

Some of our clients and the companies we talk to say openly that they are happy with their office and want to renew. If a tenant signals before the talks that it is not prepared to move, it weakens the value of competing offers and its own position. The convenience of staying has a price, and the purpose of the process is to establish whether the terms on offer justify it. The tenant's preferences should stay between the tenant and its advisor until the negotiations are over.

Our experience shows that a landlord's uncertainty about the tenant's final decision helps secure a better offer. There is one condition: the option of choosing something else has to be credible. Simply saying "we are looking at the market" means little unless concrete action follows.

BATNA: what will we do if we cannot agree?

In negotiations we use the concept of BATNA, the Best Alternative to a Negotiated Agreement. An offer from another building becomes a real alternative only once availability, timing, layout, fit-out costs, technical requirements, financial terms and the organisation's readiness to move have been checked.

Sometimes the alternative turns out to be so good that, contrary to the original assumptions, it becomes the preferred option. Comparable and attractive options give real strength in negotiations. They also help define the limit of concessions: we know which terms we can accept and when another solution is the better choice.

A BATNA has an expiry date

Even a very good offer stops being an alternative if there is not enough time to prepare the office and move in. That is why the timeline is built backwards from the date the new space must be ready. It has to cover lease negotiations, design, approvals and fit-out, but also the tenant's internal decisions. Sign-off from the board or a head office abroad can take longer than another round of talks with the landlord.

The timeline needs a buffer for delays. If the whole process only works on the assumption that everything goes to plan, freedom of choice is already badly limited. Past a certain point the tenant becomes dependent on its current landlord. The landlord knows when the lease ends and can judge whether a move is still feasible. The renewal conversation then takes place from a very different position. We write more about timing in When to start renegotiating your lease.

Internal discipline and control of information

Leverage can also be lost inside your own organisation. It is enough for the board to become attached to one building too early, or for employees to hear that a move to a particular address is a done deal. Returning to other options then becomes difficult, even if the preferred landlord is not offering satisfactory terms.

Every location under serious consideration has to be checked, including in design terms. It is worth distinguishing, though, between work needed to assess a space and commitment that in practice closes off the other options. Before negotiations start, agree the selection criteria, the limits of what is acceptable, and who makes decisions and approves concessions. The advisor should know what it can take back to the landlord and what needs further approval.

Communication with the market needs the same discipline. Remarks such as "the CEO cannot imagine any other address" or "we have no budget for a move" can undo weeks of work. Agree who presents the company's position and what role the advisor plays. Information passed on must be true, but there is no need to reveal every preference, constraint or the tenant's maximum budget.

Parallel options and alternating rounds of negotiation

A core element of our methodology is running the process in parallel for several locations, with alternating rounds of talks with their owners. We start with a short list of realistic options and offers prepared on comparable assumptions. We then go back to each landlord with expectations that reflect the results of the talks so far and the building's position against the competition.

If, for example, one landlord increases the fit-out budget, its offer may become more attractive despite a higher rent. In the conversation with the second landlord we then assess what change in terms would keep its proposal competitive. This does not require passing on confidential offers or revealing everything that has been agreed. What it requires is solid knowledge of the differences between the options and a clear statement of what we expect in the next round.

We compare the whole package. A lower rent may not make up for higher upfront costs, moving costs or less favourable indexation. Every new offer therefore goes into a single comparison of costs and risks. That shows whether a concession genuinely improves the outcome or merely looks good in the summary of commercial terms.

A common mistake is announcing the winner too early. Agreeing rent, lease length and incentives does not end the negotiation. The split of responsibility for works, security, specification and handover date can still change the assessment of the deal considerably. Dropping the other options should be a conscious decision, taken with knowledge of how far the lease has been agreed and whether the preferred solution is deliverable. Alternatives cannot be kept open forever, but you should know what you are giving up and what remains open.

What losing a tenant really costs the landlord

For the owner, keeping a tenant has a concrete economic dimension. On one side are the concessions needed to renew; on the other, the cost and risk of re-letting the space. Lost rent during a void period is only the start of that calculation.

On top of it come the costs of holding empty space, marketing, the leasing team's time, agency fees and the legal and technical work on the next deal. A new tenant will expect rent-free periods and a fit-out contribution. Sometimes a large unit has to be split, services rebuilt or the office adapted to a completely different way of working. Only when these items are added up does it become clear how much the owner gains by extending with the current occupier.

That does not mean a landlord will always want to keep a tenant at any price. It may have another party willing to pay a higher rent, a neighbour that needs extra space, or a chance to split the floor more profitably. A good advisor therefore also looks at the owner's alternatives and checks how far its statements are borne out by the building's situation. Not every piece of information can be obtained, but the better we understand this calculation, the more accurately we can judge how much room there is for further concessions.

Concessions are worth different things to each side

Tenant and landlord do not always care most about the same parts of the lease. For the company, the priority may be limiting the cost of setting up the office or being able to reduce space in the future. The owner may place more weight on the length of commitment, continuity of income or the headline rent. Recognising these differences makes it possible to propose an exchange of concessions that both sides see as worthwhile.

If the tenant plans to stay in a location for longer, it may consider a longer lease in return for a larger landlord contribution to the fit-out. That only makes sense if it fits the company's business plans. Extra fit-out budget does not on its own justify several more years of commitment, especially when future space needs are uncertain.

That is why we assess every option in terms of total cost, the timing of spend and risk. A higher incentive can improve cash flow at the start of the lease while raising the cost of the lease as a whole. The tenant should know exactly what it is getting and what it is giving in return.

"Whoever needs the deal less wins." What does that mean in practice?

This popular saying describes part of negotiating reality well, provided we understand it correctly. The advantage lies with the side that depends less on a particular agreement and can accept not reaching one. A tenant can care a great deal about a good office and still not be tied to a single building.

That freedom comes from a prepared alternative, time to deliver it and an internally agreed limit of what is acceptable. Feigned indifference will not help much if the lease ends next month and the company has not looked at any other space. Likewise, a threat to leave is not very convincing if the organisation is not really ready to carry it out. What counts in negotiations are the real options of both sides and knowledge of their constraints.

What if there are few alternatives?

Imagine a company that needs a large, contiguous floorplate in central Warsaw or in a modern building in Wola, by a fixed date. If only one or two buildings meet every requirement, you cannot expect the same competition between owners as when there is a wide choice.

In that case it is worth checking which assumptions are truly fixed. Moving the lease start date, occupying the office in phases, widening the search area or changing the space brief can open up new possibilities. Sometimes the answer is a short extension of the current lease or a temporary office, provided their availability and terms can be agreed. Each such option has to be costed and approved internally, which is why demanding projects should start the search earlier.

If the criteria cannot change, you have to assess the limits of your position honestly. You can still work on the fit-out budget, payment schedule, flexibility or the split of responsibilities. Expectations about the scale of concessions must, however, reflect how attractive each side's alternatives are.

Why an independent advisor?

The advisor's role is to prepare and run a process that gives the tenant a sound basis for a good decision. That includes finding alternatives, checking they are deliverable, comparing costs and risks and planning the next rounds. Just as important is keeping control of the timeline and communication, so that the company does not lose its freedom of choice before it agrees satisfactory terms.

An advisor's good relationships with landlords help with access to information and keep talks moving. They should not, however, affect whose interests the advisor represents. The tenant needs clarity about the scope of the mandate, how the advisor is paid and any links to the other side. It is worth knowing whether the advisor also has obligations to the owner of a building under consideration and how it handles potential conflicts of interest.

A declaration of independence alone does not guarantee results. What matters is the team's competence, market knowledge and consistency in running the process. A good advisor can also tell a client that its expectations are unrealistic, or that a seemingly attractive concession does not make up for the risk. Its job is to reach terms the tenant accepts knowingly, with a full picture of the options.

Staying, but on consciously negotiated terms

A company that wanted to stay in its current office from the start may well end up making exactly that decision. Testing the market and talking to other owners was not wasted time. It made it possible to judge the price of staying, negotiate the whole package and make sure that renewing is justified. Before talks begin, it is worth answering a few questions:

• Do we have a deliverable alternative and time to execute it?
• Have we compared the full costs and risks of each option?
• Have we agreed the selection criteria and the limit of terms we can accept?
• Do we know who makes decisions, runs the process and talks to landlords?

The answers will show whether we are setting the pace of the negotiations, or whether running out of time and options is about to set it for us. If you are staying, you may also find useful five things to check before you sign a lease extension.