We are opening a new office in Bathurst
2007 is going to be a very exciting year for us and a very high energy year as well. We spent the day today organising a new office for our website developers and graphic artists, and doing a major clean-up job. It’s always a bit of a challenge getting all of the services connected and working when you move into a new building, however things are coming together very well.
We have been recruiting website designers and developers for this new office as well as 
graphic designers and we are very excited about the dynamic and creative young team we are putting together. As well as working on our own websites, this team will be available for other businesses interested in tapping into the internet marketing skills and strategies of our very successful team.
I expect it will be a few weeks before everything is at the stage where I can tell you more about this exciting new development, so if this is something that interests you, stay tuned.
In the meantime, what I can tell you a lot more about is how I negotiated an excellent rent for this office space. I must say that this is also the first time I have rented space for very many years because I generally like to own the buildings I have my businesses in.
I’d rather be the landlord and tenant, all in one, through separate entities. 
In this case however, I was able to negotiate such a good deal that it is more cost effective for me to rent than to own. It is also a transition time for us while we wait on Council approval for the development of the Bathurst Business Park development. We will be building a new office and warehouse for our businesses, once all the planning approvals are received.
Here’s the low down on the negotiations for our extra office in Bathurst.
The landlord was asking for an annual rent of $15,581.17 including GST for 121 sq metres. Now if you are in a larger city you’ll probably say that’s quite reasonable and I’d have to agree with you. However you need to make sure that you compare apples with apples.
You need to make comparisons within the SAME real estate market rather than across different markets. In the Bathurst market you’d probably come to the conclusion that this was about the going market rent at the moment.
I spent an afternoon looking at various premises with a number of real estate agents before Christmas and came up with a short list of 3 potential properties within the Bathurst CBD. A few days earlier, I had sent a fax to all the real estate agents in Bathurst explaining what I was looking for, however only 2 agents actually came back to me ahead of my deadline with some options.
Some of my real estate investing students complain that the agents don’t get back to them. Guess what? It happens to me too! Don’t stress about it though. Take control and follow them up yourself.
During my afternoon of research with these real estate agents I determined that:
- there were quite a few potential office space options available to us at the time which would adequately meet our needs
- some office premises had been vacant for a long time (this is always a risk with commercial real estate. You can certainly get some good returns, however when the premises are vacant, they can be vacant for a long time. In other words, the returns can be better than in residential real estate. but the risks are higher too. That’s not necessarily a problem, - you just have to be aware of the risks and be able to cope with long periods of vacancy without going under.)
- The real estate boom in Bathurst has been and gone and there were several retail businesses who were feeling the pinch and who would be closing down just after Christmas. This meant that there would be even more options available in the New Year.
- Several new retail projects are under construction in Bathurst right now and these will be nearing completion in the next few weeks and months. This may attract new national franchisees into the local retail scene and create more pressure on local retailers which in turn could lead to more vacancies, especially in older premises.
Armed with this information and the asking prices of the 3 properties on my short list, it was time to negotiate for my preferred choice of property. Remember: if I could not get this property, I still had two more options as part of my ‘exit’ strategy.
After a bit of asking around I found out that the property has actually been vacant for the last three years.
Now as you can imagine, I was looking for a good deal, however in order to get that good deal, I also had to think about what would be important for the landlord who has had no income from this part of his building for the past 3 years.
I figured I would offer him a substantial up front payment in return for a reduced rent because that would give the landlord immediate gratification and a sum of money which would make an immediate difference to him or her.
As you may remember, the landlord was asking for $15,581.17 including GST.
Here’s what I offered:
- $9,000 rent including GST for 12 months, paid in 2 instalments, 6 months in advance
- no bond
- no outgoings
- 1 week rent free to clean and move in
The landlord basically accepted my offer but asked me to increase the annual rent to $9,500 instead of $9,000.
As you might imagine, it didn’t take me long to accept the landlord’s counter offer and we had a deal!
What I haven’t told you yet is that the office came with air conditioning and heating, an alarm system, a 6 line telephone system and cabling for a computer network which is exactly what we needed for our business.
If I had to instal all of these items myself, I would be looking at an investment of between $15,000 and $20,000 on top of my annual lease.
Do you see why I feel I got a good deal?
Can you also see that I structured the deal in such a way that the landlord was happy as well?
Because this office area had been vacant for such a long time, there was a bit of cleaning to do to and we steam cleaned the carpets. We also had to get a telephone technician in to help with recommissioning the phone system for ourselves and we have asked an airconditioning firm to clean and check the air conditioning unit. All in all, these costs will be less than $1,000 and we have ourselves a great new second office!
What can you learn from the way I approached this deal and negotiated the leasing arrangements?
Could you apply these ideas to other areas of your life or business?
Even if you are not looking to rent some commercial office space, ask yourself how you might use these ideas to negotiate a different type of lease.
If you are a landlord with a vacant property, ask yourself how you might be able to attract a tenant with a different (more attractive) type of offer.
I just love negotiating! It’s a lot of fun and financially very rewarding.
I encourage you to get good at it too.
If you’d like to become a better negotiator, you might like to check out the information here.
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Warm Regards,
Hans Jakobi - Australia's Wealth Coach