No option but a lease renewal? Have you thought about your BANTA?

BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In. It stands for “Best  ALTERNATIVE TO  a negotiated agreement.

BATNA is not interested in the objectives of a negotiation, but rather to determine the course of action if an agreement is not reached within a certain time frame. As a gauge against which an agreement is measured, it prohibits a negotiator from accepting an unfavorable agreement or one that is not in their best interests because it provides a better option outside the negotiation.

Since BATNA is the alternative to what a negotiated agreement would be otherwise, it permits far greater flexibility and allows much more room for innovation than a predetermined bottom line. When a negotiator has a strong BATNA, they also have more power because they possess an attractive alternative that they could resort to if an acceptable agreement is not achieved.

When creating a BATNA, a negotiator should:

1. Brainstorm a list of all available alternatives that might be considered should the negotiation fail to render a favorable agreement;

2. Chose the most promising alternatives and expand them into practical and attainable alternatives; and

3. Identify the best of the alternatives and keep it in reserve as a fall-back during the negotiation.

Although it would be absurd to start a negotiation with a predetermined decision not to find an agreement, a viable BATNA acts as an essential insurance policy.

A well conceived and clearly defined BATNA gives a negotiator the advantage to break off the negotiation if it becomes clear that a beneficial outcome is not possible. The negotiator would then know the consequences should the negotiation fail. The ‘willingness‘ of a negotiator to break off a negotiation.

I n commercial real estate, a tenant never wants to find themselves in a position of limited options.  In today’s tenant market, there should be many BATNA.

Tenants who realize their leases are expiring and  intend to renew can be tempted to pick up the phone and call the landlord or its agent and ask about the new rental rate. However, this could be a very costly phone call. In making the call, the tenant implies to the landlord they want to renew their lease. The negotiations or non-negotiations have then begun.

How can a tenant begin negotiations with minimal or no leverage? To get the best deal, the tenant must have multiple, credible options in the marketplace and suggest a real threat of moving or putting their BATNA in place.

The first step is to hire a  professional negotiator who  will represents  the interest of the tenant.  As important is the message sent to the landlord and their team  that, once the tenant has representation, they are no longer limited to just renewing, but now

will now search out the best deal the market has  to offer. In the landlord’s mind hopes of high rents and low concessions start to fade away.  Additionally, it cost a landlord approximately $90 per square foot when a tenant moves out. With  downtime, free rent, tenant improvements  and bonus brokerage commissions,  the landlords  has limited BATNA.

For now, I want you to learn the art of knowing when to walk away. As the lease negotiations evolve, so will leverage  of each party.  In many cases there comes a time when the numbers tell you the deal is shifting the wrong direction toward a lose/lose or lose/ win proposition for you. To turn the tables, it may be prudent to go silent–the symbolic walk-away–and to focus on other opportunities. When the opposition makes contact, it is important to have a well-formulated dialogue as to the reasons why you are no longer interested in the project. Be prepared to give a solution that may go something like this;

“I appreciate your asking about what can be done,” as the negotiator takes an audible deep breath. “Well, if you can increase the tenant improvement allowance by $10 per square foot, I may be able to get the tenant back to the table…”

In situations where both parties possess a strong BATNA, the negotiation would seem rather fruitless because there would be very little incentive to reach an agreement. In this scenario, both parties would be better off to seek elsewhere to pursue their business.

When a negotiator fails to explore its BATNA, they will find themselves in a very shaky situation. They will be exposed to:

1.  Strong internal pressure to make an agreement, as they will be unaware of what would happen should the negotiation fail;

2.  They will be over optimistic about proposed agreements which can then result in the associated costs not being fully appreciated;

3.  They will face the peril of becoming committed to reach an agreement, as they will be unaware of alternatives outside the negotiation. This will foster pessimism about their prospects if the negotiation fails; and

4.  They will become beholding to the whims of the law of agreement, which holds that when persons agree to something this is entirely dependent on the attractiveness of the available alternatives.

3. http://www.negotiationtraining.com.au/articles/next-best-option/

For more information or to answer questions on this article, lease renewal or relocation negotiations or any other questions about your landlord please contact.

Forrest Blake
Commercial Real Estate Negotiator
+310-850-2381
fblake1000@gmail.com

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