How a Tenant Boxed Themselves In & How We Turned It Into a Win-Win

A Masterclass in Strategy, Market Knowledge, and Negotiation Leverage

Commercial lease renewals can seem simple on the surface. A tenant exercises their option, terms are set, and the deal is done.

But if you’ve been in commercial real estate long enough, you know it’s rarely that easy.

Market conditions shift. Fair market value isn’t a fixed number. Commissions aren’t always automatic.

At Real Offer Realty, we recently handled a lease renewal that turned from routine into a strategic negotiation battle—one where the tenant thought they were securing a great deal but actually boxed themselves into a corner.

And the reason?
📌 We didn’t just understand the lease better—we understood the market better.

How It Started: A Tenant Looking to Renew

A tenant in a professional office building reached out to renew their lease. Their expectation?
A simple process:
✔️ Quick review of terms
✔️ A little back and forth
✔️ Sign the lease renewal

Then, they saw the proposed numbers—and suddenly, they weren’t so sure.

The Twist: They Thought They Had a Better Move

After reviewing the lease renewal proposal, the tenant hesitated.

They assumed they could get a better deal. So instead of negotiating, they decided to exercise their renewal option, thinking that would lock them into more favorable terms.

At first glance, this might seem like a smart move.
But in reality? They had just given up their ability to negotiate.

By exercising their option, they were now fully locked into the renewal formula outlined in their original lease.

The only thing left to determine? Fair Market Value (FMV).

The Negotiation: Understanding Market Value Better Than the Tenant

Now, here’s where things got interesting.

The lease stated that the new rental rate would be based on fair market value, with certain conditions.

The tenant assumed FMV would work in their favor.
We knew better.

Because here’s the thing:
📌 Fair market value isn’t a fixed number—it’s an argument.
📌 And we controlled the argument.

Why Our Market Knowledge Made the Difference

✅ We knew CoStar data wasn’t the full picture.
Many brokers and tenants rely on broad market reports to justify rent reductions—but these often fail to reflect real-time demand for specific property types and locations.

✅ We had real, on-the-ground comps.
Instead of relying solely on aggregated data, we analyzed recent leases in the same building, within a mile radius, and in comparable spaces.

✅ We knew that smaller office spaces command a premium.
Shorter-term leases, especially in high-demand sectors, tend to lease at a higher per-square-foot rate. We factored that into our calculations—they didn’t.

✅ We understood the pricing floor for similar Class A properties.
Even within the broader market downturn for office space, not all office spaces are created equal.
📈 Prime spaces still command strong rates.
📈 The building’s location had a competitive advantage.
📈 The tenant assumed pricing would trend downward—it didn’t.

By the time the numbers were finalized, the rent was set higher than the tenant had expected.

The Final Round: The Broker Commission Discussion

With rent finalized, there was one last piece to negotiate—the broker’s commission.

A commission is standard when a broker secures a new lease or renewal through active negotiation.

But here’s the key difference—this was a renewal option that the tenant exercised on their own.

Our Position:

🔹 The broker didn’t “secure” the deal—the contract did.
🔹 This wasn’t a new lease—it was a pre-negotiated option.
🔹 Paying a full commission didn’t make sense in this situation.

The broker pushed hard for a full payout.
We pushed back harder.

📌 The compromise? A reduced commission payout that reflected the actual value of the work performed.

The Outcome: A Win-Win That Maximized Value

✔️ The tenant stayed—but at a rental rate that accurately reflected market value.
✔️ The landlord didn’t leave money on the table.
✔️ The broker’s commission was structured in a way that made sense for everyone.
✔️ And at the end of the day—the deal got done.

This wasn’t about “beating” the tenant.
It was about ensuring the numbers were fair, the lease was executed properly, and all parties got what made sense.

The Big Lesson: Market Knowledge Wins Every Time

What this deal proved is that negotiation isn’t just about the lease—it’s about knowing the market better than the other side.

For Landlords:

🏢 Don’t assume renewal options mean you have to settle for lower rents. Use market data to your advantage.

📈 CoStar reports and general market data don’t always tell the full story. Get real, building-specific comps.

💰 Commissions should reflect actual value. If a broker didn’t actively negotiate the renewal, question whether a full payout is necessary.

For Tenants:

⚠️ Think carefully before exercising a renewal option. It might take away your ability to negotiate.

🔍 Fair market value isn’t always a discount. If the lease ties rent to FMV, you don’t control the price.

🤝 A win-win deal is always the best deal. The strongest negotiations happen when both sides understand the bigger picture.

Real Offer Realty: Smart Deals, Stronger Negotiations

At Real Offer Realty, we don’t just close deals—we strategize, negotiate, and maximize value.

✅ Landlords, want to make sure your lease renewals are structured in your favor?
✅ Tenants, looking for expert guidance on how to approach a renewal?

📩 Let’s talk. Because in real estate, the smartest deal is always the best deal.