Commonly we think of an RFP (Request for Proposal) coming from a municipality when they want to hire a company for specific services i.e. snow removal, or from a company seeking bids for their purchasing of certain materials or supplies. The purpose of an RFP is to create a competitive situation.
The RFP technique can be successfully used by real estate agents when representing a tenant. Landlords need to keep their buildings fully rented; vacancy affects their cash flow. Given today’s economy landlords have to be aggressive to keep and get new tenants. Properties are shown and the tenant narrows there interest to four or five buildings. They know exactly what each landlord is asking for. The tenant, or the agent for the tenant, can create a Request for Proposal and send it to these owners creating a competitive situation. The landlords then respond with their best “offer” to lease space to this tenant.
Generally we begin by establishing a brief window of opportunity and brief synopsis of the tenant, for example:
On behalf of our client, ABC Corp., we have been authorized to solicit Requests for Proposals for the leasing of space. We invite your firm to submit a proposal to us by April 30, 20__.
(within 10 business days of issue)They have inspected your property as well as others and are in the final decision stage. A description of their business, the services needed and other pertinent information follow:
ABC Corp. (background and why moving)
ABC Corp. is an Insurance Agency that has been in business for over 5 years. Their annual revenues are between are between $10 million to $12 Million per year and they employ 35 people in one location. Their current lease is expiring in 90 days and they are now seeking larger space for growth.
Follows is a very detailed list of what the tenant would like to see in the lease and what the tenant is willing to pay to rent space in a building. Think of it as the tenants “wish list”. It lists key elements in leases; how much space is required, the amount of rent they can pay (the tenants budget); or the price per square foot they are willing to pay, they may also be willing to pay additional rent for items like utilities or common area charges. It addresses all issues: i.e. security; desired terms of the lease; any options to renew or purchase; concession periods; sign requirements; parking; insurance; build out, construction or tenant improvements required. A complete picture of what the tenant needs, what they expect, and what they are willing to do. The proposal will also have a time line; landlords must respond by a certain date.
The tenant‘s credibility must also be shown to the prospective landlords by attaching financial information to the proposal.
The landlords who receive the proposal can now respond item by item to the proposal. They are willing to do this, but not this, or suggest compromises. Based upon the initial responses the tenant can now decide which building they wish to pursue. The stage for the final negotiations is set, using this technique usually results in initial agreement on many of the issues; those remaining may now be negotiated to the successful conclusion of a lease.
The competitive situation the landlords are placed in, knowing what is important to and the capabilities of the proposed tenant, allows them to decide if they want this tenant for their building. It also encourages them to present their best deal to the tenant. The RFP says to the landlord that this tenant is serious and will shortly by moving into new space in your building or another owners building.
In representing a tenant I can’t think of a better way to get them the best deal possible.
Ed Smith serves as Eastern Regional Director of Coldwell Banker Commercial NRT, is a Real Estate Broker, Commercial Continuing Education Instructor, Corporate Trainer, Speaker and Textbook Author; he may be contacted at Edward.firstname.lastname@example.org.CommercialEd.com.