Knowing When You Have Leverage (And When You Don’t)

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In commercial real estate, deals don't come together by chance. They’re carefully constructed by the parties, each exerting leverage where they can to create the ideal outcome. When (most) successful landlords and brokers push for the best outcome, they do so only after understanding when they have power to do so. That awareness changes everything: how firm you draw your lines, communication styles, and ultimately how much value you capture. The best of the best always make sure they are negotiating from a position of strength – if they don’t have the leverage, they find it. Only then do they swing the hammer.

Leverage isn’t static. It shifts depending on market conditions, timing, lease specifics, market dynamics, and even broker skill. Knowing where you stand, and how to act accordingly, can mean the difference between building leverage to achieve your desired outcome and losing control of the deal.

Below are three real-world scenarios that highlight the importance of leverage and the practical steps you should take in each.

Scenario 1: Tenant Approaches Early with a Renewal Proposal

You’re a landlord, and your tenant comes to you early suggesting they want to renew; however, the tenant wants a lower rent than they’re currently paying and has also inserted a broker asking for a commission for the pleasure of taking you to the cleaners. This is a pivotal moment. Do you have leverage, or do they? How do you handle this?

The answer lies in data. You need to know what comparable space is trading for (market rents - similar deals that have gone down recently), to which other locations could your tenant realistically move (and what it would cost them to do so), and what is the tenant generating in total revenue in your property (important, but definitely the least important of the three). The leverage comes not just from the tenant knowing the gap between what they want and what the market dictates but, much more importantly, from making it clear to the tenant (and/or their broker) that you know this even better than they do. You need to measure how serious the tenant is about walking away before playing your cards. You also need to know what you have at risk if the tenant actually walks.

I have encountered this request more times that I can remember in my career. There are just times where you know exactly what to say because you know the market and have the data stored in your head. It’s a gut feeling (I call this Spidey senses). There are other times when you have limited or zero market data and really need help.

The first time I got this request in my career was from a 2,800 SF credit tenant paying $1.92 PSF / month. I knew market rent was easily $3.25 PSF / month for the space. It was an end cap up against the street in front of a 55,000 SF major supermarket doing close to $40 million / year in sales. The tenant called and said they wanted to renew but they couldn’t pay the increase stated in their lease for their upcoming option and requested a reduction in rent in exchange for a longer extension. The tenant had two (2) x five (5) year options remaining.

Based on the market data I had, I knew we had all the leverage so I gave them two options:

1. Send me a letter waiving all remaining options in the lease so that I’m not negotiating while they hold a golden parachute. If the tenant didn’t like where the conversation was going, they could always just exercise their option. Total non-starter for a jumping off point for a negotiation. If they wanted to prove to me that they were serious about leaving should they not get a reduction in rent, they should have had no problem waiving their options.
   

2. Pack up your stuff and leave. This is our strong preference. We can get way more rent from a better tenant if you leave.

You may be surprised to find out that the tenant did not waive their options, nor did they leave (huge bummer on our part). They promptly sent a letter exercising their option (shocker).

Their broker attempted to use scare tactics but had no clue about the local market. That’s never going to work with someone with local market knowledge and the data to hold his/her ground. If you are going to bring in an out of state agent they better have the data to back up their negotiation, otherwise that’s just silly. If the tenant was paying $3.50 PSF and market rent was $2.75 PSF, that would have been a different story. The conversation would need to be directed towards the pain points of the tenant actually leaving versus renewing in their existing space. What is the opportunity cost of closing this location? Will your sales be the same in an alternate location? Is the tenant willing to roll the dice?

Now, if you own a property in a market outside of your core area of knowledge, you better get smart fast or at least have the best broker with the most market expertise in your corner. So how do you get smart? Data. How do you get the data you need in a situation like this? You need the following:

Market Intel

• Comparable rents: What are similar tenants paying in the trade area?
• Data on renewals and new leases signed by similar tenants (What recent deals have gone down similar to mine?)
• Vacancy and absorption trends: Are options limited or plentiful for the tenant?
• Relocation costs: Build-out, moving, and downtime expenses that would make moving unattractive.
• Incentives: TI packages, free rent, etc. being offered by other landlords. 
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Scenario 2: Selling with Multiple Buyers at the Table

When you’re selling a property and multiple buyers are circling within the same price range, it can feel like the leverage is yours for the taking. But it only lasts if you manage the process correctly. The leverage comes not from having more offers, but from knowing which buyers are real, which ones will close, and how to avoid wasting weeks on false starts. Qualifying will build your leverage.

Your strategy should focus on qualifying buyers early and often, probing their sources of capital, track record, the history between the buyer and their broker, and potential obstacles. Ask tough questions, especially the questions to which you might not like the answer. Give the potential buyer(s) an important due diligence document and tell them you want them to read and approve that document before your seller will move forward (tenant financials, environmental report, lease, etc.). A well-run process reduces execution risk and increases certainty of closing which is often more valuable than squeezing out the last dollar. In my experience, it is not possible to overqualify a buyer. In my 28 years as a broker I had a saying: I don’t do deals twice.

One of the key lessons I learned over the years is the second I found myself selling the buyer on taking action, I had lost the leverage. When selling a property the goal should always be to have the buyer sell you. The buyer should be the one convincing you that he/she is going to perform and do so in a timely manner. Force the buyer to signal intent. If you aren’t receiving that signal, that’s not your buyer.

Market Intel

• Active buyer database: Who’s buying in your segment, what they’ve closed, and how they performed.
• Broker/buyer reputation data: Past deal performance and asset class experience.
• Market benchmarks: Typical timing and pitfalls for similar transactions.
• Trade area data: Market rent and sale comps for your asset.
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Scenario 3: Framing your Buyer as the #1 Pick

On the buy-side, leverage depends on the strength of your client. If you represent the strongest buyer (cash-heavy, proven closer, clean terms) your leverage is in certainty. Sellers and brokers value smooth deals almost as much as high pricing. Your job in representing your buyer is to amplify that certainty so their offer sits at the top of the stack.

If your client isn’t the strongest, leverage can be created through positioning. You need to find other ways to stand out:

• Faster contingencies, even approving certain due diligence items up front.
• Creative deal structures that address the seller’s pain points.
• Your buyer’s knowledge of the property, trade area, and/or tenant
• Your knowledge and experience within the particular market / asset class.
• Any relationships (the team) you bring to the table to demonstrate certainty of close (a great attorney and mortgage broker that have completed multiple transactions with your buyer).
• The buyer’s willingness and desire to close quickly.

In both cases, leverage is about framing your buyer as the safest and smartest choice, regardless of whether they bring the highest number. One of my longest-standing clients back in the day purchased a very specific type of property in very specific trade areas. When we showed up to the table, we were a known quantity to the selling broker. We were picked every time because my client had the leverage (the horsepower, the transactional history, and the asset / trade area expertise) so the selling broker was confident in his recommendation to his client.

Market Intel

• Seller motivation intel: Length of ownership, loan maturity, personal matters or goals.
• Market velocity: What has sold and what is generating activity?
• Market stagnation: What is sitting and why? Know the competitive landscape.
• Trade area knowledge: Rent trends, demographic shifts, new / proposed development, etc.
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The Time to Build Your Intelligent Data System is Now

In every case, the deciding factor is the same: market intel. Leverage comes down to one thing: information. Without the right data, you have a massive disadvantage. With the right data, you can see exactly where you stand, whether you hold the stronger position or need to face your deficiencies and act accordingly. Market intel isn’t optional, it’s the foundation for every strategic move. The DealGround platform provides market intelligence in real time, giving brokers and landlords the clarity to navigate negotiations, maximize value, and seize opportunities with confidence.