Client: A medium sized company that manufactures aluminum extrusions overseas in Asia, and distributes those extrusions to clients throughout North America. When they contacted me, they owned a 70,000 SF industrial warehouse and office in Vancouver and a 12,000 SF industrial warehouse in Mississauga, Ontario.
Requirement: The client had outgrown their 12,000 SF warehouse in Mississauga and were looking to lease an additional warehouse space of 20,000 to 25,000 SF in the GTA for storage and distribution of their aluminum bundles, ideally in the Vaughan area as that was where many of their clients were located.
Challenge: At the time, the GTA in general had an industrial vacancy rate of less than 1%, with the Vaughan market in particular at an extremely tight 0.6% vacancy, historically low numbers. In simple terms, there were literally almost no spaces available, and that meant that when spaces did pop up, there was massive competition for those spaces from several different strong tenants.
Strategy: As I normally do, but even more critical in this case, I got to know as much as I could about my client so that I could really focus in on the strongest aspects of their business and on the factors that would make them a great tenant. These would be the factors that would make them a compelling and strong tenant in the eyes of the landlord, and so it was imperative that I could tell that story properly. In any market, but especially in a tight market, landlords are interested in more than the dollars and cents of a deal - it's worth noting that in such a market everyone will make a strong offer dollar-wise, so it can come down to what else differentiates your tenant, and often that is what we call their 'covenant'. This describes things like the tenant's operating history, their financial strength, their ability to pay rent, etc. But even more simply than that, what separates your offer from others in these markets can be how the landlord feels about the tenant that they will be bringing into their space. Landlords want to know who they're getting into bed with on a deal for the next 5 years and perhaps much longer. It's up to me as the tenant's agent to present that narrative about my client to the landlord and their agent.
Some of the items I was able to focus on regarding my client that I knew Landlords would appreciate:
My client had been in business for 15 years, with a 10 year presence in Canada.
My client had very strong revenues (we obtained the financial statements for the last three years and highlighted the strong revenue numbers).
We also highlighted the growth trajectory of my client's business, specifically rising revenues in Ontario, a significant growth market for them.
My client owned their own 70,000 SF industrial warehouse building in Vancouver, demonstrating substantial capital assets.
We collected all of this information ahead of time and mentioned all of these factors in our offer submission right off the bat. Often, agents will submit an offer and then provide info about financial covenant of their client later on if the landlord shows an interest. In this case, we decided to make as strong a first impression as possible and not waste any time in conveying why we thought our client was a strong choice as a tenant.
Another huge part of our strategy was that we combed the market on a daily basis looking for new listings that met our criteria and made sure to act quickly whenever we saw something that matched. We reached out on all the potential properties as soon as they hit the market and often had a showing booked within 1-3 days on market. In a tight market being a first mover and engaging with the landlord and their agent before anyone else can make all the difference in the world, especially if you're prepared.
Result: After viewing several prospective properties that didn't really work, we finally found a Vaughan industrial property that worked great but with one catch - there was not quite enough room at the back shipping envelope for a 53 ft truck trailer, a requirement for my client. However, because of the extremely tight market and my client's rapidly approaching timeline to find a space, we decided to think outside the box. My client and I discussed the possibility for them to buy their own shorter flatbed truck that they could utilize to ship product from their Mississauga warehouse to this new Vaughan warehouse. With some research on truck options, my client decided that this was a feasible option and we decided to draft up an offer for the space. After discussions with the landlord's broker, it was clear to me that they liked my client and that, despite having other offers, they wanted to work with us to get a deal done.
Then, just as those discussions were starting, I heard through my network of fellow Brokers that a new space in Vaughan was going to be hitting the market soon that fit my client's requirements to a tee. 24,000 square feet, plenty of space for 53 ft shipping, and checking all the other boxes in my client's requirement. The problem was that we couldn't have two outstanding offers on spaces due to the risk of having them both accepted, along with the fact that it would not be professional to keep stringing along the landlord from the first property in order to buy us time to pursue the second one.
After some analysis on what I thought it would take in terms of an offer to secure the new space, as well as some open discussions between myself and the landlord's agent which provided some insights on what they were looking for both in a tenant and in an offer, I presented my client with a proposal to back off from the first property and take a run at the second. I outlined the risks, the benefits, and my view of what it would take to get a deal done. My client trusted me and we decided to pursue the second property that was tailor made for their needs. I made sure to keep things very positive and professional with the agent on the first property in order to keep the chances alive that we may be able to return to that one if we couldn't get a deal done on the other property.
We then went all in on the second property, with a thorough, strong yet fair, and fully fleshed out offer to lease. As was the case throughout, I conveyed all of the positive virtues of my tenant and of their financial covenant, and even had the listing agent meet my client personally when we toured the site because I knew they would see what a great, stand-up guy he was. Agents think these things don't make a difference, but sometimes every little nuance of an offer works its way into the landlord's final decision, especially when offers are otherwise very very close.
Ultimately, it was a risk, but in the end we won the deal. After some negotiation we got to an agreement on the second space and it was a triumphant result because it was absolutely perfect for my client. There would be no longer any need for them to purchase a truck of their own, and the space checked every single box for their business. And, though it was an extremely tight market, we beat out several other offers and got a lease done at terms that were very fair for my client.
Be Prepared - Have financial statements ready to go ahead of time and get to know as much about your client as possible so that you can highlight their strengths as part of your offer and make a strong first impression.
Engage -Talk to the landlord's agent openly and really try to get a feel from them of what is important to the landlord. Sometimes these conversations will provide tips and insights that can help you tweak your offer to make it as appealing as possible to the landlord.
Be a First Mover - Constantly monitor the market for new opportunities and tap into your network for property leads before they even hit the market. This will allow you to jump on opportunities before anyone else. Sometimes the difference in getting a deal done comes down to being the first to engage.
Take Measured Risks - Don't be afraid to take a risk if the benefits are worth it, and if you have a plan that you think will give you the best chance of success. Outline the risks and benefits to the client, with a plan of attack, and ask them to put their trust in you.