As the real estate industry braces for what is likely to be a challenging point in the boom/bust cycle, getting each commercial lease over the finish line takes on greater importance and requires greater finesse. As each lease we work on presents unique challenges shaped by the current real estate climate, we’ve found that our Black Box strategies for minimizing the time, cost and risk of the legal leasing process are more important than ever.
We originally published our Black Box series in late 2014 and early 2015, and think this is a good time to revisit it.
Here is our introduction to the Black Box.
For most real estate professionals, the legal leasing process is a black box. Once the brokers and principals agree to a few salient business terms, the lease disappears into that black box and there is little understanding of exactly what the process is, let alone how to successfully manage it.
Opening the Black Box
The legal process of commercial leasing can, at its most basic level, be summed up by imagining two intersecting axes of conflict that the attorneys need to traverse as they move toward the finish line (see illustration above).
The first axis represents the conflict between precision and urgency. The need for precision can be likened to the need for adequate insurance. The hope is that you’ll never need to depend on it, but boy if you do, having it is essential.
The conflicting tension at the other end of this axis is the urgency to get the lease signed. This stems from the reality that time kills deals and the longer your lease lingers in the black box, the more likely it is that the other party will be distracted by a cute new puppy or the shiny penny over there that will trump the lease in the box.
The second axis represents the conflict between the desire to get it all, or go for the jugular, and the need to accommodate the other side and pursue win-win solutions.
At a certain point in every transaction, urgency trumps precision, and the need to accommodate trumps the desire to get it all. But there is an infinite number of paths to that all-important point, and figuring out the most direct one is often tricky. In addition, knowing you’ve arrived at that point can be elusive and requires an intuitive sixth sense even the most experienced attorneys don’t always have. The result is often a process that takes too long, costs too much and jeopardizes the outcome.