What is a Request for Proposal (RFP) in Commercial Real Estate?

If you’re looking for new commercial real estate, an unavoidable and critical aspect of this process is the Request for Proposal (RFP). Why? The RFP will cut through any ambiguity that may remain as you close in on your preferred properties.  

How do we know this? As tenant reps, we have helped our corporate clients find properties and negotiate on their behalf to receive the optimal features and lease terms. The Request for Proposal is an integral step in achieving this goal. By drafting and analyzing hundreds of RFPs, we know exactly what they should include to properly safeguard your interests.  

So, if you want to be sure that the property you’re leasing is everything it was promised to be, read on. We will outline your market knowledge on RFPs so you can make more informed decisions for your commercial real estate.   

1. What RFPs are
2. What the RFP should include 
3. When you should send out RFPs 
4. Common RFP protocols  
5. Why RFPs are so important  

What is an RFP?   

An RFP allows you to get into the nitty-gritty details of a prospective lease. It is a technical document sent to the landlords of your top choices of commercial space. Often drafted as a questionnaire, it requires the landlords’ responses to property specifics, including but not limited to:  

• Ownership 
• Amenities 
• Parking rights 
• Standards for measuring loss factor   
• Base rent/ extra charges   
• Detailed increases to rent/ operating expenses   
• The cost of operating expenses in years prior   
• The starting point of the tenant improvement allowance  

This process grants the tenant the ability to dive deep into the weeds of a commercial space. While before the RFP, they may understand the property’s specifications, it likely is not thorough. The RFP stage draws out any hidden details as you close further in a deal. It also teases out any technicalities that have not yet been disclosed.  

The name "Request for Proposal" denotes that the document is only a request. Therefore, it is not yet legally binding. 

What Does the RFP Include? 

The RFP will likely be broken into sections. These subcategories will include further questions. This is intended to pull out as much detail as possible when identifying the specifics of your leasing agreement.  

Below is a possible outline of what the RFP can be broken into. As you can see, each category includes further considerations. However, this is not an entirely comprehensive list. Know that there are innumerable other factors to consider depending on your prospective lease, organization's goals, and the property owner. 

• Buildings identifying information (address, name, suite, etc.)  
• Basic items of the building (ownership, size, availability, parking ratios, etc.)  
• Cost items (rent, rent escalations, abatement, tenant improvement allowance, etc.)  
• Lease term (start date, construction periods, renewal options, etc.)  
• Operating expenses (taxes, utilities, expense stops, etc.)  
• Janitorial considerations  
• Miscellaneous factors (building access, fees, the height of the ceiling, etc.) 
• Legal items (assignment/ subletting rights, right of first refusal, holdovers, etc.) 
• Overtime electric  

The RFP will be highly dependent on your unique requirements for commercial properties. For example, a tenant concerned about the price of operating expense escalations may request the building’s total operating expenses for the last few years.

When do you send out RFPs?  

Once you determine your property’s optimal features in an initial needs assessment, you will tour the properties. Then, following your cuts from the virtual or in-person tours, you will send the remaining buildings’ landlords RFPs.  

Likely, you will have 3-6 properties to pursue further steps with. If you are working with a tenant rep or broker, they will draft the RFP based on the specifics you determined necessary for a commercial property.  

To avoid holdups in the leasing process, ensure that you or your rep includes a firm due date for the landlord’s responses. If not, your property search could be potentially held up as you wait for the landlord’s answer to the proposal. Typically, a rep will reasonably expect a landlord’s response to an RFP in several days to a week.  

Protocol for RFPs 

The building owner receives the RFP, which will likely ask them to be specific in their responses. With this in mind, they will draft their complete responses to the document. The length of their responses will vary depending on how extensive your RFP is. For example, the landlord’s response to a singular request can be several pages.  

Keeping with the example above, a prospective landlord may not be initially willing to send the last three years of operating expenses. When this happens, your rep will send out follow-up requests to pin down any missing details.

There is often a lot of back and forth between them and your broker. Any answers they initially leave out may be amended to the document once your rep secures an answer. It is vital to retain any supplemental information in writing. It is almost guaranteed that clarification will be needed somewhere. Multiple rounds of requests are often required to get you, the corporate tenant, the most comprehensive proposal.  

Make sure that any amendments to the original RFP are in writing. An excellent tenant rep will never accept verbal confirmation. Instead, they will require that any missing information will be sent in an email, at the bare minimum, to create a paper trail.  

Once your rep receives the landlord proposals, the information will need to be digested and analyzed. Your rep will compare the proposals in not only a financial analysis but how well each site meets your specific requirements.  

Plan on allocating at least two weeks to send out and receive all the answers that make a complete RFP from the potential landlords. These answers then have to be analyzed, which will usually take at least another few days.

Why is the RFP so Important? 

The Request for Proposal is a critical step in any leasing process. It is often the first element of the negotiation stage which is absolutely integral to securing an advantageous lease. The RFP will not only give you a sense of how cooperative each prospective landlord is but can give you extra footing to leverage the value of your tenancy.  

As a result, you can quickly identify the pros and cons of each property. Analyzing how they measure up will give you more leverage in negotiation. 

You know what comparable landlords offer in terms of price and features in your market. You can use this information during negotiation to encourage competition among the various landlords. This is a key move to secure you the best lease at the lowest price. Knowing that your tenancy is at a premium, landlords are further incentivized to offer perks or lower prices to land you in their space.  

How a Tenant Rep Can Help You With RFPs 

As you now know, the Request for Proposal process can be quite comprehensive. If you are overwhelmed with pinning down the specific features and inclusive questions to include, don’t worry. You can work with a real estate professional who knows the ins and outs of commercial deals and landlord negotiation.  

As tenant reps at iOptimize Realty®, we have drafted hundreds of commercial RFPs. We have seen how tenants can get taken advantage of if the request is improperly drafted or not quite as thorough as it needs to be. We have over three decades of experience protecting the interests of our corporate clients. Whether this means skillfully drafting RFPs, helping you relocate, or renegotiating an existing lease, we have seen and done it all.  

Check out this article to learn more about working with a tenant rep!

If you are already convinced and ready to talk to a rep, schedule a meeting today!