Friday, August 30, 2024

Zero Sum Game in Commercial Real Estate: The Myth of Winning at All Costs


I’ve been reflecting lately on the term "zero sum game." It’s one of those phrases that gets thrown around often in business, particularly in negotiations. The idea is simple: in a zero-sum game, one party’s gain is another’s loss. If I win, you lose. If you win, I lose. The sum of our outcomes is zero. In this view, everything is a battle where only one can come out ahead.

 
This concept seems especially prevalent in commercial real estate transactions when the market is hedged in favor or a buyer or seller. Think about it—there’s a property on the table, and both buyer and seller have their own goals, often seemingly at odds. The seller wants the highest possible price; the buyer, the lowest. It’s easy to fall into the mindset that for one side to succeed, the other must suffer.
 
We’re often led to believe that every negotiation is a zero-sum game where our only option is to win, no matter the cost to the other party.
 
But is that really the case? Can a deal only close if someone loses?
I’ve found that in reality, this approach is not only limiting but often counterproductive.
 
Commercial real estate transactions are rarely a simple equation of plus one, minus one. The complexity of the deals, the relationships at play, and the long-term impacts on both parties are far too intricate to be boiled down to mere numbers on a scoreboard.
 
In my experience, the most successful transactions aren’t the ones where someone walks away feeling like they’ve “won” at the expense of the other. Instead, they’re the deals where both parties come away feeling satisfied, where both sides can say they’ve achieved something valuable. This is what we mean by a win-win situation.
 
A true win-win transaction takes into account the broader picture. It’s about finding common ground, identifying shared interests, and creating value for both parties. It might mean being flexible, thinking creatively, or looking beyond the immediate financials to consider the long-term relationships and potential future opportunities.
 
For example, a seller might accept a slightly lower offer if it means a quicker close or if the buyer is a local business that will positively impact the community—something that, in the long run, could enhance the value of other nearby properties the seller owns. A buyer might agree to pay a bit more if it means securing a property that perfectly suits their needs, saving them future relocation costs or renovations.
 
These are the kinds of
compromises that lead to deals where both sides feel they’ve won.
 
I’ve often seen negotiations where both parties dig in, each determined to get the upper hand. They see every concession as a loss, every gain as a victory. But this mindset overlooks the bigger picture. It ignores the fact that a deal where one party is left feeling resentful or cheated is less likely to hold up in the long run. Relationships sour, deals fall apart, or the animosity lingers, affecting future interactions.
 
On the other hand, when both parties feel like they’ve won something, the outcome is more sustainable. The buyer and seller leave the table not as adversaries, but as partners in a transaction that benefits them both. This isn’t just a feel-good sentiment—it’s good business.
 
So, where does the zero-sum game fit in commercial real estate? It doesn’t. Not if you’re in it for the long haul. Not if you’re looking to build lasting relationships, create value, and grow your business in a way that benefits everyone involved.
 
The next time you’re sitting at the negotiation table, try to move away from the mindset of “if I win, you lose.” Instead, ask yourself: What does winning really look like? How can we both walk away from this deal feeling like we’ve gained something of value? The answer might just lead to better deals, stronger relationships, and more sustainable success.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.

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