One of the most commonly used phrases used in commercial real estate negotiation jargon is “expand the pie” – ‘Expanding the Pie’ comes from the metaphor where people are negotiating for slices of a single pie, such that where one person gets more of the pie it is clear that the other person gets less. For example if the only point of a negotiation is “price” then one person’s gain is indeed another person’s loss. The idea around “expanding the pie” is if both parties in Phoenix commercial real estate work together to get a bigger pie, i.e. add additional negotiable interests, then both can have more with the same percentage division.
In many commercial real estate negotiations there is an assumption that it is indeed win-lose, such that every gain that one person makes leads to the other person losing an equal amount. In a worst-case scenario (which is surprisingly common), the broker’s negotiation turns to conflict and quickly becomes personal. The sense of fair play (or even getting what I need) then goes out of the window as each player seeks to harm the other before they get harmed themselves. In negotiations that are perceived to be “win-lose” both parties often forget about what they are actually negotiating and focus more on “winning” itself. This attitude of “I must win” typically creates contention and deadlock at the negotiating table.
MIT defines Expanding the pie as follows: “The process of adding elements to a negotiation which help one or both sides to gain more – a result from making negotiations more integrative. These are usually elements which are valued differently by each party and often they have the characteristic that one side will gain a little, give up nothing or suffer only a small loss in return for a great gain to the other. These elements can usually be added to almost any negotiation no matter how distributive the negotiation first appears to be.” Although this sounds easy enough to accomplish, expanding the pie is often passed up by an inexperienced commercial real estate negotiator as both negotiators immediately begin discussing the obvious negotiable items. Experienced Menlo Group negotiators work first to identify the underlying interests of all parties before anchoring with a price or position. It is often the questions asked before the negotiation begins that assist in constructing an offer that makes both parties better off.
Expanding the pie negotiation techniques indeed change the frame of the Phoenix commercial real estate brokers negotiation from a zero-sum, win-lose game to a win-win scenario where both sides can benefit more by working together on mutual benefits.