Commercial Real Estate and Business Negotiations
Olga Ladorenko is an experienced specialist in business communication in the field of commercial real estate. She knows how to negotiate effectively, establish dialogues with partners and clients, and build relationships based on mutual benefits, not on the victory of one party. In her interview with the Global Women Media, the expert shared her unique knowledge and tips on business communication. She also talked about the prospects of commercial real estate in Russia and worldwide.
PhD, psychologist, business communication expert, author of educational courses for business schools
Olga Ladorenko’s expertise is unique thanks to its versatility. Ms. Ladorenko graduated from the Lomonosov Moscow State University. She specialized in philosophy and then in psychology. Her deep understanding of people and the essence of things, strategic thinking, and desire to move forward constantly helped her not only achieve significant success in her career but also come to an understanding of fairness as the main principle of quality business.
– If we compare the spheres of psychology and philosophy to the field of commercial real estate, they seem to be quite far from each other. How did you enter that business?
– I had a very interesting story of entering that business. When I started being engaged in the field of commercial real estate 25 years ago, I understood absolutely nothing about it. I knew poorly the terms and concepts discussed at our meetings. I understood: to develop further in that area, I needed highly-specialized knowledge.
I started with buying the Civil Code and thoroughly studied the chapter on renting real estate. I also managed to find a book in English, which gave me a basic understanding of Western accounting. In Russia, it was quite difficult to find professional information on that topic at that time. I had to read literature from abroad and adapt the new knowledge to our realities. My education helped me very much because my studies at the Philosophy Faculty taught me a systemic approach to obtaining knowledge.
I drew information from everywhere. At work, when I was surrounded by lawyers, I asked a lot of questions and always listened very carefully to everything they were saying to each other. Later, when the Internet became more accessible, I had an opportunity to study real cases of legal disputes.
Psychology and philosophy became a powerful basis that helped me in acquiring other competencies. Systemic, painstaking, and very responsible self-education and supplementary education in the field of finance played a key role in that.
The field of commercial real estate attracted me because it combined many elements like a mosaic and it was a great pleasure for me to collect them.
As a business communication specialist, I needed to know the basics of law and taxation and to be familiar with financial and technical matters to be able to negotiate in the field of real estate. That knowledge was necessary to find a common ground with partners, colleagues, clients, and contractors.
– What is the peculiarity of business communication? What are its basic principles?
– Business communication is communication with a purpose to gain profit or benefit. This sphere is limited both by the scope of tasks that must be solved during the conversation and by the communication style. It is characterised by conservatism, a certain formality, clarity, business manners, and following rules. In their speech, opponents rely on laws and business practices.
Preparation for business communication has two main phases. Firstly, the person must formulate what goals he or she wants to achieve and what tasks he or she plans to solve through communication. Then a person needs to clearly understand what business interests are manifested in his or her position (i.e., to answer why it is important to him or her) and what are the justifications for the demands and proposals to the other party.
One of the main ‘pillars’ of the negotiation method developed by the Harvard School lies in the fact that, behind any positions, there are interests that can combine and complement one another. If the parties have complementary or at least non-contradictory interests, it is necessary to seek a solution to the problem that will maximize the interests of both of them. This is called the ‘nonzero sum game’ in game theory and the ‘win-win’ strategy in negotiation theory. If the positions of the parties are opposite, it is necessary to reconcile them using objective criteria. They can be taken from statistics, laws, and business practices. The position can sound like this: “My commercial terms are based on current market practice” or “Statistics on the transactions show that the conditions that we offer to you are competitive”. Turning to objective criteria makes it possible to move away from personal confrontation and prevent possible conflict.
It is important to understand that there are no ‘friends’ or ‘enemies’ in business communication. However, there are partners, each of whom has specific goals. They need to combine these goals to reach an agreement. At the same time, it is desirable to look for solutions that will be mutually beneficial to both parties.
If one party decides to concede in negotiations, this should be the result of a conscious position. One should ask oneself: “What benefits and advantages can I receive in the future if I yield now?”
Ideally, neither party should sacrifice its interests for the sake of the other. Negotiating from a position of strength with one party imposing conditions and the other submitting does not lead to a long-term and fruitful cooperation. The losing party will withdraw from the partnership as soon as the opportunity arises. In Russia’s Civil Code, such a thing is called an ‘unconscionable contract’.
The negotiations I described are called ‘principled’. They require a high level of business culture, and awareness from counterparties, an ability to not only state one’s position but also put oneself in the shoes of the interlocutor, understand, and hear him or her.
There are also positional negotiations. Their strategy is focused on a dispute about specific points in resolving a conflict issue. In my opinion, such communication is much less effective. It becomes difficult to come to an agreement when some people unreasonably demand something and others don’t understand why they should yield.
When taking part in principled and positional negotiations, I noticed that the first model requires much intellectual effort, often brainstorming. However, in return, such negotiations charge all participants with emotions and energy. The second model of negotiations exhaust everyone and most often bring desired results to neither party.
The way a person presents information is particularly important in business communication. For example, the pace of speech should not be too fast. One should avoid the usage of various specific terms that one’s counterparty may not know. The goal of business communication is not to show your professionalism and competence but to establish a constructive dialogue. To make that possible, the interlocutors must hear and understand one another.
One of the problems in establishing any communication lies in the possibility of a misinterpretation of information by the party receiving this information. That is why it is so important not just to convey one’s point of view but also to ask questions to the interlocutor, be in a dialogue with him or her in order to receive feedback.
People tend to perceive about 90% of information through nonverbal and paraverbal channels. Not only what we say, but also how we say that is important.
For example, there can be confusion if the speaker does not watch his or her intonation. There are two main reasons for raising voice involuntarily: anger and excitement. Now imagine that, when negotiating, a specialist touches on a topic that is important to him or her and for which he or she is responsible. The speaker’s voice rises because of excitement. However, interlocutors perceive it as aggression without knowing those reasons and also get into an aggressive position. Most likely, such negotiations will not bring any results.
The timbre of the voice is no less important in business communications. I read that Margaret Thatcher had special training with a phoniatrist before entering the political arena. She naturally had a high voice and it was quite difficult to perceive it as the voice of an authoritative and influential person. Men, on the other hand, are recommended to negotiate in a baritone rather than a bass. People associate a voice that is too low with something heavy, clumsy, and inflexible.
– At first sight, it seems that selling-buying and renting real estate are poorly related to psychology. However, it turns out that we simply can’t do without psychology in these areas. Is it true?
– Yes, it is. Psychology is a very interesting science important for all spheres of society’s life and activities. It helps establish relationships among people. Of course, those are the ones who sell and buy real estate.
It should be noted that psychology in commercial and residential real estate has different functions. In my work, I focus on negotiations and establishing communication between the partners based on rationality. The task of the real estate specialist is to make the clients interested by influencing their emotional perception.
Commercial real estate belongs to B2B (‘business to business’) sales. That area has almost no room for emotions and impressions. To sell the product, it is important for the specialist to be rational, competent, knowledgeable, and persuasive rather than emotional.
Professionals in the field of residential real estate sales have an interesting psychological tip. To influence the clients emotionally, before showing the apartment or house, they warm up pastry products in the oven or brew aromatic coffee. When a person crosses the threshold, he or she immediately feels comfortable and unconsciously associates this space with such concepts as ‘home’, ‘family’, ‘warmth’, and ‘love’.
Business is a sphere based on interaction with people. That is why psychology plays one of the key roles in it.
– What can you say about the development of the commercial real estate market? What prospects does this area have in Russia today?
– Commercial real estate is a field that is still going through a crisis. It depends directly on the processes taking place in the economy. When the GDP is growing by more than 5%, investments are increasing and companies are expanding and renting new spaces. In this case, we can witness the growth in the office real estate market. The more businesses and companies appear in the market, the more people get jobs. Their wages and salaries rise as well as their purchasing power. Accordingly, commerce goes up, which leads to the growth of the retail real estate market. In times of crisis, all of these indicators go down, the number of jobs decreases, and people’s purchasing power is reduced. The pandemic has exacerbated all the problems that had occurred in commercial real estate in recent years.
The COVID-caused crisis has only intensified and exacerbated the trend towards a global shift in commercial real estate formats. That trend has been evolving since before 2020. Due to digitalisation processes, a lot of businesses shifted to an online format. Even before the introduction of remote work, employees of companies began to think more about the time they spend to get to work and back. For example, even before the pandemic, VimpelCom moved a significant portion of its employees to remote working. The company noticed that both work efficiency and satisfaction of its employees increased significantly. With the development of e-commerce, many consumers, especially the new generation, began to prefer ordering goods online instead of going to stores. Marketplaces started replacing shopping centres gradually but steadily.
These trends have resulted in the need to transform the commercial real estate market and to change the very concept of many spaces.
Today, the office is no longer perceived as a place where people work adhering to a strict framework of time and rules. It is a space where colleagues meet when needed to discuss current problems and tasks, brainstorm, and communicate with clients. The office has become a place for creativity and development, not for spending working time in four walls.
Today, shopping centres are a space for not only buying goods but also experiencing impressions. People can buy most goods and products online. They tend to go to the shopping centre in the pursuit of emotions and the new experience that can’t be gained through a computer screen.
The world is currently developing completely new formats of commercial real estate focused on bringing people together.
An interesting format of real estate, which has already gained popularity in Western countries, is now appearing in Russia. These are so-called community centres, spaces that combine a variety of functions interesting to the population of a particular district. For example, ADL in Moscow buys old Soviet cinemas and creates multi-format spaces, in which stores are placed next to cafes, cinemas, children’s playrooms, places for workshops, and regular events. Thus, the new space combines retail, entertainment, and social components.
Modern people want live communication and interaction. They are interested not in the division into residential and office areas but in the comfortable location of all necessary infrastructure within walking distance. The pandemic has only intensified these needs and accelerated the process of mixing formats.
The current transformations in commercial real estate are very interesting. The world is changing and it is important for us to adapt the space to the demands of today and the needs of the people. We are already creating a new environment for current and future generations.
– Today, you are promoting bankruptcy real estate. Why is this field interesting for you?
– I started working in the bankruptcy estate business this year. After many years of working with commercial real estate, I experienced professional burnout. I was tired of the endless cycle of contracts and the same conversations with brokers and leaseholders.
Suddenly, my colleague asked whether I wanted to take up selling the bankrupt brick plant in a town in the Bryansk Oblast. He introduced me to wonderful lawyers who are educated people running their businesses according to European principles and models. I agreed to the offer almost immediately and understood that the case would be interesting although the work was new to me.
Once there was an episode in my life when the company I worked for went bankrupt. Many employees and I were fired and we filed a lawsuit because we disagreed with that decision. I had to study a lot of information, the law on bankruptcy, and court practice. We failed to win the case but I gained some valuable experience, which turned out to be very useful for my professional development.
In addition to selling the brick plant, I was offered to engage in selling the mechanisms for the production of printed circuit boards. In both cases, I had almost no idea of what I would do but that didn’t scare me away.
Supported by technical specialists. I started establishing communication with clients and promoting projects. That was very interesting thanks to the fact that I met completely new people different from those with whom I communicated when working with commercial real estate. The majority of them not are only managers but also practising specialists involved in the work and able to tell you amazing stories and explain the most interesting nuances of their work.
Of course, I was also very attracted by the work itself. Today, I am very excited when reading the court decisions on this or that bankrupt object. I find them similar to thrilling detective stories.
– You are the author of several original educational courses. What should we teach the rising generation?
– Yes, I deliver courses at the Russian School of Management and have developed several original programmes. The main course is related to the topic of lease relationships. Within its framework, I talk about the leaseholders and the features of cooperating and negotiating with them. I teach my students to formulate commercial offers and compile lease contracts. In addition to me, other practising professionals and experienced leaseholders share their experience with students.
A separate course is devoted to marketing in the field of commercial real estate and the promotion of major projects in the field of B2B. The peculiarity of this activity lies in the fact that every object is individual. There are no completely same people on Earth. Similarly, there are no completely identical spaces or buildings. Their price, target audience, and ways of promotion depend on a number of factors.
As a specialist in business communication, I couldn’t miss the topic of negotiations. A separate educational programme is dedicated to negotiating. I adjusted the information to make it possible to apply it to the field of commercial real estate.
Today, I’m developing a major remote course for lease managers in the field of commercial real estate. It unites all my knowledge and that of my colleagues in this sphere.
As a mentor, I would like to bring up literate specialists able to not only succeed in the profession but also possessing highly-developed business culture. In my opinion, fairness, openness, and sincere care for the interests of clients and partners are no less important than many other professional competencies in the retail field.
– What would you wish women of the world?
– Firstly, never forget about your professional and creative fulfilment. It’s important to listen to yourself and discover something within yourself that you can show to the world.
Secondly, don’t be afraid to try yourself even in ‘male’ fields of business. Women are naturally endowed with many strengths. We must use them not to compete with men but to cooperate with them. Such a mutually supportive partnership always leads to success.
Thirdly, don’t be shy because of being different and don’t worry about not fitting into a standard role model. There are two interesting books titled Gods in Everyman and Goddesses in Everywoman by Jean Shinoda Bolen. Based on the archetypes of Greek goddesses, she described 12 female characters or images from a ‘warrior’ to a ‘keeper of the family hearth’. The author showed how different women are. I want every woman to understand that if she doesn’t fit into one role model, she is simply closer to another one. The main thing is not to be shy to be yourself.
Viktoria Gusakova, Global Women Media news agency
Translated by Nikolay Gavrilov