How Do RFPs Work in Commercial Real Estate?

By Published On: November 19, 20211.8 min read

A Request for Proposal (RFP) is a document in which one company or government entity requests detailed information from another company to determine whether or not they should conduct business together. Many governments use RFPs to announce projects, such as building a highway. The request for proposal outlines the scope of the project and then gives potential contractors a specific outline for how to apply to be on the project. An RFP process is similar to grant writing in that you have to apply using a very specific format and set of information in order to be eligible.

To vet each contractor and narrow down the process, the hiring agency may also ask for a request for qualifications (RFQ).

Who Uses Requests for Proposals (RFPs)?

Governments, private and public companies use RFPs to get the lowest possible bid on a project. An RFP also allows them to see how different contractors would approach the project. This allows for healthy competition from the bidders, as well as a more unbiased process.

RFPs in Commercial Real Estate

In commercial real estate, RFPs are slightly different. They’re more commonly called Letters of Intent (LOI). Tenants interested in leasing a commercial building will put together RFPs and send them to the property owners, outlining what they need from the space. Tenants normally include some background on themselves in RFPs, such as websites and branding materials, and then what they’ll need in the space (the “spatial requirements”).

In the RFP, the tenant will lay out their proposed use of the space. If the tenant is a jewelry store, the owner would explain what they would need in storage and storefront space. If they were a manufacturing company, they would lay out their processes and need for large equipment, lighting and ventilation.

Real estate RFPs include details about the expected length of the lease, other amenities the tenant is seeking, subleasing options, and janitorial services. As the tenant lays these out, the landlord responds to them as a sort of long questionnaire. This helps commercial tenants determine the best buildings for their long-term use and helps commercial real estate owners remain competitive as they see what is most attractive to commercial tenants.

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