Commercial lease renewals are a great time for companies to evaluate their current use of space, future needs, research the current commercial real estate market, and use that information to negotiate a great commercial lease renewal.
If landlords see you as being a well-informed tenant that knows your commercial lease options and how they effect the changing needs of your business, you have a much better chance at securing a better deal.
Below are 6 tips to consider when negotiating your commercial lease renewal
1. Start the process early and keep a pulse on the market
It’s important to be proactive and start the process many months before your commercial lease expires. You should actually approach the landlord before they do you. Frequently review your lease so you remember all the important dates and conditions.
The commercial real estate market can change rapidly due to economic conditions so by staying abreast of the market there may be opportunities to renegotiate the commercial lease renewal early and take advantage of potential savings
2. Know how the landlord will benefit from renewing your commercial lease
In most cases landlord’s will financially benefit when you renew your commercial lease. If you leave the landlord has to incur additional costs to market the vacant space, do renovations or improvements, and potentially incur a loss of rent because of the space being vacant
To have a successful commercial lease negotiation it’s important to know the landlord’s situation and the financial impact that your tenancy has within the market and their portfolio. Once you have this information you want to leverage it in a way that will help you get better financial lease terms and conditions.
3. Evaluate how your company can use the space more efficiently
What space is not being utilized as much as it should? How can you avoid having space go unused? How can you repurpose space or create areas that can be modified for multiple purposes? What technology or office configuration can you employ to create a more efficient and better work environment? What amenities would you like to have to create the ideal work environment that makes the employees happy?
Once you have evaluated and discussed all these points then use them to negotiate against your landlord. If it means they can keep you as a tenant they may be willing to incur the costs for some of your requests.
4. Compare other alternative commercial properties in the market
Even if you plan on staying in your existing building take the time to get educated on other properties and property owners in your desired area. You just may find another building that is as good or better than your existing one.
Most likely market conditions and available spaces have changed since you signed the last lease. Other owners may be in a position to offer better amenities or financial incentives
Whether you choose to relocate or simply stay where you are by researching other options you create differentiating factors to the table to help with negotiations and incentivize your existing landlord to offer better financial terms and conditions
5. Create a plan
Do not give your existing landlord the impression that you plan on staying. Do this and you lose all leverage in your commercial lease negotiations in which they may decline your requests or be less likely to negotiate. Create a plan that puts your company in a strong negotiation position and strategically show the landlord that you have done your homework and are prepared to walk away if favorable terms cannot be agreed on.
6. Consider engaging a commercial real estate agent to help you negotiate the renewal
If you are not familiar with the market or current market conditions or do not have the time to manage the commercial lease renewal negotiations process you should consider engaging a commercial real estate agent who specializes in commercial lease renewals to help you win the best deal.
Don’t be a captive tenant. Take control of the commercial lease renewal negotiation by hiring an agent who represents your best interests. They will know the market and alternatives and can help leverage this information. Landlord’s always hire experienced knowledgeable listing agents to educate and represent them so you should do the same to level the playing field. Find an agent that adds value by understanding your business objectives and current and future needs.
Take action and take the renewal process seriously
While you may be satisfied with your current commercial lease space it’s important that you take the commercial lease renewal process seriously. You need to evaluate all your options and choose the one that makes both business and economic sense. If you don’t do this you will end up paying EXACTLY what the landlord wants you to pay and leave money on the table that you could have used elsewhere in your business.