Commercial Real Estate Space Lease Renewal Myths

Commercial Real Estate Space Lease Renewal MythsMost tenants who lease commercial real estate space think that renewing the lease is an easy process that does not require any additional work. Well I’m here to tell you if done right and you want to get the best deal possible renewing a commercial lease takes time and effort.  Even if you don’t want to move and even if you are just exercising your option to renew and extend, commercial lease renewals have the same economic impact as signing a new lease elsewhere and relocating your business.  Below are some common misconceptions about the commercial lease renewal process.

The Landlord Will Take Care of Me

Many tenants assume that because they have paid rent on time and been a great long term tenant that never complains that the landlord is automatically going to give them the best deal.  This is not true.

Landlords buy and lease commercial real estate properties to make money.  You are either negotiating with the owner or an owners representative that is an expert in market conditions and is ultimately trying to get the highest rents they can, and keep their expenses as low as possible.  Their experience, knowledge, and resources is greater than yours which means they have the upper hand in commercial lease negotiations.

I Have To Take My Renewal Option That is Already Negotiated

You may have a renewal option with pre-negotiated lease rates however that does not mean you have to take it.  What if you signed your lease in a hot market and negotiated $40 sf rents………and now rents have dropped to $30 sf.  Do you have to take your renewal option and renew at your pre-negotiated renewal rates?  NO.   That would mean you are paying over $40 sf when market rates are $30.  To protect yourself you want to start you lease renewal negotiations WAY before your renewal option expires.  This will give you more time to try and negotiate a better deal, and if you can’t you can take the pre-negotiated option or relocate to a better location.

Moving is Expensive So I Have to Take My Renewal Option

Relocating your company is expensive and can be disruptive however paying too much for your renewal space can be worse.  A new landlord might offer you a lower lease rate and give your significant tenant improvement dollars while your renewal option might not be that great.  The only way to find this out is to take time to research the market and see/compare your options.

I Don’t Need Help with my Commercial Lease Renewal

If you are 100% sure that your renewal option (that has a pre-negotiated rate & terms) is the best deal possible then maybe you don’t need help.  More times than not this is not the case.  You could spend your own time researching available alternatives, generating lease proposals, getting construction bids, etc. however that is not a very good use of your time.  I’m sure you have other business needs to attend to.  Getting help from a commercial realtor with experience and that only represents tenants can save you a ton if time and money and they can ensure you get the best deal possible.

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