When it comes to office space lease renewals many companies assume that landlords will just renew their lease with reasonable terms and do not even attempt to negotiate it or evaluate other alternatives. Before the tenant knows it the landlord’s lease renewal proposal is on their desk and the economics of the deal are considerably higher than anticipated. Because they don’t have the time to see if a better option can be negotiated in a different building, such tenants end up getting a bad deal.
Even if a company is 100% committed to staying at their current location it’s important to look at a renewal as a brand-new deal and look at all the options in the marketplace. Otherwise tenants are potentially executing a lease contract without having any idea of how much money they could have saved.
5 key points that will help maximize the value of any office lease renewal
1. Start the process at least 6 to 12 months before your target renewal or move-in date. It can take several months to find other options, negotiate with potential landlords (lease rate, tenant improvements, etc.), and then negotiate with your existing landlord. You’ll also want to allow 2-4 months if you have to plan a move.
2. Consider hiring a good tenant representative to help you research suitable properties and negotiate on your behalf. Commercial real estate brokers can give you an overview of the office market, and offer other valuable input. This will allow you to focus on what you know best…..Your Business and let your broker handle all the heavy lifting while educating you and keeping you in the loop.
3. Tour other properties in the marketplace to see what other options are available and what kind of economic deals can be had as a new tenant. Understanding market rental rates, tenant improvements, free rent, and other benefits will not only give you a sense for what you might expect if you go elsewhere, but it can also help you negotiate your current renewal.
4. To get the best deal allow multiple building owners to compete for your occupancy, including your existing landlord.
5. Let your landlord know you are actively seeking alternative solutions for your space needs, while making sure to preserve your good relationship with them. It generally costs the landlord more to attract a new tenant than it does to retain an existing one. Most landlords do not want to have to deal with a few months of vacancy, showing the office space, paying for free rent and/or tenant improvements, and having to deal with any other unknowns.