Navigating a Lease Renewal

If you are approaching the end of your lease, the path of least resistance is to accept the Landlord’s proposed rent and lease terms, to forgo any inducements, and to simply renew.

Before you take this route, you should consider what your Landlord stands to lose if you don’t renew your lease.  If you relocate, your landlord will have a loss of income while trying to secure a new tenant.  In this market, any incoming tenant will likely be paying discounted rent, and benefit from inducements like free rent and an improvement allowance.  It is far more profitable for your landlord if you renew your lease.  Your tenancy is valuable, and you should view it that way.

If you are considering a lease renewal, I recommend that you think about following 6 points before signing:

1. Start Early

It takes time to review your needs, project your space requirements, survey the market for options, negotiate an offer and lease, and complete renovations.  If you don’t start a minimum of 8-12 months in advance of your lease expiry, you can compromise the leverage for a lease renewal negotiation, and ultimately the quality of your office space.

2. Run a process

Your landlord knows the market and the tenants that are ‘on the street’ looking for office space.  You need to invest time in a process that explores the different competitive options.  You may be surprised at the opportunities that are available.

3. Make it competitive

Always request a proposal from your landlord, and other landlords.  This isn’t just for leverage. It is always wise to have a plan B…and plan C.

4. Limit communication

Leverage during negotiations slips away quickly when you, or a staff member, disclose your position.  Even an inadvertent comment to the building manager or leasing representative can jeopardize your position in a negotiation.

5. It’s a business decision

Relationships are important, but at the end of the day, the potential business terms of the renewal are going to drive the decisions.  Just because you have been in the building for many years and established a relationship with the landlord doesn’t mean you are guaranteed the best deal.  In fact, your landlord knows the longer you have been with them, the less likely you will be to relocate.

6. Outsource

I know it seems self serving coming from a real estate agent, but letting an agent, active in office leasing, run a transparent process goes a long way to arriving at the best deal.  When your landlord knows you are working with a credible agent, they know that you are going to have competitive options.  Unless you can devote significant time and your full attention to completing a lease transaction, and you are fully aware of all possible opportunities in your market, you are likely to leave savings and favorable conditions “on the table”.

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