10 Ways To Approach Lease Renewal

Negotiating a favorable lease renewal can provide flexibility, improve operations and result in substantial long-term savings. Here are 10 ways to get a good deal by using your existing leverage.

1. Avoid the approach, “it’s only a renewal.”

More than any other, this attitude helps the landlord keep an existing tenant without offering anything material in exchange. The landlord avoids “market concessions” such as lower base rent, free rent or facility upgrades if you fail to ask for them.

2. Determine the future plans of other tenants in your building.

You must discern your landlord’s goals and motivation. To do so, leasing plans by other tenants should be investigated. If the building will be half-empty in six months, your negotiating position will be stronger. If other tenants are expanding, space will become more expensive.

3. Compare your renewal with offers at other locations.

Evaluate the cost of “change.” Even if you are enchanted with your current site, you should research other opportunities, if only to ensure your landlord offers similar incentives to make sure you stay put. This process provides critical guidance in determining an asking price as well as negotiating lease terms regarding base years; metered electric; expansion, renewal and cancellation options, etc.

4. Avoid making concessions because your landlord is your “friend.”

Your landlord may have become your best buddy, but you should still maintain an “arms-length” distance during renewal. Create a buffer during the negotiations process through professional representation, perhaps with an attorney or real estate agent.

5. Analyze your current lease.

Your current lease, probably gathering dust somewhere in your filing cabinet, should be exhumed and reviewed by a real estate lawyer or leasing professional. Commercial leases can contain up to 30 relevant components including clauses on alterations, default, subletting and infractions.

6. Gather market data.

Market data will vary depending on your neighborhood, region and the national economy. You should research sublet opportunities and pending relocations in your immediate vicinity.

7. Analyze your space.

Avoid a good deal for too much space, or too little; or the wrong building, wrong location or wrong lease terms. In today’s economy, you can improve your current arrangements, optimize your business environment and plan for the future.

8. Start negotiations well before your lease expiration date.

Procrastinating negates one of the most valuable negotiating tactics in any business situation, the ability to wait out the other side.

9. Evaluate your own value to the landlord.

Do you always pay your rent on time? Are you a friendly neighbor? Do you add valuable infrastructure? Landlords will almost always prefer tenants they know to those they don’t. This bias can be easily leveraged into monetary and contractual advantages.

10. Evaluate your landlord’s situation.

Like tenants, all landlords are faced with a unique set of circumstances. Their financial interests, arrangements with tenants, and their incentive to avoid vacancies can be affected by both unalterable realities and their own interpretation.

Lease renewals can affect your business for years in the future, and following the suggestions above can lock in favorable arrangements and ensure your organization’s ultimate success.

By: Alan Peterson

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Alan Peterson, Principal of Choyce Peterson, a commercial real estate broker and consulting firm with offices in Stamford, CT and Rye Brook, NY, co-founded the company in 1997. See his other articles at commercial real estate advice and the company blog at Space is Money.