The Top 5 Critical Steps to Commercial Lease Renewal

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Commercial Lease Renewal

 

When the time comes for a commercial lease renewal, it might seem like a simple process. The decision to stay simplifies the process since you won’t need to tour sites, and, especially if you have a renewal option, negotiating the price and terms is usually easier, as well. However, if you look at staying in your space as being the same thing as moving into your space again, the importance of the process comes clearer. Treating a commercial lease renewal as if it was a completely new lease lets you take full advantage of the freedom to change to potentially save money or improve your terms.

 

Step 1: Carefully Assess Your Space

Just because you’re leaning towards renewing your lease doesn’t mean that you shouldn’t give your space a once-over. Take the time to look carefully at your space. First, determine if it really meets your needs or if you would be better served to be in a larger or smaller office or in a different location. Second, determine if it needs changing or repairs. Spaces that have been occupied for a long time usually need some freshening if not a total remodeling.

 

Step 2: Abstract Your Lease

If you’ve never abstracted your lease, it’s wise to do it before a commercial lease renewal. Even if you have, it’s a good idea to do it again. The reason for this is that it’s common for companies to forget about some of their provisions in their lease over time. Something that was acceptable to you might not be any more seven years later. Doing an abstract forces you to sit down and carefully re-read the document so that you know exactly what you’re about to renew.

 

Step 3: Hire a Broker

Your commercial lease renewal isn’t on autopilot, even if you think it is. As you start the renewal process, you will still need market information and you will still need help negotiating. Bringing in an experienced tenant representation specialist will give you access to the skills and information that you need to get the best possible deal.

 

Step 4: Survey the Market

Surveying the market before you sign your commercial lease renewal serves two purposes. First, it allows you to look at all of the buildings and spaces that have come available since you signed your lease. It could very well be that there is a more perfect space for your company out there and, if there is, a renewal might not be the best choice. Second, it gives you market data that allows you to assess the attractiveness of your option, if you have one, or of your landlord’s renewal offer.

 

Step 5: Renegotiate Everything You Can

Finally, when you’re ready to do your commercial lease renewal, use your market data and the broker that is helping you to renegotiate as many terms as possible in your favor. If you have an option, it usually isn’t binding on you. In other words, you can sign it if you want to, or you can negotiate a more attractive renewal. You’re just as wide open as you would be if you had no option. The difference is that, with one, you’re guaranteed the ability to renew at pre-set terms and conditions.

As you work with your landlord, remember how much he saves by renewing with you. He avoids the cost of marketing and of subsidizing new TIs. The space also stays occupied without a break. In most markets, these benefits add up to significant savings of which you can negotiate a share.

 

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