How To Negotiate A Commercial Lease Renewal

Commercial leases are a large expense for businesses so knowing how to negotiate a commercial lease renewal is important. Lease renewal time can be stressful for any business owner. It can also be a time to improve upon your bottom line.

There is an opportunity to reassess the value to your location and negotiate a better lease agreement. It is important to be well-informed about the market and leasing options due to the impact the lease has on your business. It also pays to be aware of the evolving needs of your business. The more you know the better your chances will be to secure a favorable lease.

Here are some tips to consider during your lease renewal:

Know the local market and start researching early

A commercial lease is a big investment. It’s always best to give yourself plenty of time and ammo when it comes to negotiations. You should be reviewing your lease and approaching your landlord months before you need to make a decision.

The commercial real estate market is constantly changing due to economic conditions and many other factors. Therefore, it pays to know a little bit about the current state of the local real estate market. Time and knowledge are two things that really affect the chances of signing a good lease agreement.

Understand how your landlord profits with a lease renewal

It costs a landlord a fair amount of money to find a tenant. When a tenant decides not to renew their lease there is a loss in rent. There are also other expenses that come into play when a landlord needs to find a new tenant.

Landlords have to market any vacant space so they can find a new tenant. They usually have to make updates or renovations to the property for a new tenant as well. This really helps put a little power on the side of the current tenant.

Knowing a little about the landlord’s situation including their current portfolio will also help in negotiating a lease renewal. It’s important to understand how your lease renewal will impact the landlord’s bottom line. Knowing how much your lease renewal means to the landlord can help you save a lot of money with your lease renewal.

Know how the location/space affects your business

There are a lot of things about a commercial space that affect your business. Knowing how the location, environment, amenities, and more affect your employees and customers can impact your decisions on the lease renewal.

There are a lot of questions to ask when it comes time to renew your lease. Are there workplace safety issues? Is the location ideal? Does the office or warehouse space fit your current needs? Are there upgrades or repairs that need to be made? Is there another space that can work better to fit your needs?

Once you have answers to all your questions you will have a better idea about how to go about your lease renewal. In some cases, your landlord may make upgrades or cover during expenses to keep you as a tenant.

Research other options in the local real estate market

It always pays to know what other buildings and owners in the market have to offer your business. Knowing that you want to stay in your current space should not affect your desire to research alternatives. You may find a better space for your business or perhaps learn some information that impacts your renewal.

Chances are good that there are different market conditions and available spaces since you signed your last lease. There could be other landlords that offer better terms, amenities, location or many other things that affect your decision.

The research may change your desire to stay or give you more ammo to bring to the negotiation table. Information and options can give your landlord a lot of incentives to give you a better offer.

Have a plan prior to lease renewal negotiations

You always want to have a plan and never want to give your landlord the impression that you plan to stay no matter what. There is very little room to negotiate a better lease agreement if your landlord doesn’t feel there is a chance you may take your business elsewhere.

If you did some research and have other options to present to the landlord the ability to negotiate improves. Having a plan prior to beginning the negotiation process will help you get a more favorable lease. Showing your landlord that you have your ducks in a row and know your options is a great way to begin negotiating.

Get professional tenant representation

What is tenant representation and why you need it is something everyone looking to sign a commercial lease should know. There are many reasons to have tenant representation even if you have a good relationship with your landlord. Business is business and it’s important to have someone between you and the landlord that handles commercial leases for a living.

A commercial realtor that specializes in local tenant representation knows the market. The tenant rep will be familiar with the process and key points. Having tenant representations also shows the landlord that you’re serious.

Good brokers know how to fight for you and have a solid understanding of the local real estate market. They also know how to negotiate things you may not consider. Tenant representation brokers get their fees from the landlord so it doesn’t cost you, the tenant, anything.

You can like your current space, landlord, and lease agreement, but you need to view lease renewal as a serious business investment. A good broker will take the emotion out of the deal and focus on the business side of things.

The bottom line is it pays to be proactive with your lease renewal

It never hurts to have a discussion with a local tenant representation expert about your lease renewal needs. If you’re in the Dallas or Fort Worth area then you should contact us at any time.

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