When you get to the end of the term of your commercial lease, imagine being at the foot of the bridge in the image above. You know you will cross and transition into another chapter of your business life, but will you go to the right or left when you get across?
Particularly now, tenants are thinking more about their current leases and what they expect going forward. If you need to renew your commercial lease in the next few months, here are some tips for choosing the best direction.
- Be proactive. Make sure you have plenty of time to work on evaluating options and negotiating the renewal. If you have less than six months to go, start working on it now. If the lease ends later, put it on your calendar to follow up.
- A renewal option is just an option, not a requirement. Most commercial leases will have an option to renew the lease because both landlord and tenant expect things to go well and want to continue working together. Sometimes things change, though, and that particular provision may not work well now. Get ready to do some evaluation and have some frank discussions.
- Decide what you really need. Is the space you have currently to big? Too small? Too far for your customers? Easy to find (or not)? Do you have a good relationship with your landlord? Decide what you really need to have and whether your current location is a good fit.
- Know your current terms. If you decide to stay put (and there’s nothing wrong with that), review the terms for renewal in your current lease. This is your opportunity to find out if the upcoming rental rate makes sense. If the rate is “then market rates” or “to be negotiated,” be prepared ahead of time with data to support what you believe a reasonable rate to be.
- Know your options. We know moving your business can be a hassle, but it’s still good to know what other options are available in the market. This will help you in a couple of ways. First, it will give you a sense of how hard you might be able to push for new renewal terms. Second, if you don’t agree on terms for a renewal at your current location, you’ve done some preliminary work on finding an alternative.
- Understand your landlord’s motivations. Negotiating a commercial lease renewal is in many ways just like negotiating a new lease. Getting to a successful conclusion means understanding what the other party is trying to achieve also.
- Seek professional advice. Just as with a new lease, you may need professional advice when negotiating your renewal. This may be market information and trends from a commercial real estate broker or legal advice from an attorney. Be ready to ask for assistance from these professionals to get where you need to go.
When you’re ready to start working on your lease renewal, we are here to help provide market insights and negotiate other renewal terms that may be helpful to you such as a different lease term or a landlord contribution to refreshing your space. We can also provide referrals to other service partners as needed. If you would like to talk to one of our agents about your lease renewal, contact us.