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It seems like a simple process. The Landlord or Property Manager gives you a friendly call to discuss your upcoming lease expiration. You have a cordial conversation and the Landlord proposes some easy lease extension terms that are similar or even a small discount from your current monthly obligation. He sends over a one page lease amendment you sign and go on with running your business.This is the single biggest mistake you can make in the process.
Although signing a quick lease extension can be very quick and easy it is costing you a significant amount of money! This happens approximately 70% of the time. Below are 5 tips for renewing your office lease that can save you a significant amount of money and get you the best lease terms possible.
1. START EARLY
You should allow 9 – 12 months letting the entire process play out. It takes time to research alternative properties, gather comparable lease information, engage in negotiations with other landlords, and finally after seeing all the information to go back to your current Landlord. The closer you are to your lease expiration the better leverage your existing Landlord has against you.
2. GET GOOD ADVICE
Although that initial call that you will receive from you property manager or Landlord may not feel like a negotiation, IT IS! The Landlords number one priority, and rightfully so, is to increase the value of his asset. By engaging a tenant representative professional you get the benefit of a person that has just as much if not more experience in negotiating an office lease as the Landlord. They will know the key deal points to look for and will have market knowledge of what types of deals you’re Landlord and competing Landlords have been doing. Rent Abatement? Tenant Improvement Allowance? Rate Reduction?
3. UNDERSTAND THE TRUE COSTS OF MOVING
Understanding the quantitative and qualitative costs of moving office space or staying put.
Quantitative Costs: Rental Rate, Occupancy Costs, Concessions, Tenant Improvements, Technology Costs, Furniture, Down Time, ect.
Qualitative Costs: Office Perception, Corporate Image, Amenities, Workforce, Moral, Visibility, Upgrade, ect.
It is important to look at these costs and analyze if renewing or moving is the best long term decision for your company. A qualified tenant representative will be able to assist you in creating financial models to compare these costs and how they can affect you decision.
4. CREATE A COMPETATIVE ENVIROMENT
The best arrow in your landlords quiver is the knowledge that moving is a hassle and that it cost money. Most Landlords feel that they are negotiation from a position of power because of these facts. This same confidence can be used against the Landlord by creating competition! By engaging the assistance of a tenant representative professional alone goes a long way to put the Landlord on notice that you are educated and want the best deal. The next step is the competitive environment that you’re Tenant Representative can create by successfully taking you to the market. It is a tenant friendly market, and this can be used to your advantage!
5. ANALYZE & PULL THE TRIGGER
Your Tenant Representative should be able to place all the options including the Landlords renewal proposal in a simple financial model that will allow you to compare the costs of each option. As well as helping you to analyze the qualitative differences to allow you to make an informed decision.
In many cases you will still just renew. But by going through the process you will know why you did and have the confidence that you received the best possible deal.
