When you find a space that suits your business needs and is working well for your team, renewing your lease is usually preferable to searching for new space. Searching for a new unit to lease and going through the moving process means time and money spent, so most businesses prefer to remain in their current locations unless their requirements have changed.
If you already know that you'd rather stay in your current location than go, you still have another decision to make: do you want to wait until the last possible moment to negotiate a renewal with your landlord or would you rather renegotiate now? Each option has its own set of benefits and drawbacks that you need to weigh to make the right decision.
Pros of Renegotiating Early
There are a number of advantages to renegotiating a commercial lease early, including:
- More Chances to Come to the Table. If you start negotiating now and can't reach an agreement that suits you both, you can always revisit the issue at a later time if you start renegotiating now.
- Opportunities for Perks. In competitive markets, landlords value stability and appreciate knowing that they have tenants lined up. Securing new tenants can be costly and time consuming, so many landlords will be willing to give you a deal that can save your company money.
- Less Risk. Approaching your landlord now will reduce your risk of him or her beginning to search for a new tenant, so you're less likely to have to give up your space.
Cons of Renegotiating Early
- Less Urgency. Your landlord may in some cases have the upper hand in an early negotiation. This is most often true in areas where there is little competition but high interest from companies looking to lease space in commercial real estate.
- Less Flexibility. If your business needs change between now and when you would have renewed your lease, you won't be able to move until your renegotiated lease expires.
Pros of Waiting to Renew
- Possibility of More Pressure on Your Landlord. If it's near the end of your lease and your landlord has doubts that it will be easy to fill your space, you could have leverage going into the negotiations that will help you get what you desire out of your new lease.
- More Flexibility. If you're not completely certain that you want to renew, waiting will allow you to reevaluate your business needs closer to the time of renewal, so you're not locked into your space.
Cons of Waiting to Renew
- Less Opportunity to Talk. Waiting until the last moment may mean you only get one or two shots at negotiating your lease with your landlord, so you may end up having to settle for less than what you wanted or even having to look elsewhere.
- More Risk. Unless you have language in your lease that guarantees you the right to renew, there is a risk that your landlord may begin looking for other tenants if you wait. If he or she finds a tenant that will be more profitable, you could end up being forced to relocate even if you want to stay.
Before you seriously consider when to time your request to renegotiate or renew, be sure to carefully review your lease agreement. This way, you'll know what rights you have in terms of renewal options and when the deadline is for you to notify your landlord about whether to stay or go. Every lease is different, so arm yourself with knowledge before you approach your landlord.
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