The commercial real estate lease renewal process opens both great opportunity and great risk for you and your company. Done right, you can get a great deal on space that will serve you well for years or decades to come. Getting the process wrong, though, can leave you tied to an expensive location that could sap your employee's productivity and long-term satisfaction. Here are some tips to make your next lease renewal the best one ever.
1. Forget Your Options
If you have a renewal option for your space, forget about it. It's there if you need it, but in most cases, you won't end up using it. Why? The option does a very simple thing. It specifies the terms at which your landlord has to rent space to you, but it doesn't tell you what you can rent your space for. Your option probably doesn't include tenant improvement allowances or the right to move to another building. It's useful if the landlord would otherwise kick you out of the building, but in any other case, it's usually the worst deal you can negotiate instead of the best one.
2. The Early Bird Gets the Space
Renewing office space might not seem like a complicated process. If you're staying in your existing space, you just need to renegotiate your lease, and that's it. Right?
Wrong. As you'll read here, staying shouldn't be any easier than any other option. You want to have time to consider every option and to, if necessary, move to a brand new space with all of the time that goes into the construction process. The best way to do your lease renewal is to start the process at least 18 months out. That way, you shouldn't ever be under time pressure.
3. Get Some Help
Two statements are probably true if you are reading this. One, your business is better at its specialty than just about anyone else in the world. Two, your business isn't commercial real estate. Why not get someone who is an expert in commercial real estate on your side? Skilled tenant rep brokers do nothing but help businesses like yours find the right space at the right price and terms. He or she is a market expert that knows what is available, where, and what is reasonable to offer for it. Even better, since the landlord usually pays his or her fee, your tenant rep shouldn't cost you anything.
4. It Is (Not) Time to Move
Early in the lease renewal process, step back and see if moving could be an option for you. Considering a move helps you understand the market and can inform your negotiations with your landlord. Conversely, if you think that you're sure that you want to move, being open to staying could also position you to make a better deal with a new building.
5. Always Survey the Market
Whatever you decide in the previous step, always take the time to look at what is out there. Having multiple options gives you and your tenant rep useful perspective as to what to ask for with the buildings that you ultimately choose to consider. Looking at other buildings and spaces may also give you ideas for how to better use your existing space. A market survey isn't hard to do, either. Your tenant rep will use his or her market expertise to assess the options available and usually prepare a tour for you to see all of them with a minimum amount of time and effort.
6. Lease for Flexibility
Finally, as you renegotiate your renewal or your new lease remember that the one constant in most businesses is change. It's hard to know what your organization will need when the new lease comes to an end, but it's pretty easy to guess that you'll need something different than you need today. With that in mind get a flexible lease. Shorter lease terms are usually better than longer ones if you and your tenant rep can negotiate the right rent and concessions. Options to expand to adjacent spaces cover you for growth while choosing a space that can be easily split up if you need to shrink can give you flexibility in the other direction. Consider doing less configuration with built space and more with furniture and flexible partitions, as well. That way you can rework your office for your future needs.
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