7 Considerations When Negotiating an Office Lease Renewal
Negotiate for your office lease renewal is very complicated. Hovering over your office land lease is usually one thing: the lease renewal. Unlike residential leases, landlords will approach commercial leases with proposals months in advance of the renewal date. Like residential leases, the terms for the renewed lease include a standard element: higher rates.
1. Don’t Wait Until the Last Minute When Negotiating an Office Lease Renewal
If you’ve ever relocated offices, you recognize the strain and strain it can placed on your people, including your day-to-day operations. Not only will moving offices require substantial getting to ensure your furniture, equipment, communications, infrastructure, and IT are seamlessly transferred, educating your employees on the changes to their commutes, workflow, and work environments are key to a successful move. That said, waiting until the eleventh hour to finalize (or not) an office lease renewal serves no party effectively – including your landlord.
2. Proactively (and Continually) Research Your City’s Commercial land Market
No matter where you’re located, your city is likely experiencing a boom in modern, cheap commercial real estate development – and that’s good news for your negotiations. With numerous new constructions coming online, it’s never been a far better time to see potential expansions or relocations to newer, more desirable office spaces. Do your homework well before and through the negotiating period to seek out out more about your landlord’s competition – doing so can only serve your interests.
3. Consider Your Landlord’s Position
Unless you’re located in a highly competitive coastal market like New York, Seattle, or San Francisco (or have been grandfathered into below-market lease terms), it’s often in your current landlord’s best business to keep you right where you are. However, that won’t stop them from trying to boost your rent during the renewal period. “Fair market value” is a term that many commercial real estate companies use to excuse an increase, but doing your own independent research into your city’s market value is a valuable asset when it comes time to take a seat down and talk together with your landlord.
4. Assess Your Current Needs and Opportunities for You to Negotiating an Office Lease Renewal
Is your company growing steadily? Have profits increased year-over-year? Are your employees comfortable in their current workplace? These are all inquiries to consider when brooding about your options in an office space renewal negotiation. If your current space is suiting your needs adequately, it’s going to not be in your best interests to think about another space. However, if you’re bursting at the seams or your current landlord can’t accommodate growth and expansion, maybe it’s time to seem for greener grass.
5. Don’t Expect Loyalty (or Tenure) Will Buy You an in.
One of the ugly realities of being a landlord in a commercial space is the renewal option, which gives the tenant-right of first refusal on an extension of a previous lease agreement. That binds their ability to plug the space to prospective tenants willing to pay a better rate or a bigger tenant within the building wishing to expand. Approaching your renewal agreement with the duration of your previous relationship, therefore, might not carry the maximum amount of weight as you’ll hope.
6. Counteroffer – and Be Prepared for Theirs
As with most negotiations, one party makes a primary offer with the expectation that their terms be met with a counteroffer. With higher stakes deals like long-term agreements for commercial land, the negotiation and proposal process may take several months, with each side inching closer and closer to a suitable arrangement with each successive offer/counteroffer.
7. Hire a Tenant Rep Broker to Help You in the Process When Negotiating Your Office Lease Renewal
If you and your company aren’t familiar with the commercial real estate market or rental talks (or you don’t have anyone in your company with the bandwidth to properly manage the process), cause a tenant broker to represent your company and walk you thru the method on a uniform basis. It’ll ease your headaches, save you time, and guarantee the process results in a favorable outcome for your company.
However you opt to approach the lease renewal process, it’s important to know current commercial land market conditions and investigate any availabilities in nearby spaces which will improve your company’s workplace and financial situation. The better prepared you and your team are to relocate, the higher your position during the negotiation period is going to be.
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