Should I Renovate Or Relocate My Commercial Space?

It’s the age-old question tackled by nearly every HGTV show: Do you renovate your existing space or cut your losses and relocate?

When you’re dealing with commercial real estate, though, the magnitude of this question rests on a greater scale. You are wrestling with the needs of an entire organization and not just a family unit.

Not only do you have to worry about what makes sense for the comfort of your employees, but you must consider factors like the demands of your stakeholders, financial and performance indicators, and fluctuations within the market.

Adapting to the changing needs of your organization is a full-time job. When your space no longer fulfills its purpose for whatever reason, you need to do some proactive damage control. Essentially you have two options. You can either adjust your current space to evolving property requirements or find a new space that will better suit them.

Making this decision is easier said than done. This is especially true because there is never a cut-and-dry answer. The most sensible option will depend based on the needs of your company.

As tenant reps, we have seen countless clients grapple with the decision of whether to relocate or renovate their corporate spaces. The truth is that each action has its benefits and drawbacks. However, our experience with real estate has allowed us to understand what the proper situational decision should be based on the qualities your business wants to prioritize.

Ready to learn more about how you can improve your CRE portfolio? Read on to learn when it is better to renovate your commercial space and conversely when you should be looking to relocate.

When Should I Renovate?

In many circumstances, renovating will fit your company's needs better than relocating. If these circumstances apply to you, it is time to look towards renovation.

If You’re Mostly Happy With Your Space

Is your space mostly perfect? Will it comfortably fit your employees for the foreseeable future? Are you happy with your location and landlord?

If the answer to these questions is yes, then you probably have your answer. For any tenant mostly pleased with their space and the circumstances surrounding it, renovating is most likely a better option.

Moving can be quite a hassle, and an expensive one. Often, the time and energy devoted to a move can also significantly derail your organization's productivity.

If a space mostly checks your boxes why would you want to move? If you do not want to risk hurting the generative capacity of your business for at least a quarter, then renovating offers a simpler solution.

If You Can’t Get Out of Your Lease

On many occasions, tenants do not have the freedom to locate. As a result, renovation is the only option. If you can’t get out of your existing lease for the foreseeable future, conducting improvements to the space can give you the features you may be seeking out in other properties.

If You Want to Save Time and Energy

Renovating is usually a much quicker process. Think about it. When moving, you must spend a substantial period conducting market research to see your options for alternative properties.

Once you isolate the spaces that may work, you have to engage in landlord negotiation. In order to land the terms that you want, arbitration can potentially take months. Then you may have to go through the renovation process in the new space anyway, as tenant improvements are generally a staple in corporate leases.

All of this hassle is before you’ve even begun the actual move. You then have to deal with disassembling your office, moving all of the pieces to the new space, and then reassembling in the new one. All the while, your employees have to adapt to this disturbance of their usual responsibilities. On the other hand, if you are making a substantial move, you may need to start fresh with new talent. This in itself is a complicated, significant endeavor.

If You Can Adapt Your Space Through Build-Outs

Renovating the existing space would solve these potential issues. You may even be able to negotiate more tenant improvement dollars if you negotiate a more extended stay in your current lease. Your landlord will be happy to have a guaranteed income for longer and more willing to offer incentives like build-out funds. If you design and mold the property to your needs, you can remain a tenant for longer. There will be less of a reason to move in the future.

The only tangible drawback to renovating a space you are mostly happy with is the inconvenience of working around construction. Depending on how extensive the build-outs are, your entire office or certain parts may be inaccessible for your employees. It may even be necessary to rent a temporary working space.

Let’s sum it up…

Pros:

Quicker process
Freedom to design existing space
Potential for more tenant improvement funds
Usually easier to remain in existing space

Cons:

You could be missing out on properties that better suite your needs
The inconvenience of working amongst renovations
Renovating does not solve issues with geography, landlord, or expiring leases

When Should I Relocate?

There are many reasons an organization should seek to relocate to a new commercial space. If any of these apply to you, it may be time for you to start looking for new properties if:

You are in the wrong geographic location
You are unhappy with the price you’re paying
You have a difficult relationship with your landlord or other tenants
Your lease’s expiration date is impending and you’re not renewing
Renegotiations of your existing lease have failed
Your space no longer fits the size of your team

Of course, there can be other reasons, but these are traditionally the motivators behind a corporate relocation. If you are in the wrong space, you are in the wrong space. Sometimes the only thing you can do is see what else is out there.

Right now, tenants have more freedom than ever to seek out properties that fit their needs and culture. There is a surplus of vacant space and landlords will do anything to fill them. This means better terms for better prices if you are willing to sign a long-term leasing agreement.

Companies are also taking advantage of regions with lower overhead costs. If you move to a new state, county, or area with reduced payroll, tax, and rent costs, your organization can greatly benefit. The savings earned in the long run can offset any expense inherited from moving. Your current location may simply not be conducive to the optimal financial performance of your organization.

Where Should I Relocate?

Relocating doesn’t necessarily have to be a significant geographic move. While many companies are moving to places like Florida and Texas, that is not the only way to benefit from a property shift. Depending on what your business is trying to achieve, moving down the block, out of the city, or into a different county can potentially improve your bottom line.

If you are considering either relocating or renovating, you already know that your current space could use improvements. There may be other options that better suit your needs. Renovating your space will not appease issues with geography or an expiring lease. If you don’t have to option to remain in your area, relocating is the right move. In the grand scheme of things, it may be just as expensive to relocate as it is to renovate. It just depends on what your company would prefer to devote its time, funds, and energy to.

Let’s sum it up…

Pros:

Potential for more financial gain
More freedom to assess your property needs
Allows you to leave a property that doesn’t work

Cons:

The inconvenience of moving entire office and employees
Significant cost and timeline
Renovating is easier if your required improvements are minor

Should I Relocate or Renovate?

The answer is up to you. The circumstances surrounding this decision will lead you to your proper course of action.

If your property no longer fits your organization's size or geographical preferences, it is time to relocate. However, if you think you could salvage the space in any respect through construction and design, it may be simpler to renovate.

If you need help coming to a conclusion, tenant reps are here to help. As CRE experts who solely represent tenants, they have decades of experience determining the most skillful moves for their corporate clients.

If you do decide that relocating is right for you, then tenant reps are here to help. They can find the right property and conduct negotiations with your new landlord. If you are looking to renovate, you still may be in luck. Tenant reps may be able to renegotiate your existing lease to get you better terms like more TI dollars.

No matter what you decide, their market intelligence could prove vital to improving the overall health and efficiency of your CRE portfolio.

Should I Renovate Or Relocate My Commercial Space?