If your current office is working for you, renewing your commercial lease makes good sense for your company. Typically, staying in place is the most cost-effective option, and by remaining in your office you won't have the time sink of looking for new spaces. To ensure that you get the best possible terms when renewing your lease, keep these tips in mind:
1. Your Right to Renew May Not Get You the Best Terms
Exercising your right to renew may seem like the simplest option, but doing so could mean leaving money and concessions on the table. Typically, the terms outlined in the right to renew clause are written in the landlord's favor. By negotiating a completely new agreement, you can potentially save on rent and get more favorable terms.
2. Now Is the Time to Improve, Grow or Shrink Your Office Space
Before you begin to negotiate your renewal, carefully evaluate how well your office is meeting your needs. If many of your employees are now permanently working at home due to COVID-19, you may not require as much floor space, or you might need to spread out to allow for social distancing in your office. Depending on the availability in and layout of the building, you may be able to decrease your floor space or expand. Your landlord may also be amenable to providing a tenant improvement allowance to update the space or to provide a rent abatement that would enable you to cover the cost of upgrades.
3. Consider Long-Term Agreements With Flexibility Built-in
Your landlord is much more likely to agree to more economical rents, improvements and other concessions if you agree to continue to remain in your space for a long term. To protect your business from the uncertain, add language to your new lease that allows for greater flexibility. Examples include the right to sublet and assign and early termination clauses.
4. The Market May Look Very Different Now Than It Did When You Signed
The coronavirus has impacted every sector of the economy, and the commercial real estate market is no exception. Due to the effects of COVID-19, it's likely that current market conditions are much different than they were when you initially signed your lease. Take the time to research the trends. You may find that rents have fallen dramatically or that un-occupancy is on the rise, meaning your landlord may be very eager to keep you in your office.
5. The Earlier You Begin, the Better
The negotiation process for a commercial lease renewal can be lengthy. Start as soon as you can to ensure that you have enough time to reach a satisfactory agreement with your landlord.
6. Tenant Rep Brokers Aren't Just for New Lease Agreements
Tenant representative brokers are a huge asset during the lease renewal process. With their knowledge of the latest market trends, they can help you evaluate offers from your landlord, and during the negotiation process, they act as your advocate, making the process fairer and smoother. In the event that you can't reach an agreement with your landlord, the tenant rep broker will assist you with finding a new office that fits your needs. As with new leases, a broker's fees for renewals are covered by the landlord, so their services won't add extra costs to your renewal.
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