To Renew or Not to Renew: Deciding What to Do at the End of Your Lease

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Getting near the end of your commercial lease agreement? If you haven't started thinking about whether to renew your lease or move into a new space, it's time to get started. After all, you'll need to time to find that perfect new space if opt to forgo renewal, and if you do choose to stay in your current location, you'll want plenty of time to negotiate a fair deal.

So how can you decide what to do regarding a renewal? Read on to discover the biggest advantages and disadvantages of staying where you are.

Benefits of Renewing a Commercial Lease

You Won't Have Any Disruptions to Deal With. Moving to a new space means interrupting your operations for at least a day or two to complete the move. If you renew, it will be business as usual.
You'll Save Money... Renewing your lease will spare your company expenses, including mover's fees and the cost of reprinting marketing materials
...and Time. When you renew your lease, you don't have to spend hours researching new properties and touring properties. Negotiations for renewals are also typically shorter and less complex than new lease negotiations.

Drawbacks of Renewing a Commercial Lease

While there are some benefits to renewing a commercial lease and staying in your current location, there are some downsides as well, including:

- You Could Be Stuck in a Less Than Ideal Space. Your space requirements may have changed since you entered your lease. Maybe you need more square footage now to accommodate new employees or have instituted telecommuting or job sharing policies that have reduced your size requirements. Staying in your current space could mean settling for a property that is second best.

- Your Landlord Has the Advantage. If you decide that you want to renew, you're going into the renewal negotiations at the mercy of your landlord. He or she knows you want to stay and will try to capitalize on that, even if you have a longstanding relationship.

What to Do if You Choose to Stay

If you do decide to stay in your current space, you can take a few simple steps to make sure you get the best deal. First, don't go into negotiations without any idea of what new tenants in the area are paying for units like yours. Otherwise, you could end up paying more than a new tenant moving into your space would.

To determine what a fair rental rate is, you can conduct a market survey of rental rates. Another option is to have a commercial real estate broker with tenant representation experience on your side at negotiations with your landlord. Your landlord may pass along fees to you if you do, but the amount you could potentially save may more than offset the cost.

Also, before you negotiate, be sure to reassess your space requirements. This way, you can request any reductions in square footage or reconfigure your layout to make your current space more conducive to your needs.