Top 5 Questions to Ask at Commercial Lease Renewal Time
Can we renew early?
Commercial lease renewal negotiations should begin at least 12 months before the term expires (earlier for larger businesses). By starting early, you can evaluate the market, present a plausible interest in relocation, and walk away from a first offer if necessary. Negotiating early will allow you to take advantage of changing economic conditions, and provide enough time to achieve the best possible deal.
Are tenant improvement funds available?
Does your space need new paint and carpeting? Are there other tenant finish issues that should be addressed – such as common area renovations or upgrades? Your landlord would likely offer improvement funds to a new tenant if your business were to move out, so make sure you can take advantage of this valuable benefit.
Does our rent reflect current market rates?
Market conditions and availabilities may have changed since you signed your last lease. Surprisingly, you may even be due a rent reduction based on current local market conditions. Survey the market — both your existing sub-market and alternative, potential relocation sub-markets — find out as much as you can about rates, terms, tenant finish allowances and free rent offered in the market to new tenants. Bring these differentiating factors to the table during the negotiation process to creating incentives for the landlord to make you a better offer.
Can we give back any unneeded space?
Create a space program to determine how much space you need. Do you need to grow or to contract? Think not just about today but how much space you may need in three to five years. If you have excess space in your existing lease, you may be able to return it to the landlord in exchange for a reduced rate.
Are there plans to make future changes within the building?
For a long-term landlord or a new owner (who may have just purchased the building), it is important to understand their future plans. Do they plan to renovate or sell the property? Are the anchor tenants staying? Changes to the building’s environment and tenants could have significant future impact on your business, and may be reasons to consider relocating.