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It is a pain to relocate a business, but tenants should go through the same strategic exercise to ensure that the commercial lease renewal negotiation process has the maximum leverage possible for the commercial tenant. Unfortunately, that rarely happens. Here is why.
This is the most common and over-arching problem for most tenants. If you do not do this one, then solving the other problems will not matter. Tenants start the renew-or-relocate process too late firstly because people are busy working in their business and not on their business. Real estate is such a long lead-time project, and most people simply have no idea what is really involved in creating the threat of a move.
The average business relocation process looks something like this:
For the tenants that are aware of how long the process takes, it can still be a challenge to make something a priority that is so far in the distance compared to the fires that need to be put out on a daily basis.
Tenants tend to be very narrowly focused on their space, their lease, their needs. Learning about the bigger picture can improve your ability to achieve a lower rental rate, the length of term you want and other goodies like free rent and tenant improvement allowances.
For example, during your lease renewal negotiation you should know:
Too often commercial tenants play hot potato in appointing the internal person to handle the lease.
Since it is a negotiation that typically happens only every 5 years for a tenant, the individual appointed to negotiate the lease is not well equipped to be on a level playing field with a landlord who negotiates leases every day.
That person is focused on the rental rate and wants to ensure they keep their job at the end of the negotiation. They often do not really understand what is in the lease, and equally important, what is not in the lease.
For starters, if you cannot answer all of the questions below, you should probably seek some help:
All the landlord has to do is make that person feel like the tenant got a good deal.
The hands-on business owner is often well rounded enough to handle most facets of running their business.
But with success comes delegation. When an owner transitions to not handling every minute detail of operations, there is a challenge with filling those gaps with people that care as much as the owner.
There is a big difference between the small business owner who will grind to squeeze another dime out of a deal, compared to the office manager who is annoyed that the search for new office space, or the lease renewal negotiation is a big distraction from regular duties.
This one is really a combination of the factors above. Tenants that renew and get the best deals are the ones that:
If you are a company that is guilty of all of the above, the landlord will know he does not have to do you any favors on the lease renewal. He will know that it is almost 100% certain that you will renew your lease and he will receive the full price (and all other landlord-friendly clauses will remain intact).
Leverage is created when you legitimately explore other options and let the landlord know about it. You always look into multiple suppliers in other aspects of your business, and renewing your lease should be the same process (even if you have no intention of relocating).