A lease renewal can allow companies to acquire multiple benefits, many times ahead of current lease expiry:
- Reduce rent and occupancy costs;
- Make costs fixed and predictable;
- Reduce security deposit;
- Reset operating expenses and tax calculations;
- Get a firm commitment to upgrade building equipment and facilities;
- Acquire more favorable business conditions;
- Update outdated legal documents;
- Acquire rights to support growth or contraction of business thus ability to ‘reduce or acquire space, renew the lease, or to purchase;
- Resolve outstanding issues between tenant and landlord.
Negociate to your advantage
Most companies don’t realise that renewing their lease ahead of its expiry can lead to significant advantages, even cost reductions. In the context of changing market conditions or increased market supply, corporate tenants can gain significant bargaining leverage if the renewal process is led correctly. Obviously landlords will not openly offer concessions, but the development of solid argumentation supported by plausible bargaining alternatives can lead to significant advantages 18 to 36 months before expiry (and sometimes more).
Lease flexibility – an often underestimated advantage
If your business could reduce its rent when business conditions warrant, or alternatively take on more space when needed, then flexible lease conditions could be more important than finding the perfect building. In the context of an increasingly more sensitive and fragile economy coupled with evolving workplace behaviour brought on by mobile technology, it’s important that your lease provide sufficient flexibility to meet business challenges. This flexibility implies the possibility of reducing your space when times are more difficult, acquiring more space at low cost when the business is on the upswing or even cancelling the lease when conditions permit.
Renewing a lease can involve less risk than relocating your business. A renewal also requires less effort for a landlord than dealing with potential new tenants. Thus, if a lease can be made to contain ideal conditions, it is often a better choice than moving business operations. This is why companies have every reason to negotiate in advance with the landlord. However, seasoned owners are often in a position to dictate their own terms knowing a move is costly and disruptive. If the tenant is to negotiate on a level playing field, the steps leading to a renewal must be carried out in a sophisticated manner if the tenant is to come out a winner.