Why are you getting a worse deal on your lease renewal than new tenants?
Because landlords know that ~70% of their tenants will renew their leases. So, if you don’t put your landlord on notice that you are considering other options or don’t give yourself enough time to consider alternatives, you’ve lost the negotiating leverage that a new tenant would have.
The three biggest mistakes you can easily avoid:
Dealing directly with the landlord
Leaving a renewal negotiation until it’s too late
Not finding alternatives
Dealing directly with the landlord
Put your landlord on notice that you are considering alternatives. The most effective way to do this is to hire a tenant representation broker to represent you on your lease renewal. Why? Because any landlord that deals directly with a tenant knows it’s a near certainty that the tenant will be renewing and the landlord has all the leverage.
Good tenant representatives will create leverage by getting market proposals that will cause the landlord to agree to the most competitive terms and conditions possible. In other words, treat you as if you were a new tenant.
The landlord pays tenant representative fees so there is no cost to you. But be diligent in selecting a tenant representative that adds value. For example, have your tenant representative complete a lease audit during the renewal process. This is a very effective way to put your landlord on notice that you intend to seriously consider alternatives before renewing.
Leaving a renewal negotiation until it’s too late
The earlier you start the renewal process and negotiation, the greater your leverage. Being early and proactive about alternatives is a powerful negotiating tool.
Most tenants underestimate the time and effort required to find alternatives. There are many factors that will impact the timeline including but not limited to the size space you need, market conditions and availability, negotiation time, space planning, lease documentation, permits, and build out time. In general, if you are looking for less than 10,000 square feet you should work backwards from your desired move-in date and allow at least 6-9 months for your search. If you are looking for more than 10,000 square feet you should allow at least 9-12 months.
The later you start researching alternatives and negotiating your renewal, the higher the certainty in the landlord’s mind that you will be renewing.
Not finding alternatives
Treat every renewal exactly as you would relocation. Whether or not you plan to renew your lease you must find other alternatives to create leverage with your current landlord. Evaluate your current space against several options.
It has likely been 3/5/7 or more years since your last lease so the renewal process is a good time to reassess your current business and real estate objectives. Planned growth, location, transportation requirements, parking requirements, estimated space requirements, optimal space configuration, technology requirements, timing and budget are important to determine before you start.
Determine the right amount of space. Make headcount projections for the expected term of the lease. Then, consider options so that around 2/3 or 3/4 of the way through the term you start reaching the occupancy limit. Look for spaces that are more efficient, like rectangular spaces versus angled corners of a building. No two spaces with the same square footage are the same. Floor plan and layout matter.
Thoroughly researching your options will give you a Plan B in case you aren’t able to work out an agreement with your current landlord. There is no negotiation leverage if you aren’t willing to relocate. So, treating your renewal exactly as you would relocation will give you the negotiating leverage that a new tenant would have.