If your term is about to expire and you think renewing is as simple as calling your landlord and extending your current terms and rate, then you may want to read on because I’ve got some news for you.
The truth is, negotiating a lease may put you in a costly trap, whether you try to do it yourself or hire a professional.
A renewal may represent an opportunity to:
- Save money,
- Modify key lease terms,
- Make facility upgrades, or
- Improve business performance.
However, when negotiating without knowledgeable and professional representation, this opportunity is often lost.
That’s because many parts of the process aren’t widely known to tenants (or even brokers), but rather, they come from the experience of dealing with landlords on a weekly, or even daily, basis.
And if you get it wrong, you’re stuck with your situation for 5 or 10 years, or maybe longer. This is something we’ve seen when approached by businesses looking for help because they can’t afford to make the same mistake twice. From inadequate requirements, compromising to meet deadlines, stressing over uncertainty, or getting locked into overpaying… the space you occupy should be the least of your operational worries.
Now, we’ve seen Five Common Costly Mistakes that tenants and users make when renewing their leases, and while you may not be able to execute on these items in real-time in a boardroom (and we wouldn’t recommend going without a broker who is a leasing specialist) you should at least be aware of them.
Taken individually, they may only have minor impacts on the transaction. However, a combination of many (or all) of them can spell disaster to the end result.
Today, we are in the second issue of our series on “Renewing Your Lease In Your Favor and On Your Terms,” so let’s dive right in…
Major Pitfall #2: Starting Too Late
Leveraging Demand From Other Suitors to Negotiate Better Terms
In a typical week, most businesses are busy dealing with clients, employees, vendors, fulfillment, or sales, and renewing your lease gets pushed way down the priority list.
However, in our experience, waiting until the last minute to begin the process can put you at a significant disadvantage when it comes time to sit down with your landlord because it is simply difficult to execute on a compressed schedule.
This is especially true if you are looking to discuss long-lead-time solutions like build-to-suits or existing building retrofits.
By conducting an analysis of your current lease and identifying all feasible options, you can approach other landlords and keep alternatives in your back pocket should yours be unreasonable or unwilling to negotiate.
Ironically, it is this willingness and ability to leave and relocate that turns the tables and puts you in a position of power, ensuring that you, at the very least, receive a market competitive rate.
Bottom line: competition creates negotiation leverage.
Contact us today if you are preparing for an upcoming expiry or would like help in managing your renewal process.
Daniel Smith is the Vice President and Principal of Lee & Associates Toronto, specializing in the acquisition, disposition, and leasing of industrial properties, as well as providing clients such as local and national corporations, landlords, and developers with a full range of real estate services.
ABOUT LEE & ASSOCIATES
Lee & Associates is a commercial real estate brokerage, management and appraisal services firm. Established in 1979, Lee & Associates has grown its service platform to include offices in the United States and Canada.
Lee & Associates provides superior market intelligence in office, industrial, retail, investment, and appraisal to meet the specialized needs of our clients. For the latest news from Lee & Associates, visit leetoronto.com.
To get clarity and direction when looking for space or going through a lease renewal, or to discuss any other real estate needs, please contact Daniel at 416.628.8173 or email at email@example.com.