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 fourth issue of our series on “Renewing Your Lease In Your Favor and On Your Terms,” so let’s dive right in…
Major Pitfall #4: Not Knowing Values & Rates
Are You Sure This Is The Best You Can Get?
This is the question that most people ask themselves when making a long-term commitment.
Or when negotiating terms and pricing on a deal.
Landlords’ businesses rest on a phenomenal understanding of values and strategic negotiation of leases.
They know the market, including:
- tenant demand,
- the performance of competing properties, and
- the pricing of competitive transactions.
Further, they know the lowest rate at which they could afford to make a deal, as well as the total cost of a lease transaction, including concessions such as free rent and tenant improvement allowances.
Ultimately, they know just how valuable your company’s occupancy is to the value of their building. However, they will not be compelled to tell you (nor would they always know for certain) if you could find a better deal elsewhere. It is your duty to do your due diligence and compile an analysis of all possible options.
And if it’s been a few years since you’ve had to engage in negotiations, then the time required to educate yourself and get up to speed on topics such as: the market, current trends, going rates, new developments, incoming supply, vacancies, etc. (not even accounting for off-market activities) will quickly overwhelm and pull you away from your day-to-day focus.
Further, unless you have a dedicated research team, then it may not be in your best interest to perform this analysis and reporting.
That’s why you should turn to an experienced tenant representative who is immersed in your market and has their finger on the pulse of all relevant happenings. They can level the playing field and equip you with the right information and insight that rivals (and often exceeds) the landlord’s.
If you would like someone else to provide everything you may require in order to negotiate your lease renewal, then give us a call and we would be happy to assist you.
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.