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 first issue of our series on “Renewing Your Lease In Your Favor and On Your Terms,” so let’s dive right in…
Major Pitfall #1: False Assumptions About Cost
Is Renewing Really Your Best Option?
The amount of time, money, and energy it takes to move and set up shop again can be enormous, however, it may be prudent to consider relocating before signing on the dotted line.
This is because the commercial real estate landscape is dynamic and constantly changing, with factors such as:
- Changing rental rates; whereby other boroughs or pockets may be more cost-efficient,
- Newly available options; better product is on the market now that wasn’t when you were initially looking,
- Now-feasible alternative locations; impact on your operational efficiencies is equal or better in a different geography, but with lesser rates, and
- Logistics; proximity to new transport infrastructure or labor pool at comparable or lesser rates.
Any or all of these may suggest that your situation has changed, and what was once the best option is no longer so.
Further, depending on your business operations, market, and competition, it may be strategic to consider a move, or at least, conduct a location audit.
Only with the help of an experienced real estate advisor and a full economic analysis of all viable options can a tenant truly make an educated comparative assessment.
If you are moving closer toward the expiry of your current lease, please give us a call and we would be happy to discuss your unique situation.
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.