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 fifth and final issue of our series on “Renewing Your Lease In Your Favor and On Your Terms,” so let’s dive right in…

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Major Pitfall #5: Thinking DIY Will Save You Money 

The Most Expensive Way to Renew Your Lease

Some things in life are generally accepted as must-haves. Things such as investing in insurance, or deferring to legal, medical, or accounting professionals to provide you with subject-matter expertise and liability in case of negative outcomes.

You may file your own taxes, but you wouldn’t prepare an audit case before the CRA…

You may treat minor colds or the flu, but you wouldn’t perform surgery on yourself…

Then why do some businesses believe they can do it themselves when acquiring or leasing commercial real estate?

The reality is that occupational decisions can directly impact the top and bottom lines of your business. It can become the bedrock you rely upon to push past economic downturns, or it could be a liability exposing you to unnecessary risks.

On the flipside, you need to understand that utilizing a professional broker is built into the pricing model, and, at the very least, a broker will earn their pay in direct proportion to the amount of value they can create in a deal.

Regardless, landlords typically calculate brokerage fees into the cost of owning and leasing their properties. When tenants negotiate renewals directly, many assume the landlord passes these commission savings on in the form of a reduced rental rate or concession. However, by self-performing, tenants give up market leverage and forfeit vital market information that could radically impact the landlord’s renewal proposal.

Like any new business, it is not in the landlord’s interest to reduce its return, and what your landlord may propose as savings on broker fees is often a fraction of the value a savvy real estate professional can provide. 

So if you are a tenant looking to minimize the cost of leasing space and finding the best possible solution for your operational requirements, then I would advise you reach out to a broker and let them take care of you while you focus on what’s most important – your business.

If you would like more information on rental rates, availabilities, or off-market opportunities, then please give us a call; 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 dansmith@lee-associates.com.