Leases can be subject to change from year to year based on your contract terms. As your business approaches its lease renewal, entering into negotiations can be beneficial for both your business and your landlord. The topics of negotiation will vary widely, depending on your business’s needs, your lease terms and the fluctuating real estate market, but one of the best ways to successfully negotiate a lease renewal is to be well researched and prepared. Gaining insight into your business needs and the needs and position of your landlord will make lease negotiations proceed with more ease and clarity. As your business moves forward into the negotiating phase, consider the following five tips:
1. Start Negotiations Early
It is wise to begin lease renewal negotiations 9 to 12 months before the lease expires. Beginning negotiations early has numerous benefits. Before consulting with your landlord, consider your foreseeable business needs. Will you need more or less space? Will you require any additions or construction to your office space over the next few years? Will your business thrive in its current location? The sooner these questions are considered and addressed, the more stability your company will have. If your landlord is unable or unwilling to provide you with the terms you require, knowing in advance will be advantageous to both you and your landlord so that you can begin considering options. It is not unusual for landlords to ask for a higher rent when the tenant renews. If you are well invested in your current office space and the location or layout has helped your business thrive, make sure to take this into consideration.
2. Know Your Terms
Due to the dynamic nature of the real estate market, monitoring the market’s ups and downs could be to your benefit, allowing you to better understand your position and that of your landlord. Landlords want to avoid vacancy, but in a prime real estate market, renters may face more competition. This may also factor into which party approaches the other first. Don't wait to approach your landlord if you are ready to begin negotiations.
Presenting yourself as a well-researched and vigilant renter will let your landlord know you are serious about negotiating the best terms. If you are considering signing a long term lease, your options for negotiating rent may be stronger.
3. Understand How the Office Space Benefits Your Company
Depending on your business and its locational or technological needs, a move may be a serious endeavor. If you are in a specialized field that relies heavily on certain technological, locational or security requirements, moving may be significantly more difficult. Knowing how easy--or difficult--finding a new office space in your region may be will help you prepare better for future negotiations. Although starting early is a good idea, do not rush to sign a renewal without understanding your options. Talk to your landlord. What are their future plans for the building? Will their vision align with your business's vision? Landlords are often willing to consider your needs when approached in advance. By taking time to thoroughly weigh your situation and your bargaining abilities, you will be able to better negotiate your lease, while also gaining a better understanding of your landlord’s offerings. While waiting too long is unadvisable, take the time to consider your terms before signing on the dotted line.
4. Negotiate Beyond Rent
Negotiating a lease may be a good time to bring up non-rent related issues. Have you been considering added signage? Are there issues with parking? A lease renewal can provide a good opportunity for revising portions of your lease you wish you had addressed before.
5. Reconsider Your Sublease Clause
If you are planning for growth and will rent more space than you currently need, ensuring you have the right to sublease office space is important. While you want to plan for growth, you don’t want that growth to be restricted by paying for underutilized office space. If your landlord allows for subleasing, your business could recover some of their preparatory costs through short term subleases. The way office space is being used is changing with the boom in cloud computing and mobile technology. Revisiting the sublease clause can allow renters more flexibility in using the office space as they prefer. Think about how you want to use your office space in the upcoming years and how your lease may need to be negotiated to meet those goals.
Negotiating your lease renewal can be an opportunity for clarity. As your business considers its future wants and needs, you will be better able to communicate those goals to your landlord, allowing you to assess the future potential of the leasing agreement. Remember that most commercial leases are not standard forms. Often, landlords are willing to meet your needs halfway, but the better understanding you have of your respective positions, the easier the process will be.