business owner negotiating commercial lease renewal

How to Negotiate a Commercial Lease Renewal

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    Running a business is generally costly and time-consuming, especially when you need to ensure that all the different facets of it are operating smoothly. Fortunately, knowing how to get the most from your commercial lease renewal can mean the difference between paying too much — which eats into your bottom line —  and a profitable year. 

    A commercial lease renewal is the perfect opportunity for a company to assess its current position, revisit the commercial real estate market, and negotiate a better lease agreement from its landlord. This guide will discuss what you need to know about commercial lease renewals and provide you the tips to ensure you are getting the most out of your negotiations.

    What is a Commercial Lease Renewal?

    Before you can understand what a good commercial lease renewal deal looks like, you need to understand the different terms of commercial real estate:

    • Commercial Lease

    This is a contract between a business and a landlord for the rental of a property. Companies will typically choose to rent instead of buy because less capital is required.

    • Commercial Lease Renewal

    A commercial lease renewal is a time period during which a company can decide whether it wants to re-enter into a lease agreement or revisit the commercial real estate market and find a different location.

    It is essential to recognize that commercial lease agreements are starkly more complicated than residential leases, as the terms vary greatly from lease to lease. Working with a commercial real estate broker may be your best option to ensure you are maximizing yours.

    Why Getting the Most From Your Commercial Lease Renewal Matters

    Most companies understand that moving a business is expensive. Many negotiating a lease renewal agreement thus take the time as their chance to avoid such costly hassles and keep a space that works for them. 

    commercial lease renewal negotiation

    Some fail to realize that the renewal process can be even more important than initial lease negotiations, however: That’s because getting the most from your renewal means you can:

    • Save money and eliminate costs
    • Minimize employee stress and turnover
    • Get the best terms for long periods of time
    • Show your landlord that you care about your business
    • Gives you the opportunity to gain potentially valuable rent concessions
    • Grow your operation more quickly, without worrying about finding a new space and starting over

    Understanding these benefits can both help you make the right decision about whether you want to renew your commercial lease, and give you insights that help you during renewal negotiations.

    Step-by-Step Guide to Negotiating that Renewal 

    One of the most significant issues business owners face in renewal negotiations is that they have no idea what to do first. This guide will walk you through the factors to consider before your negotiations and which actions to take to ensure you get the deal you are looking for.

    Step 1: Start negotiations early.

    When looking into the renewal process, it is incredibly beneficial to be proactive. This means reviewing your lease terms continuously and approaching your landlord months before your lease expires. It is also important to continually monitor the market conditions to take advantage of any opportunities, which can create significant long-term savings.

    Step 2: Do research about the space and what it does for your company.

    Before committing to any deal, you need to do your research. This means considering your current space and figuring out what your business needs to do to improve the work environment and overall efficiency.

    touring office while in commercial lease renewal process

    You can then better understand what you may want from your new lease and bring up these discussions during your renewal negotiation. In some cases, a landlord may be more willing to incur costs to update your space with tenant improvement allowances if it means they do not lose you as a tenant.

    Step 3: Negotiate everything.

    Many business owners do not realize that everything is in consideration when renegotiating a commercial lease. You can not only negotiate specific terms out of the lease, but also work some into it. Keep this in mind when discussing particular items or lease terms with the landlord.

    Step 4: Figure out and set lease terms.

    The length of commercial leases usually run anywhere from five to 20 years, which means this renewal is a big decision for your company. One of the most critical parts of your negotiations needs to be figuring out your lease terms.

    Consider both personal and economic factors to determine the length of time that may be right for you. Remember, a commercial lease renewal can have many unintended effects on you, your business, and your family, so scrutinize all the terms.

    5 Tips to Get the Best Commercial Lease Renewal Terms

    If you find yourself about to negotiate your existing lease, consider the following tips to help you get the best renewal terms:

    1. Look into alternate office space and evaluate your options, making sure to relate them to your individual business needs.
    2. Consider the improvements needed and weigh those options with your want to move.
    3. Before you start negotiating, make sure you settle on your budget, the must-haves, and extras you would like to have.
    4. Try to see if there are ways to lower your rent depending on your lease terms.
    5. Look into all the available perks and negotiate for them.

    When it comes to commercial real estate, there are numerous things that can be requested and negotiated to make a lease work out in your favor. Do not be afraid to ask for what you want, but also remember to do your homework so you are prepared to go after what you need.

    Get Expert Help With Your Commercial Lease Renewal

    Commercial leases are often tedious and complicated, and many business owners do not like to tackle them on their own. Luckily, you do not have to.

    If you are looking to renew yours, contact The Genau Group today to speak with an expert about any commercial lease renewal or tenant representation questions you may have.