by Jake Wilkinson, NAI Partners
I speak with companies every day who tell me the following:
They’re not looking to move.
They’ve been in the same space for 20-plus years and do not want to consider looking elsewhere.
They want to see what the economy is going to do before they make any changes.
These instances are all understandable. Outside factors that we cannot control absolutely drive decision-making. However, no matter the reasoning for wanting to renew your lease, there are always ways to create leverage. Leverage is the key to a successful renewal. The more leverage you can create against your landlord, the better off your rental agreement will be for you. The following ideas are just a few ways to help you do just that.
Tour buildings even if you know you are not going to move. More specifically, tour buildings that are also listed by your current landlord’s broker or current landlord’s broker’s company. Brokers always share information. If your landlord hears that you are out shopping other options, then as far as they know, you are open to moving. Your landlord does not know that you do not plan on moving. The idea is to create the appearance that you are more than willing to move if the landlord does not play ball. Yes, this will take up more time than just going straight to your landlord and asking for a renewal proposal, but the time spent could be well worth it.
Be careful not to notify your landlord that you intend to renew too early. This will make it seem like you have already made up your mind and your landlord will know that you have no intention of looking elsewhere. On the other hand, if you wait too long to renew, your landlord could potentially slow play the process and back you into a corner. In the latter scenario, he knows he has the upper hand and will be very difficult to negotiate with. Ideally, you would like to begin looking into a renewal anywhere from six to eight months before your lease expires.
Hire a broker to negotiate on your behalf. When landlords know you are working with a broker, it will instantly create a sense of seriousness and willingness to move should the landlord not present you with a favorable offer. The landlord will know that you are looking into every option. A commercial real estate broker not only knows the real estate market, but they also know what kind of concessions, rates, and other beneficial deals you may not be aware of. The best part about using a broker is that you are already paying for brokerage services regardless of whether you use a broker or not. 95% of the time a broker’s fee is already included in your rental rate. A good broker will still be able to more than pay for himself by doing his job successfully the other 5% of the time that the fee is not included in your rate.
Speak with other tenants in your building or business park. This will give you an idea of what terms and rates your landlord has been offering his other tenants. A little research goes a long way. Landlords do not offer every tenant the same deal. Often times tenants’ contracts will look very different because the landlord is always going to want to get the most out of each deal.
Whether you decide to use these ideas to your benefit or not, the best way to ensure that you obtain the best possible outcome is to create leverage against your landlord. Carrying out these steps may take up a little more of your time, but it will be well worth it in the end.