No one likes to move. That’s why about 90% of the activity in the commercial real estate market is lease renewals. Typically, every five years, business owners stride boldly forth into a meeting with their landlords hoping only to minimize the rent increase. But you have more power than you think.
The average tenant only renegotiates the rental rate, but you should actually be negotiating tenant allowances and free rent every time you renew, explains lease consultant Dale Willerton, president of Calgary-based The Lease Coach. Willerton, who has been involved in commercial leasing for 15 years, suggests you consider the following before you negotiate your lease renewal.
Create competition for your tenancy
Even if you don’t want to move, you should see other locations and get other offers. Ask yourself, if I couldn’t stay here where would I go? Then get proposals from other landlords that you can use in your renewal negotiations. It’s an extra step, but it will save you money.
Give yourself time
Ideally, says Willerton, you should begin investigating your options ten months before your lease expires. Fact is, if you want to play hardball, you may end up forced to move, and for this you need time. “Most people wait two months or two weeks before their actual lease expires,” explains Willerton, “and then they can’t negotiate at all because it takes longer than that to move.”
Keep a secret
Tenants often announce their intentions to stay at the beginning of the negotiation. Hoping to garner a sympathetic edge, tenants who employ this tactic often sabotage their own ability to negotiate further. Willerton offers the following advice: “You have to say, ‘I’ve been here for nine years. Do you want me to stay for five more? Then give me a deal that will make me stay.'”
Demand tenant allowances
Negotiate a tenant allowance on every renewal, says Willerton. This is an allowance provided by a landlord for improving and updating the space. For example, if a landlord rents out your space after five years to a new tenant, she will have to replace some of the space’s finishes, such as the carpet, says Willerton. It’s cheaper for the landlord to keep you there and give you new carpet, he explains, than to find a new tenant who will in turn negotiate an allowance to buy new carpet anyway.
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© 2003 Yvan Marston