Three Things to Discuss with your Broker Before Your Lease Expires

Having worked with countless clients on new property purchases, building and leasing - this is article is the absolute truth. "The major point to take away here is this: Close attention to an expiring lease takes more time than you may think, but is absolutely essential and can help keep your ship afloat." Before you lease, give me a call to review the documents. There are key components we can add to make renewal negotiations easier and/or keep you out of mediation.   - Jerry Slusky

(NAi Global) While your business is cooking along and you’re busy rising to challenges and putting out fires, it’s easy to lose track of where you are in the leasing term for your space. Considering how important the physical location is and how significant occupancy costs are to your business, this is not something you can afford to do. Laws and regulations, restrictions in your existing lease, and changes in the surrounding market and even your current building all come into play when a lease expires. It’s smart to enlist the services of professionals that specialize in handling these negotiations to represent your interests.

There are some key things to consider well in advance of the lease’s expiration that will help ensure that your next move is a smart one. Most experts recommend addressing these as long as one year before the end of your current lease, since you may find that some time-consuming negotiations, or even relocation will be necessary. A broker with experience and market knowledge can keep you ahead of the game and demonstrate to the landlord that you mean business.  Let’s focus on three key services to expect from a real estate broker during lease negotiations.

#1 Review the Lease

Before negotiations begin, the broker will become familiar with all of the terms of your lease, so that you know your options. If you’re strongly considering staying in the location, it’s essential to know if you have any renewal rights and/or options.

Another important element of the lease can be a holdover clause. This states the amount of rent that you will be obligated to pay for every month that you stay past the lease expiration, and is included in most leases. This amount can range from 1.5 to 3 times your current monthly payment. It is important to note that a holdover clause may come into play if you are relocating but need to stay in your current space if the timing for the new space is further out than your lease expiration. A knowledgeable broker will explain the significance and impact of these clauses to you.

#2 Renewals are the time to ask for it

Your broker can familiarize you with the many options that can be built into a lease, and renegotiation is the time to get your word in on adjustments and changes that you would like to make.  Here are some considerations that you may want to nail down in your renewal:

• Renovation of existing space
• Resetting base years for real estate taxes and utilities
• Options for additional space in the building
• Plans for renewing the lease in the future

#3 Re-Evaluate the Market

Making a good deal on a lease renewal requires taking a good look at the comps in the area and how the market has changed since you’ve been there. See what other landlords are offering in concessions and ask your broker to compare a renewal deal to a new lease. This knowledge gives you more leverage for negotiation and helps you set realistic expectations. You may begin the process thinking that you want to renew and find a new space that meets all of your criteria and then some. Alternatively, you may have your heart set on relocating only to find that you can achieve the best deal by crafting a smart renewal. You broker can clearly communicate these expectations to your landlord and signal your intent.

The major point to take away here is this: Close attention to an expiring lease takes more time than you may think, but is absolutely essential and can help keep your ship afloat. 

Engaging a real estate broker early in the process to advise you in this critical decision will ensure that details are not overlooked and put you in a more powerful bargaining position.  

Peace of mind and a better deal. All part of the service.