When was the last time you renegotiated your lease? Have you ever? How’d it go?
Negotiating your lease to fit the needs of your company is a key component of running a successful business. Lease terms, whether during the entrance of a lease or a renewal, should always be seen as a starting point.
Confidently renegotiating terms can lead to lower lease costs, open doors for an expansion of your practice, money to update your space and more. Knowing how to avoid these lease negotiation pitfalls will allow you to negotiate without fear.
Pitfall Number One: Underestimating the Time it Takes
The month of your lease renewal is NOT the time to open discussion on changes you’d like to make to your lease. Neither is three months before.
Really, it’s never too early to start thinking about your occupancy plans. However, you should kick-off initial discussions about your lease renewal no less than six months before your lease expires. And even then, nine months out is better.
This is especially true if you’re negotiating significant changes or anticipate push back on your expectations for your new lease.
Pitfall Number Two: Not Assessing the Market
Just because you plan to renew your lease doesn’t mean you shouldn’t look elsewhere. If nothing else, understanding your options gives you negotiating leverage.
As much as it’s a hassle to move, it’s even more of a hassle for your landlord. Your leaving causes your landlord to have to make the space “market-ready.” They’ll also pay leasing commissions and carry any expenses for however long the space is vacant. Thus, your landlord will work to keep you, and the threat of leaving is your biggest negotiation tool.
Tour the market, learn what other landlords are offering their tenants, and what the going rates are. Know what’s going on in the commercial real estate market, and you’ll secure your negotiation position.
Pitfall Number Three: Not Exercising Renewal Options
Landlords expect you to renegotiate, and your lease typically has built-in renewal options. However, don’t expect your landlord to bend over backward to get you to exercise those options.
At the basic level, you can request new carpet and paint to maintain the integrity of the space. You should also stand by the fact that essential building improvements should be non-negotiable. And modernization enhancements shouldn’t be off the table.
Then, even in a stay-put scenario, there are ways to protect your future flexibility in your lease. For example, your renewal clause might require the landlord to give you the first look at any new spaces in your building. This gives you the option to expand right where you are.
Don’t Fall into a Stagnant Lease
The market trends and statistics are always changing. If you fail to revisit and renegotiate your lease, you’re hurting the future of your practice.