This is a question that has been posed to us hundreds of times. The answer is simple: now! A company’s business should drive its real estate needs, not the other way around. The real estate should support the business. Many people believe that a lease is a fixed liability and that nothing can be done, changed, or improved in your lease until it is a few months from lease expiration. The truth is that a lease is a more fluid document than people think. It can be amended and improved during the term of the lease depending on if you have the right leverage and story to tell your landlord.
Another question we often hear has to do with approaching lease expirations. When should we start looking or negotiating for a renewal? The answer is – whether relocating or staying – the time frame is the same. To achieve optimal leverage, and therefore optimal results in a renewal negotiation, you need to retain the perception that it is possible for your business to relocate. The relocation process – from site selection, negotiating business terms, negotiating the legal terms of the lease to submitting for permits and construction – can take 12 to 18 months. And that’s assuming the transaction is a priority for the tenant, the landlord and the brokers.
If you approach the landlord three to six months prior to your lease expiration, they can be quite certain you have not spoken to other properties and they will present an offer in confidence that they are not competing to retain your tenancy. In a lease negotiation, time provides the tenant with leverage. So do competing offers. Therefore, we recommend giving yourself a minimum of 12 months lead time (18 months if you are above 10,000 rsf) to begin researching the market for competitive offers. The earlier you approach your landlord, and especially if you approach them with another offer in hand, the more likely you are to get fair market terms.