By Tenant Advisory Group · Updated
Short answer
Decide by comparing a renewal and one or two real alternatives on the same basis: total cost over the term, how well each space fits the team you expect to have, and the disruption involved. Count the full cost of moving and the cost of staying in space that no longer fits. Test the market even if you expect to stay, because a credible alternative is what improves renewal terms.
Why the default answer is usually wrong
Most companies approach an expiring lease with a default already in mind. Some assume they will renew because moving is a headache. Others assume they will move because the team has complaints about the current space. Both defaults skip the comparison that would show which choice is better.
The landlord has a default too. It knows that most tenants renew, that moving is costly and distracting, and that a tenant who has not looked elsewhere has nothing to compare its renewal proposal against. A renewal offer made to a tenant with no alternatives tends to reflect that.
The decision improves when you treat renewal as one candidate among several, and evaluate it the way you would evaluate any new building.
Start with fit, not rent
Before looking at cost, ask whether the current space would be on your list if you were searching today. The team that signed the lease may be quite different from the team that will occupy the next term.
- Does the size fit our expected headcount and attendance pattern for the next term, not the last one?
- Does the layout support how we work now: enough meeting rooms, call rooms and focus space?
- Can the building support our technology needs, including power, cooling, connectivity and any equipment rooms?
- Does the location still work for hiring and for where our people live?
- Has the building been well managed, and has the landlord been responsive?
- Is the ownership stable and investing in the property, or is the building showing signs of neglect?
- Is there room to expand here if we grow, or would growth force a move partway through the term?
If the answers are mostly yes, renewal is a strong candidate and the work is to get the best terms for it. If several are no, find out whether the landlord can fix them, for example with a different suite in the building, a renovation of your existing space, or added rights. A renewal does not have to mean the same space in the same condition.
Count the real cost of moving
Relocation costs are easy to underestimate because they are spread across many budgets. List them all before comparing.
- Build-out costs above whatever the new landlord contributes.
- Furniture, whether new, reconfigured or moved.
- Technology: cabling, network equipment, audiovisual systems, access control and the cutover itself.
- Movers, and the cost of overlapping rent if the new space must be ready before the old lease ends.
- Restoration and surrender obligations at the current space, such as removing cabling or specialty installations.
- Legal and design fees.
- Internal time. A relocation consumes attention from operations, IT and leadership for an extended period.
- Schedule risk. If construction runs late, you may face holdover rent at the old space, which many leases set well above the regular rent.
New landlords know these costs exist, which is why proposals to relocating tenants often include free rent, a build-out contribution and sometimes a moving allowance. Those concessions can offset a large share of the cost. Whether they offset all of it is a question for the actual proposals, not for assumptions.
Count the real cost of staying
Renewal has costs as well. They are quieter because nothing has to be purchased or scheduled.
- Paying for space you do not use, if attendance has changed since the lease was signed.
- Working around a layout designed for a different team, which shows up as crowded meeting rooms and people taking calls in hallways.
- Smaller concessions. Landlords often offer renewing tenants less in improvement money and free rent than they would offer a new tenant for the same space, on the reasoning that the tenant is unlikely to leave.
- Aging improvements. Carpet, finishes, furniture and mechanical equipment that were new at move-in may need replacing, and a renewal without an allowance leaves that cost with you.
- A lease form that never improved. Renewing by a short amendment keeps every unfavorable clause from the original lease in force for another term.
A renewal is the natural moment to address all of these. Ask for a refurbishment allowance, a resized or reconfigured space, updated flexibility rights and corrections to clauses that caused trouble during the first term.
Why to test the market either way
Testing the market means running a real search: surveying available space, touring a short list, and requesting written proposals from landlords, including your own. It does not commit you to moving.
It does three things. It tells you what the current market would offer a tenant like you, which is the only sound benchmark for a renewal proposal. It gives your landlord a reason to compete, because a tenant with a written alternative is a tenant who may leave. And it occasionally reveals an option that is plainly better than staying, which you would not have found otherwise.
Two cautions apply. First, the alternatives must be credible. Landlords can tell when a tenant has toured nothing and is bluffing. Second, check your lease before you begin. If it contains a renewal option, note the notice deadline and how renewal rent is set, since an option gives you a floor to negotiate from, and missing its deadline removes it.
Timing is leverage. A tenant that starts early can credibly move. A tenant that starts late cannot build out new space in time, and the landlord knows it.
This is the core of what a tenant representative does on a renewal. Tenant Advisory Group runs the market process, obtains competing proposals and negotiates with the current landlord against them, so the stay-or-go decision rests on real offers.
Putting the two side by side
- Read the current lease for the expiration date, renewal option terms, notice deadlines, holdover provisions and restoration obligations.
- Define what the next term requires: headcount range, attendance, layout, technology and location.
- Request a renewal proposal and proposals from one or two alternative buildings for the same term length.
- Build a comparison of total cost over the term for each, including rent, increases, operating expenses, concessions and all one-time costs.
- Score each option on fit and on risk, including schedule risk and the condition and ownership of the building.
- Negotiate the leading options in parallel until the terms stop improving.
- Choose, then have your attorney review the lease or amendment before signing.
When the comparison is done honestly, the result is often close on cost, and the decision turns on fit and on how much disruption the company can absorb at that moment. That is a legitimate basis for choosing. What matters is that it was a choice.
Frequently asked questions
Is renewing always cheaper than moving?
No. Renewal avoids moving costs, but relocating tenants are often offered larger concessions. The only reliable answer comes from comparing written proposals for both on the same basis.
Will looking at other buildings damage our relationship with the landlord?
It should not. Landlords expect tenants to review the market before an expiration, and a professional process is normal business practice.
Can we renew and still change our space?
Often yes. A renewal can include a larger, smaller or different suite, a renovation of the existing space, and new lease rights. All of it is negotiable.
What if our lease has a renewal option?
Note its notice deadline and how it sets rent. An option protects your right to stay, and you can still negotiate a better deal outside it. Have your attorney confirm what the option requires.
This guide is general information, not legal, tax or financial advice. Have your attorney review any lease before you sign it.