When is the Right Time to Negotiate Your Lease?
This is a question that has been posed to me hundreds of times in my career. The answer is simple: now! What I mean by that is you should review your lease on a yearly basis. 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.
The next question I most often receive has to do with an approaching lease expiration. When should we start looking or negotiating for a renewal. The answer is that whether relocating or staying, the time frame is the same. The reason is that 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. A relocation from site selection, negotiating business terms, negotiating the legal terms of the lease, submitting for permits, and construction can take 12-18 months, assuming the transaction is a priority for the tenant, the landlord, and the brokers.
If you approach the landlord 3-6 months prior to your lease expiration, they can be quite certain you have not spoken to other properties and they will present an offer reflective of the knowledge they are not competing to retain your tenancy. In a lease negotiation, time provides the tenant with leverage. So do competing offers. Therefore, I 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.
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