Why Exercising a Lease Renewal Option Is Your Last Resort

If you’re approaching the end of your lease in your current space, you essentially have two options: stay or go. For those who want to stay in their current space, we always stress to tenants that renewing a lease as it stands (or exercising a renewal option) is most often the least desirable choice.

Even if you’re happy with your current location and lease terms, negotiating your agreement gives you the opportunity to secure better rates and even receive improvements to the space.

Renewals are often viewed as easy to deal with and allow tenants to quickly move on. But that’s generally because some tenants don’t understand the process or are intimidated by negotiations. Many times, tenants choose not to hassle with their landlord, so they elect to avoid the process and exercise their renewal option. However, when this happens, tenants miss out on potential savings and a laundry list of items that can add value to the space.

Whatever the reason, when you don’t negotiate, money is left on the table.

Keep reading to see why our team suggests some degree of negotiations to get the most “bang for your buck” when it’s time to renew your lease.

Why You Should Negotiate Your Renewal Option

When you bring on the help of a real estate advisor and enter negotiations with your landlord, you immediately show that you mean business, your landlord realizes you’re poised to look at alternative locations, and that you expect your landlord to compete for your tenancy. There are several benefits to discussing lease terms such as the following.

1. Lower Rental Rates 

In a time where just about everyone is tightening their budgets, the potential to secure lower rental rates is ideal. While no one can guarantee lower rates, it’s always a possibility and it’s worth having your advisor discuss with your landlord. 

2. Allowance for Office Improvements and Renovations

A landlord will most likely be willing to make cosmetic alterations such as installing new carpet and paint to accommodate a new tenant. To keep long-term tenants, landlords very often have to make larger investments, including modifying the suite, which may include demolition and construction costs.

During negotiations, your advisor may be able to secure certain allowances from your landlord to help you revamp your office space—not only bringing your office a fresh look, but also helping to improve operations, and employee attraction and retention. 

3. Improve Shared Facilities 

Hopefully, your landlord and their respective property manager are already implementing certain improvements throughout the building to enhance health and safety. This can be in the form of touchless doors, motion sensor sinks or soap dispensers, and more frequently located sanitizing stations. No matter what measure your landlord is taking, there’s always room for improvement and as a tenant, you have the right to ask. Ask what your landlord is doing to improve the overall air quality throughout the building, or how they’ll be ensuring the safety of shared facilities like fitness centers and on-site cafes.

Not only can you use this opportunity to discuss health and safety measures in the offices of tomorrow, but this is also your chance to ask for other enhancements throughout the building. If there are specific amenities that you’d like to see implemented or improved in the common areas of the building, ask for them. These requests could be things like improved security or the use of more sustainable materials. Negotiating is also your chance to learn what your landlord’s plans are for more “fun” amenities, such as new cafes or social lounges (and if there are no such plans, now is the time to ask for them).

4. Flexible Terms and Conditions 

In the past, lease agreements would rarely include terms and conditions that discuss flexible lease options, such as expansion, contraction, renewal, and termination rights. However, with more people adopting flexible work policies, we expect to see such provisions included in leases more often. If you’re interested in discussing flexible options, speak with your advisor to develop a plan and potential lease agreement to present to your landlord. 

Think twice the next time your lease expiration is approaching. Don’t fall into the renewal option trap. Realize that it’s a quick and easy solution, but also that it will likely cost you and your organization money in the long run. Make the right decision for your company and take the money that’s sitting on the table.

Ready to discuss your options? Speak to an advisor to get started.

Enter the negotiation process with confidence by enlisting the help of a trusted advisor. Click here to schedule a free 30-minute consultation to start discussing your options.

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