Common Renewal Mistakes, Part 1 of 2

It’s the most common mistake made by commercial tenants: they miss a huge opportunity, and lose truckloads of money, by negotiating their own lease renewal. While more than 90 percent of companies looking for 5,000 square feet or more rely on the expertise of a real estate professional to find and negotiate a new space, hese same companies abandon this tried-and-true approach when renewing.

They choose instead to go it alone, negotiating without professional representation because they feel it’s “only” a renewal.  However, renewal situations can be a great time to extract concessions from your landlord if you know how.

Approximately 80 percent of tenants who negotiate directly with their landlord simply stay in their current space without evaluating alternatives. When your landlord assumes you’re unlikely to move, your negotiating leverage is eliminated.

Tenants who are “only renewing” need professional representation even more than when they’re searching for new space, for several reasons:

1. Send the right message: Landlords do offer concessions to renewing tenants, but only if they know they’re competing for your tenancy.

2.  Experienced landlord vs. inexperienced tenant: who wins?: The landlord, as their team negotiates multiple deals a year and better knows how to negotiate a renewal lease than tenants, as most tenants will only be involved in a handful of leases in their entire career.

3. Cost: Your out-of-pocket cost for a commercial real estate broker is a nice round number:$0 A tenant representative’s fee is paid by the landlord as a percentage of the lease value.

4. More dollars at stake: As your company’s second or third largest expense, real estate significantly impacts your bottom line and makes the handling of your lease renewal critical. In this economic climate, landlords are providing free rent, lower base rent and tenant improvement dollars to renewing tenants who know how much to ask for, and how to ask for it, based on market conditions specific to their geographic area.

                                                                               (to be continued next week)