Why is it that tenants that renew their leases typically do not get the same economics that new tenants get? Many tenants mistakenly assume that because they have been a loyal tenant that pays their rent on time, that their landlord will renew their lease with favorable terms and conditions . What needs to be understood is that most landlords presume their tenants will renew and therefore are captive. Because of this high renewal probability, the landlord factors in favorable renewal terms into their pro formas at the time of the original lease negotiations.
It is important to avoid this inconsistency by setting up your negotiations in such a manner that the landlord must compete for your tenancy. A tenant's business is not negotiating office space and landlords know tenants will not typically spend much time in prolonged negotiations. Landlords will come across as cooperative in order to appease the tenant to avoid them from hiring representation.
The landlord will offer nominal discounts, while keeping crucial lease protections, tenant improvements, operating expense exclusions and a host of other concessions out of the conversation. If the tenant does bring up these various terms. the landlord understands that negotiating an office lease is time consuming and will detract from the time a tenant has to center on their business.
In order to acquire the best terms possible, the tenant must establish they are not a captive tenant but rather a professional that is not dependant on the landlord. They should execute the right process to convey this message. Understanding space efficiencies, layout, evaluating the market, potential relocation facilities and what other landlords are willing to put on the table pursuant to the tenant's needs are all critical elements to the transaction. Having these requirements successfully negotiated in two or three relocation alternatives will compel the existing landlord to step up and negotiate a compelling renewal. Leverage cannot be emphasized enough. A lease due to expire within the next few years should be viewed as an opportunity and not an undue inconvenience.
The landlord needs you. The value of their building relies upon your tenancy. It should not be an unbalanced victory for the landlord.
