Business owners face an inherent disadvantage during a lease renewal negotiation. Landlords recognize the disruption that results from a relocation. They know that, due to the cost of a move, tenants choose to renew their lease 7 out of 10 times. Landlords negotiate leases every day, while their tenants will be in the market only every 3 to 10 years.
Following these guidelines will help even the playing field:
1. Hire a tenant representation broker. Their presence will enhance your negotiating leverage by demonstrating your desire to consider alternative space options. Rely on your tenant representation broker's expert advice to evaluate market conditions and introduce competition into the negotiation. See 3 Common Mistakes Made by Tenants and 4 Advantages to Using a Tenant Representation Broker.
2. Start the process early. You need enough time to evaluate your alternatives, negotiate your renewal, and relocate to your alternative if the negotiation fails. Beware that your landlord will interrupt a late start date as an indicator that you have no intention to relocate. Thus, starting the process late decreases your negotiation leverage.
3. Have the landlord make the first proposal, revealing his position. Do not accept the first proposal. Do not believe the landlord's assertions that your prior tenure and/or 'relationship' with the landlord has earned you a special deal. Counter with your own proposal, asking for more than you can get. Make your first proposal at least as far from the objection as the landlord's initial proposal. Your tenant representation broker will serve as your advocate and guide during negotiations, and help to take emotions out of a business decision.
4. Limit those involved in negotiations to key executives. Only speak with your tenant representation broker, do not speak directly with the landlord or leasing agent, as this may undermine your negotiating strategy.
Troy Golden is Vice President at SCGroup Real Estate. He received his undergraduate degree from Yale University and his MBA in Real Estate from the Wisconsin School of Business. Troy specializes in commercial office brokerage in Chicagoland. Please contact him at email@example.com or (630) 474-9997. Visit SCGroup Real Estate at www.scgroupco.com.