By Ken Jorgenson, Carr Healthcare Realty
If you love your space, location and yes — even your landlord — start setting yourself up for a seamless lease renewal today. Renewing commercial leases can become a nightmare fast when tenants fail to pay attention to important renewal details. Early action is everything. Use these seven simple steps to save money and your space.
1. Start the process early.
Even if you’re not sure that you want to stay at your current location, you should begin the renewal process at a minimum of 12 months before your lease’s expiration. Then, whether you decide to stay or not, you will have done the research and preparation, and have multiple options. Having options is your greatest asset in lease negotiations. The longer you wait to begin the process, the fewer options you will have, and the more power you’ll give the landlord. So, start early and give yourself plenty of time to create a substantial list of possible locations.
2. Know the conditions of your lease renewal clause.
Oftentimes, leases incorporate renewal clauses as a safety net; if you have the clause, your landlord must allow you to renew your lease according to its terms. Depending on the market, using the lease renewal clause will either benefit or harm you financially. First, find out if you have a renewal clause. If you do, study its conditions (rate increases, notification time frame, etc.) and determine whether you want to act within the clause or start new negotiations.
3. Study your lease.
Before researching other locations, you really need to know the terms and conditions of your own lease. What kind of lease do you have? Is it a gross lease or net lease? Is it a triple net or full service? Also, what are you paying per square foot? Not to overwhelm you with questions, but these all are important factors for you to know when entering negotiations. Along with your rent, you also should take note of what, if any, concessions were afforded to you at the start of your lease.
4. Research the market.
Knowing your market can be a bit of a challenge because commercial real estate listings are not open to public access like residential listings. Multiple listing services (MLS) for commercial properties require expensive subscriptions that typically only real estate agents purchase. When going it alone, the best place to start is within your own building complex and immediate surroundings. Find out what new tenants in your area are paying. Do the rates appear to have dropped? Gathering this information may require making several cold calls, but it will equip you with the information you’ll need to be effective in negotiations.
5. Find alternatives.
While researching your market, you should compile a list of locations that would be viable options for your business if you had to move. Remember, having other options is essential for negotiating a better lease at your current location. Don’t give your landlord the upper hand. It’s essential that you walk into the renewal negotiations equipped with other locations to show your landlord that, while you want to stay, you have other options and can leave if the new terms are unreasonable. Set yourself up to save money and receive other accommodations.
6. Negotiate with everyone.
After creating your list of potential locations, you should begin negotiations with all of them, not just your current landlord. Use your market research, current lease conditions and potential alternative locations to negotiate for favorable lease terms with each landlord. While you may not actually want to move, getting great lease terms with a location comparable to your current location will provide leverage for you to negotiate a successful lease renewal, which equates to money saved for your practice.
7. Rewind and get an agent.
As you may have noticed, like the creation of a lease, the lease renewal process requires extensive and time-consuming work. Negotiating a successful lease renewal demands a lot of research, in-depth market knowledge and strong negotiating skills. Most businesses do not have the time or the desire to become experts in commercial real estate. If you would prefer to have an agent take care of the vast majority of the last six steps for you, then start your successful lease renewal process by contacting a commercial real estate agent.
Ken Jorgenson is a commercial real estate associate with Carr Healthcare Realty, representing only tenants and buyers, and exclusively working in the health care real estate space. Carr Healthcare Realty offers expert advocacy without conflict of interest. They understand the unique real estate needs of health care professionals and their vast experience saves their clients time and money. Learn more and get a free lease or purchase evaluation at carrhr.com.