Office lease renewal using your tenant representative? Why would you need to use a a real estate broker when you are only renewing an existing lease with a landlord that you have known for five years? After all doesn’t adding a brokers commission to the landlords expenses increase the overall rental rate?
The facts are that a building is going to charge a market office rate. Irregardless if a tenant uses their broker to renew the lease or not. The landlord will not offer a rental rate that is lower than the market rate because such a rate decrease would have a negative impact on the value of the building. The higher the rental rate a landlord can obtain from an office lease renewal the more value they create for their investment.
The other reason is landlords know that tenants discuss rental rates. If they were to offer one particular tenant a lower rental rate there is a good probability that the tenant will share the information with their neighbors. This would obviously have a very negative impact upon the tenant population in the building.
When a landlord is preparing their operating budget for the year they include commissions in their leasing assumptions. They generally assume that a broker will be involved in every transaction. This is the case in the Dallas Fort Worth office market. So for a landlord to not pay a broker and offer a discount is telling the tenant that they don’t want you to have representation. So you don’t know the market. The landlord can take advantage of the tenant’s lack of knowledge.
Office Lease Renewal Strategies
A professional tenant representative will help a tenant with their lease renewal and add significant value in many ways. Some of these are listed below and others we can discuss later.
How many years has your company been operating? Over those years is it far to say that you have acquired friendships and professional relationships with people in your business? Tenant representatives that have been helping people for several years. They have also made connections with others in the business. Your broker can bring all those relationships to help the negotiations for your lease renewal.
Your office lease renewal will be a lot easier. When you have the proper tools to help you make the correct decisions. A tenant representative will bring you multiple data sources. Giving you the ability to establish a fair market rate for your base rent. Additionally accounting of the numbers will be shown in a way that is easy to make comparisons between offers.
The Ultimate Resource Your Time
In order to get the best results time needs to be spent looking for alternate locations that the tenant can use to renegotiate the office lease renewal. Alternative spaces need to be on the negotiation table. By doing this extra work the tenant gets two primary benefits.
- An establishment of the true market rate that can be used in the negotiation.
- The client now is a position of power because they have options if the present landlord isn’t willing to negotiate
The entire process will give the client the leverage. Leverage to get favorable results from the landlord. The landlord will fight to keep their tenant instead of assuming that the tenant is theirs to keep. This leverage will allow us to negotiate free rent, higher construction allowances and other important concessions.
The key to a successful office lease renewal can be found in positioning the tenant to have the most options possible. Don’t make the dreaded mistake of waiting to long to start the process. If the decision is to relocate construction alone can take 60-90 days. The lease negotiation take 30 days. So begin the process 6-9 months prior to your next office lease renewal.