10 Golden Rules for Office Tenants in a Renewal Negotiation
Office tenants face an inherent disadvantage in the renewal negotiation, and they usually lose money when renewing their office lease unless the tenant retains a qualified, experienced tenant representation broker. The asymmetry in a renewal negotiation arises from the fact that, unless there is a compelling reason to leave, tenants will renew 70% of the time due to the cost and disruption associated with relocation. Tenants can shift the odds back in their favor following the guidelines I have outlined below.
1) Hire a tenant representation broker.
Ideally an “Advisor”, such as Corporate Realty Advisors. Professional landlords conduct negotiations on a daily basis, while tenants are only in the market once every 3 to 10 years. A qualified tenant representation broker will know the terms offered by the current landlord’s competitors. The simple presence of a broker will signal to the landlord that the tenant is considering relocation, prompting more competitive terms from the landlord.
2) Introduce competition for your tenancy.
The tenant must do this regardless of market conditions and its ability or intention to relocate. If the current landlord does not believe that the tenant is considering relocation, than the tenant has no leverage in the renewal negotiation. The tenant and his advisor must convince the current landlord that the landlord is competing for the tenant, even if that is not the case.
3) Start early.
Allow for enough time to evaluate the market, negotiate the transaction, and (threaten to) relocate if necessary. The tenant must have enough time to relocate so that the threat…