What to Do When the End of the Lease Is in Sight
The end of your business’ lease is in sight, and decision time is approaching. There’s an impending choice to make.
Should you stay in the space? Should you move? Your choice will carry significant weight; after all, location can play a defining role in shaping your business. That only adds to the pressure you’ll feel as the countdown ticks on.
What should you do?
Don’t worry – we’re here to help. Let’s weigh the possibilities to find out.
The Three Possibilities
When the end of your lease is in sight, the possibilities can seem overwhelming, but in reality, they can be boiled down into three options. You can:
- Move to a new location.
- Remain in your space and negotiate for upgrades.
- Remain in your space as it is.
Each presents its own opportunities and challenges that may influence your decision. To give you an idea of what’s possible, let’s unpack each option.
1. Move to a new location.
This option involves the most change and timing for this option is extremely important so that you allow enough time to successfully execute it. You’ll be cutting ties with your current space and venturing out toward greener pastures. Of course, the biggest question to ask when considering this option is: do greener pastures exist?
If you’ve been at a location for a number of years, the chances are good that you don’t understand the full context of the current market. The last thing you’ll want to do is commit to a move when no better options are available. You’ll end up settling for a space that’s a worse fit, or you’ll come crawling back to your current landlord with absolutely no leverage.
Make sure there are spaces available that can meet your needs. A real estate broker can help you to understand the market and identify potential landing spots before you make the leap.
If there are options available, you’ll have a many considerations to think through to ensure the move goes well. Those are discussed in more detail here.
2. Remain in your space and negotiate for upgrades.
The second option you have is to remain in your current space and negotiate for upgrades.
The reality is that, while the end of a lease may feel like pressure to a tenant, it puts at least equal pressure on the landlord. If tenants don’t renew, building owners (or property managers) are forced into the laborious work of finding new tenants. Depending on the market, this may be difficult to accomplish, and, at the very least, it introduces a level of risk into the equation – what if a new tenant turns out to be a bad tenant? For a landlord it is usually best to keep the tenant you have than have vacancy and undertake the task of finding a new tenant.
This situation grants some amount of leverage to tenants when the time comes to renew a lease. You can choose to put that leverage to use by requesting upgrades to your space.
Has an old paint job been bothering you? Is the flooring looking its age and showing wear marks or does it look outdated? Is the lighting a bit outdated or do you need a few walls built or moved?
If you like your current location and landlord but there are elements about your current space that bug you, bring requests for updates to the landlord as your desire for them to do in order for you to stay. They’ll be incentivized to work with you in order to minimize the risk of you leaving and maintain consist rental revenue from their property.
And here’s a pro negotiation tip: if you add a few items that you don’t expect to receive, you’re more likely to get at least some of your requests. Psychologically, people can feel more comfortable granting concessions if they’ve been able to exercise the power of rejection, too – it makes the situation feel fair.
3. Remain in your space as it is.
Your final option – and potentially the simplest one – is to remain in your current space and forego requesting any upgrades.
This may be a good option if you’re satisfied with your setup. However, it also presents opportunities to negotiate in other areas for more favorable lease terms.
Propose a list of items you’d like to see in your new lease, and don’t be afraid to think creatively. You could ask for reduced rent or other monetary freebees since your landlord is not paying for upgrades. What if you asked for a free month of rent at the start of each lease year? Or one quarter or free utilities? An interesting request can give your landlord pause – and you may be able to benefit from unique solutions.
Don’t Miss Your Opportunity
Whatever you do, don’t wait until the last moment to consider your next steps. If there’s only a month or so left on your lease, your landlord has all of the leverage in negotiations; there’s almost no way you’d be able to find a more suitable alternative solution at that point. If you plan to move you will need a good six months minimum and the whole situation feels less cramped and stressful if you have all the details worked out without waiting until the last minute.
And, to maximize your chances of making the best move, work with a professional real estate broker. Not only does it help to have a middleman to play the “bad cop” and fight for your best interests, but you’ll also benefit from their expertise into the market.
Concerned about the cost of consulting with a professional real estate broker? 9 times out of 10 the Landlord pays for this anyway.
At Blackwolf Commercial, we’re here to help. We have years of experience in brokering commercial real estate in Frederick to make great deals happen, and we take pride in benefitting our clients’ businesses.
Is the end of the lease on the horizon for your business? Don’t let the process intimidate you. Treat it as an opportunity and capitalize on it by getting in touch with us today.