When To Re-Negotiate Office Rent and What to Ask For

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By James A. Schnur, CCIM
President and Designated Managing Broker
Integrated Real Estate Solutions
LinkedIn

With the mass return to in-office work remaining in flux, business owners and office tenants are increasingly seeking out solutions for ways to retain the spaces that are so central to their hard-built brand and culture, but without sinking under the weight of paying for a space that is only used sparingly. We’ve explored the prospects of sub-leasing some of the current space or switching to a shorter-term lease, but another opportunity to explore is in re-negotiating the current commercial lease terms with the landlord.

Re-negotiating office lease terms can be a powerful tool for tenants. It allows tenants to retain the same space their business has called home, while offering more reasonable terms or concessions. Of course, there is no guarantee that the landlord will agree to the new terms, but there is nothing gained without asking, and if business owners have a good relationship with their landlord, they should be able to come to mutually agreeable terms that benefit both parties.

Timing is Everything

Early is on-time when it comes to re-negotiation. It’s better to be on the ball when considering re-negotiating the terms of a lease, and approaching the conversation long before the current lease is set to expire is imperative. This shows the landlord that the business is interested in remaining in the leased space, as well as strong organizational and management skills on behalf of the business, which reflects favorably on the business as tenants — landlords always prefer working with those they don’t have to worry about.

It’s equally important to stay on top of market trends and move when the market’s situation is most beneficial for renters. Now is a prime opportunity for business owners to re-negotiate terms as landlords are actively looking for committed tenants versus the possibility of letting space go unoccupied in the current market climate.

Know What You Want

Approach the table with a specific plan about what the business wants during re-negotiation. Whether asking for a temporary or full rent reduction, partial or full rent abatement, or an increase in the tenant improvement allowance, putting in the work to arrive organized and prepared shows the landlord that the tenant has done their due diligence.

Given current market circumstances, it could be beneficial for both the tenant and the landlord to agree to a temporary or full rent reduction. This helps ease the month-to-month financial burden on the tenant, and allows the space to remain occupied without a major financial hit to the landlord. But any ask should still be substantiated, and tenants should come prepared with all the necessary paperwork, data, and records to back up what they are asking for.

Be Prepared for a “No”

A re-negotiation is just that — a negotiation. As with any negotiation, be prepared for the scenario where the other party counter-offers, or even rejects the proposal. This is a further part of being fully prepared before sitting down to re-negotiate. Plan out what is and isn’t acceptable to concede so that the business is still able to benefit from the re-negotiated terms. In some instances, this may mean accepting concessions, such as extending out lease terms, re-evaluating the amount of space being leased, or accepting terms to move out early should the landlord find a new tenant for the full space.

Recruit Help

Entering lease re-negotiations requires a significant amount of attention and care, so splitting time between day-to-day operations while taking on the re-negotiation process alone can be overwhelming. Consider bringing on a commercial property tenant representative, such as the professional team at Integrated Real Estate Solutions, Inc., to help work through terms and ease communications during re-negotiations. The team at IRES works on behalf of the tenant to ensure that the needs and considerations of their business are kept upfront as the focus for how the terms should be updated and revised. With detailed knowledge and experience within the commercial real estate market, the representatives at Integrated Real Estate Solutions are uniquely qualified to act as committed partners for businesses throughout their lease negotiations.

Integrated Real Estate Solutions, Inc. provides clients with the in-depth knowledge and experience that is critical to determine the right path to your next move, lease renewal, or strategic repositioning of your real estate portfolio. Contact us or call 847.550.0160 today about your needs, and put our success to work for you.

Author: Jim Schnur

Jim Schnur is the President and Designated Managing Broker of Integrated Real Estate Solutions, Inc. Jim started the firm in 2003 after almost 20 years negotiating and overseeing real estate transactions at Hewlett Packard Co. and Agilent Technologies, Inc.

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