Don’t automatically exercise your option to renew your office lease! In a tenant’s market you can often get a better deal by renegotiating the lease.
While an option to renew may seem convenient, it frequently leaves money and other benefits on the table. Here’s why renegotiating your lease could be the smarter move.
Get an incentive
When you exercise your option to renew, you’re typically agreeing to a continuation of your existing terms – without the benefits landlords often offer to attract new tenants. In today’s market, these incentives can include:
- Rent-free periods: Periods of free rent to reduce your upfront costs.
- Fit-out contributions: Funds to upgrade or redesign your space.
- Discounted rents: Significant reductions over the lease term (often referred to as rent abatement).
By renegotiating, you gain access to these valuable benefits, which can often amount to six-figure savings, or more. Landlords are often more willing to provide incentives to retain existing tenants than to face the costs of a vacant property.
Create negotiation leverage
The ultimate power in any negotiation is the ability to walk away. When you exercise an option, you give up that leverage by locking yourself into a binding commitment to renew under predetermined conditions.
Renegotiating allows you to explore alternative properties and create competition among landlords. Showing your landlord that you’re actively considering other spaces can pressure them into offering more favourable terms.
A vacant office is a costly liability for landlords – use this to your advantage to secure better terms.
Other benefits of renegotiating
Renewing under an option often locks you into rigid terms that may no longer suit your business needs. In contrast, renegotiating your lease opens the door to additional benefits:
- Reduced make-goods: Minimised or eliminated obligations for returning the premises to its original state.
- Tailored space requirements: If your business has grown, downsized, or adopted hybrid working, renegotiating gives you the chance to modify your space or secure a more suitable location.
- Updated terms: Additionally, when renegotiating, there is an opportunity to make changes to the original lease and possibly re-address old lease terms in your favour.
Let a tenant representative do the hard work
Renewing an office lease requires market knowledge, negotiation skills, and careful planning. This can be time-consuming and complex – but it doesn’t have to be your burden.
An independent tenant representative handles market research, negotiates with your landlord, and drafts the lease heads of agreement. They’ll usually secure incentives and favourable terms that more than cover their fee, saving you time and money.
Don’t miss an opportunity
While exercising an option to renew may seem like the easier choice, it often results in missed opportunities and unnecessary costs.
In a tenant’s market, landlords are eager to retain reliable tenants, giving you the perfect opportunity to renegotiate. By doing so, you can secure better terms, access incentives, and create a lease agreement tailored to your evolving needs.
Don’t settle for the status quo – renegotiate and maximise your savings.
