Five Tips to Get a Better Office Lease

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Are you considering a lease renegotiation or renewal? If not, you should be shopping for space in today's record high vacancy market. The basic law of supply and demand has never been more in your favor.

But if you want to renegotiate, the one thing you shouldn't do is try to do it yourself. Why? Because a landlord's goal is to get your rent as high as possible and your goal is to pay no more than fair market rate. Regardless of your satisfaction with your current landlord, you are at odds at renewal time.

Most landlords' strategy is to keep you in the dark and offer you an above market proposal by assuming that you won't seek professional assistance and that the inconvenience of moving will keep you from relocating. Unfortunately, some tenants are so busy with their business that this bet will often pay off.

The most effective strategy you can employ to combat above-market rent proposals is to know your options and to use this knowledge to negotiate the best renewal package possible from the landlord. Only when the landlord is convinced that you are prepared to vacate his building will the negotiation tip in your favor.

Today most businesses engage the services of a professional to represent their interests at the bargaining table, making the perceived threat of moving very real to their landlord. It fires a shot across the bow to notify your landlord that you are prepared to explore all of your options.

The ironic truth: More often than not landlords offer better deals to new tenants. Why does a tenant off the street get offered better terms than loyal rent-paying existing tenants? Because the landlord has to compete heavily to attract new tenants to his space. You, quite frankly, are already there.

To get the best rate you must get back "in the market," comparing price and terms. Then, in order to keep you, the landlord will have to offer you the concessions needed to attract new tenants. Losing your business is very expensive for a landlord. In addition to the loss of your rent, he'll lose your contribution to operating expenses, taxes, and insurance, and incur advertising and marketing costs, leasing commissions, and legal expenses.

And that's before the new tenant demands improvements.

Here are five tips to save money on your upcoming renewal:

1. Start the renegotiation process early. Begin the process nine to 12 months prior to the expiration of your lease, maximizing your options.

2. Seek out other suitable spaces. Obtain real, viable bids from other landlords.

3. Never accept the first offer. By rejecting the first proposal, you have drawn the line in the sand and established your "worst case scenario." Negotiate down from there.

4. Never reveal your interest in renewing your lease. Don't express interest in renewing your lease in your current location to your landlord, his agents or brokers, or any of his employees. This includes the building property managers, maintenance and janitorial personnel.

5. Always refer your landlord to your professional representative. Your landlord, his agents or brokers should deal directly with your professional representative and you should instruct your staff to never discuss your current lease or your leasing intentions with anyone at any time.

Greg Schenk is the president The Schenk Company, with 27 years of experience as an active real estate consultant, advisor and tenant representative broker