With all businesses, aspects of how you operate can change at any given time. You may feel as if you had negotiated the perfect lease with all the terms you wanted (or close to them at least). But if the COVID-19 pandemic taught us anything, it’s that things can go sideways even with the best plan in place.
While a lease is “written in stone”, everything is ultimately negotiable – something that is so true within commercial real estate. So how can you amend the terms of your lease after it has been executed to help meet your changing business needs? Below are a couple of tips we would recommend to help you navigate the process.
1. Understand Your Lease
Very few people actually read their lease. Why would you if you have an attorney and broker to give you the high-level overview? Nevertheless, reading your lease will help you understand the terms and stipulations that hold you to certain clauses while also giving you an idea of where you could find loopholes that will give you leverage during the renegotiation process.
2. Trade Places
The best way to understand someone’s perspective is to put yourself in their shoes. Try to understand what the Landlord wants and is hoping to gain from a renegotiation. Evaluating their upside provides context on how to approach the conversation. Maybe there are incentives for him/her to consider by re-trading.
3. Extend Your Term
One of the simplest ways to renegotiate a commercial lease is to add time to your current term. Typically, Landlords favor longer-term tenants with good credit. It incentivizes them to get more creative with new terms.
4. Expansion/Relocation Options
Outside of the lease term, consider the opportunity of an expansion or relocation within your current building. Landlords may be more favorable to extend this option to your business considering it means their building stays occupied and they won’t need to search for a new tenant.
5. Buyout/Sublease Options
Another strategy is to buy out the lease. Depending on the initial tenant improvement allowance and rebates, there could be the potential to buy out the lease. This would allow you to relocate to a new property that will allow for a better lease for your current business needs. If a buyout is not an option, reassigning your lease via a sublease would save money from a buyout and allow another tenant to commit to the terms of the original agreement.
6. Hire a Commercial Real Estate Broker
Above all, the best way to renegotiate a lease is to hire an expert. It can be a time-consuming process to renegotiate. Having a market specialist provide market comps, best practices, and experience to strategize will add the most value and save you time and money in the long run.