So, your commercial lease is coming due and you are considering staying put and signing a lease renewal with the landlord. Before you have the lease drafted, think about the concessions you’ll want from the landlord in return for signing on for more years. It’s all about negotiating the best deal you can possibly get from the landlord!
Here are a few things you should consider asking for:
Generally, you’ll want to try to get a free month of rent for each year that you plan on staying in the building. If you are signing a five-year lease, you’ll want to try and get five free months of rent. This will be dependent on location, the property and the landlord. In big cities with prime real estate, it will be a lot more difficult to try to get one free month for every lease year. At best, you might get two or three months of free rent on a five-year lease. It’s also likely that the landlord will want to spread out the free months of rent over the life of the lease (ex: three free months of rent to be applied to the first month of each of the first three lease years of a five-year lease) rather than consecutively in the first year of the lease renewal.
In the suburbs or when dealing with older properties, the landlords may be willing to offer more incentives for long-term renewals like a free month of rent for each lease year. Free rent can also be affected by other concessions which may be agreed to by the landlord.
A lease renewal is the perfect time to negotiate with the landlord to have general improvements made to the office space at the landlord’s expense. This may include, but is not limited to: (1) replacing the doors, windows or flooring in the office space, (2) new build out, expanding or reconfiguring of the existing office space, (3) adding, removing or replacing plumbing, lighting, electrical, fixtures and/or major appliances, (4) upgrading the restrooms within the office space (if applicable) and (5) repainting or touching up the office space. If you’re planning on staying in the space for a few more years, get the landlord to spruce up the place!
An often missed or forgotten opportunity is the HVAC system. In buildings where the HVAC is tenant-controlled, you’ll want to know the age and condition of the HVAC system prior to the lease renewal. Most commercial HVAC systems run for about fifteen to twenty years when properly maintained and most landlords require tenants to maintain the HVAC system and have a HVAC maintenance agreement in place throughout the lease term. You should have a pretty good idea of how the HVAC has performed during the previous lease term and you should get an assessment from your HVAC contractor prior to the lease renewal to see whether the HVAC should be a topic of negotiation. In other words, you may want to negotiate with the landlord to have the HVAC replaced.
Depending on the size of the office space, there may be more than one HVAC system. The HVAC can be a split-system, packaged system, water-cooled system, etc. Repair and potential replacement costs of the HVAC system can become quite expensive especially if the HVAC has reached its manufacturer recommended lifespan. If you know the HVAC has reached its end-of-life, why not have the landlord replace the HVAC so that you know the system will be in its optimal operating condition during the life of the lease renewal term.
You may also want to negotiate having the landlord take on the responsibility and costs of the ongoing maintenance of the HVAC system including repair and replacement. Depending on the other lease concessions and the term of the lease renewal, the landlord may be willing to take on the cost in exchange for keeping you in the building as a long-term tenant.
These are just some of the items you’ll want to keep in mind when you are looking for concessions from the landlord as part of your lease renewal. While you might not get everything you want, the goal is to get the most bang for your buck!