Why should you appoint a Tenant Representative in a Lease Renewal?

We are often asked why Tenants should use a Commercial Tenant Representative to handle their lease renewal process. And we get it – if the relationship with your Landlord has been going well and the current space meets your business needs then the renewal process should be straightforward. Why would you need a Tenant Representative?

Frequently Tenants consider us most relevant for the site acquisition process and don’t realise the active role that we play throughout lease negotiations or the insight we provide into the habits of the current market.

You wouldn’t invest millions without the advice of an accountant or industry expert. Nor would you execute a contract without the advice of a lawyer.  Likewise, you shouldn’t make an expensive leasing decision without the advice of a Tenant Representative.

We achieve favourable lease renewals for our clients.  In this article, we set out a few skills that we utilize to accomplish that.

A Tenant Representative Creates Leverage

Clients often assume that Landlords are not prepared to offer incentives for Tenants to renew their lease. Nor that the lease terms are open to any valuable renegotiation. Breath a sign of relief when we tell you that this is incorrect. However, creating an environment for such negotiations to flourish is dependent on creating leverage.

Tenants should power through the entire leasing process – including site selection – for a lease renewal. Of course, it is a commercially sound decision to inform yourself of the options available to your business. But it also creates some leverage with your Landlord.  Ensure that your Tenant Representative is showing you alternatives and negotiating potential terms for a future Heads of Agreement with the alternative Landlords / Agents, in real time.  Your behaviour should look like ‘relocation’.

We find viable options that make staying vs leaving feel relatively indifferent. But more importantly, we often negotiate a better deal on a comparable basis at an alternative site. This creates leverage with your current Landlord. And leverage is what ensures that the negotiation ecosystem works.

A Tenant Representative Knows the Current Market Trends

Leverage isn’t the only benefit to following the renewal process at Liberty Leasing. It benefits your business to know the alternatives. It ensures that you don’t make an incredibly costly decision for your business without due consideration and analysis.

Most Tenants sign a lease for 5-7 years. Think back to where you were as an individual (or a younger business) 5-7 years ago and how many things in your life has changed since then. The market – not much different. The market does follow certain cycles but even those cycles can change dramatically and are significantly impacted by a range of external factors.

We understand the market though. We regularly collect and analyse data regarding vacancy rates and current rents. As an additional by-product of our experience and activity in the industry, we are also aware of factors that are simply not going to be found on google – like incentive patterns.

A Tenant Representative Negotiates Better Terms

The best-case scenario for a Landlord is that you renew your lease. This is a powerful starting point.

If you don’t renew your lease, the Landlord will suffer some downtime (i.e lost income),  it is going to incur marketing costs and agent’s fees and will ultimately have to incentivise a new tenant into the space.

A Tenant Representative knows how to calculate the monetary benefit of these scenarios. This is what restores the balance of power in a Tenant / Landlord negotiation.

During the renewal process, we review your current lease to determine how we can increase the value of your lease terms. This includes identifying terms for negotiation that may have been overlooked when you first entered into the Lease. It also includes amending the terms to ensure they are reflecting the current standard within the market.

Ultimately a Tenant Representative is going to secure you a lease with more favourable terms and a deal which is more economically beneficial than you could secure on your own. And, sometimes you may actually find a space that better fits your needs and end up moving after all.

 What if your lease has an option term?

Even if your lease contains an option term, we negotiate with your Landlord prior to your exercise dates.  Whilst the lease terms provide that an option term will be on the same terms as the current lease, in our experience there continues to be space to negotiate.

What’s next?

We recommend that Tenants start the renewal process 6 -18 months before the lease expiration date (depending on your size). If you have a lease expiry or option period coming up, we would be excited to meet with you and layout a strategy.  If you would like assistance from Liberty Leasing you can call us on (07) 3359 8273 or schedule a consultation here.

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