Sunday, March 1, 2009

Renegotiate your Lease NOW!

Commercial tenants take note: a perfect storm is brewing, and it's working in your favor. Act on it and you have an excellent chance of reducing your operating expenses right away. Ignore it and you'll never know what may have been.

The "storm" is the combination of rising vacancy rates, notes coming due, and ongoing fear over the economy's direction. The storm's impact is that landlords are open to trade-offs they might not have considered a year ago. Present them with a sound business proposition, present it in a manner that says you're serious, and build the case that this proposition is the better of two alternatives, and there's a strong likelihood that you'll get what you want.

There are a couple of key considerations related to timing and execution...

Timing... in regards to your lease.
The best time to begin renegotiating a lease is 12 to 18 months prior to its expiration. Don't panic if you have less time, but be advised that you're losing leverage by the week. Landlords know that it takes months to complete a corporate relocation, and they'll respond best when you have options. On the othe hand, what if you have two years to go? It's still not too early to reap savings now if certain factors align.

Execution... you'll need help.
You can renegotiate even if you have no intentions of moving... You just don't want your landlord to know that you have no intentions of moving. One of the best ways to demonstrate a willingness to move is to engage a professional tenant representative. The tenant rep most likely won't cost you anything (because landlords rep's typically share their fees with the tenant rep), and he/she will indicate to the landlord that you're serious. Furthermore, depending upon the landlord's response, there may be a significant amount of work required to identify options to convince the landlord that their tenant is in jeapordy. Alone, this work can involve days of work. With a professional representative, you'll simply need to keep up with the rep's progress.

Timing... in regards to your savings.
Your new rent doesn't have to wait until your current lease expires to kick in. With the proper win-win scenario, landlords will be open to making new rates effective immediately.

The key to it all is strategy and execution. Contact a reputable commercial real estate agent to discuss the specifics of your situation and see if you have a shot at a successful renegotiation.