Why do site selection if you’re not planning to relocate?
Friday, August 15, 2014
Prior to negotiating a lease renewal, there is great value in conducting a site selection. Typically, many years have gone by since you last looked at available commercial properties, and it's time to do that again.
The reason that so many commercial tenants resist doing this homework is they say they don't have the time, there isn't any good space for lease near them or they don't plan to move anyway. Why waste time and money looking at other locations?
Timing is critical when you request lease proposals from landlords and their listing agents. Ideally, you can do your site selection all at once and receive multiple proposals within a few days, including any renewal proposal from your landlord. This allows you to compare the deals on paper side-by-side.
Sometimes, a landlord's real estate agent sends a casual email proposal, which is not as effective as a full proposal on their letterhead. If you want to show this competitor's lease proposal to your landlord to create stronger leverage for your renewal negotiations, it has more clout if it looks more official than a casual email.
The purpose is to create a bidding war for your tenancy between your existing landlord and relocation opportunities.
Remember to not assume that any of what you're doing is held confidential. The grapevine in commercial real estate is a thriving one, and if you want the real estate agent and landlord to keep the deal quiet, don't just tell them, ask them and confirm they will keep it confidential.
Your strength or leverage may lessen the closer you get to the renewal option deadline or lease termination date, so the farther in advance you can find out what the landlord wants to do with your tenancy and rental rate, the more time you have to react.
If you're going to get bad or disturbing news (in the form of a rental increase), you want that information sooner rather than later. Keep in mind that most landlords want and plan to have their tenants renew, so you're usually on the same page anyway.
This also applies in cases where you don't have a renewal option and want to remain in your same location. The closer you get to the end of the term, the less relocation time you have, and it becomes clearer to the landlord that you can't or don't intend to consider a relocation.
There's also the peace-of-mind factor of putting the lease renewal to bed well in advance, if possible, as you want to plan renovations. Don't hand your renewal over to the landlord on a silver platter; make the landlord pursue your tenancy.
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