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Some landlords believe they can renew their tenants at the same rental rate a broker is able to negotiate. Alternatively, tenants often believe they can do a good job representing themselves in their renewal.
Whether a landlord or a tenant, your commercial real estate representative can make a solid case why you should contract an experienced broker to represent you.
I am not referring to dual agency, but rather single agency where a broker would represent either a tenant or a landlord.
There are many nuances too numerous to list that can affect value in a commercial real estate lease renewal.
Know your options, build a strong case
Rental rates are for the most part determined by supply and demand. A broker may be aware of a space not quite yet on the market that could be ideal for a tenant whose lease is coming up for renewal.
Alternatively, if a local tenant does not have a renewal option, might the landlord want to know if there is a national occupier in the market who would be an ideal fit for the space?
Whether a landlord or a tenant, you need to know about these potential alternatives.
A commercial real estate broker can assemble comparable lease data from various sources to support a negotiation. Your position is much stronger if you can present factual recent lease transaction information.
A broker with an in-house market analyst keeps up-to-date absorption and vacancy statistics that can help predict which way a market is going.
These two pieces of information alone can have a profound impact on renewal strategies.
Other considerations
There are terms that can be easily overlooked.
If you are a landlord and the tenant has no renewal option, is this the opportunity to roll the lease into a new, more favourable net lease agreement which provides for amortization of capital improvements?
Alternatively, if you are a tenant, did you think to ask for another renewal option or some building improvements such as new flooring, paint or a free month’s rent?
Arm’s-length negotiation
It may be difficult to negotiate your very best position and still maintain a good business relationship with the other party.
Real estate negotiation is what brokers do every day. A good broker knows how to tactfully achieve the desired result without stress or compromising a relationship that may have been developed over years.
Why not ask a broker what their fee is to provide lease renewal representation?
I am confident if you engage a good broker you will realize the investment is a small price with the benefits far outweighing the cost.
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