RENEWING YOUR
COMMERCIAL LEASE
COMMON PRACTICE, CRITICALLY IMPORTANT
REPRESENTATION IS CRITICAL
Lease renewals are the most commonly performed transactions in commercial real estate. Tenant with a thriving business or practice, an established patient base, and well-designed and functional space will likely see no reason to relocate.
However, healthcare tenants may not realize they are particularly vulnerable during these lease renewals, as their lack of leverage in negotiating opens them up to being taken advantage of by their landlord. This is more true of lease renewals during renewals than any other transaction, as many landlord’s definition of a “fair market lease rate” is really the highest amount they can get out of a renewing tenant.
Furthermore, landlords are skilled negotiators and hire landlord representatives to aid them in maximizing renewal rates.
It is essential that healthcare businesses and practices build leverage in lease renewal scenarios to avoid being taken advantage of.
LEVEL THE PLAYING FIELD
Your leverage is derived from two primary realities. First, that you are not required to renew your lease and, second, that you have ample time to explore the market and cause other Landlords to compete against your current building for your business.
Your landlord wants more than anything for you to simply renew your lease under the terms they offer, and loves when you wait until the last minute to begin the process. At that point, they know you don’t have many options.
Jones Healthcare Real Estate helps you build and maintain leverage during your lease renewal. We give you the edge that your landlord doesn’t want you to have.
BUILDING LEVERAGE IN LEASE RENEWALS
Remember: your Landlord wants you to renew, but their goal is always to maximize lease rates and make their building more valuable.
Landlords love it when renewing tenants:
Don’t have a comprehensive real estate strategy
Don’t hire a Tenant Representative
Don’t fully explore their alternatives
Don’t understand their value in the market
Wait until the last minute
Renewing Tenants should receive the same treatment, concessions and courtship that new tenants receive, yet when they take a D.I.Y. approach to renewing their lease, they often do not have the leverage to avoid being taken advantage of.
KNOW YOUR WORTH
Healthcare practices and companies commonly underestimate their value to the Landlord when contemplating a lease renewal.
Part of understanding your value is to perceive it from the Landlord’s perspective.
If you elect not to renew, and instead relocate to another building, it will cost your Landlord a substantial amount of money, including:
Lost rental through vacancy
Potentially remodeling or demolishing the interior of the space to provide a “whitebox finish” for a new tenant
Lease up costs, including marketing expenses and downtime
Utilities and expenses on the space during vacancy
and more…
The Landlord may say they can easily backfill your space with another Tenant, but it will cost them time, money and work to compete with other buildings for those Tenants.
Tenants contemplating renewal must know their value and keep it firmly in mind during renewal negotiations. A renewing Tenant should receive, at a minimum, the same economics and concessions offered to a new Tenant, or better! After all, your renewal saves the Landlord a substantial amount of money.
WANT TO KNOW MORE?
Check out some Frequently Asked Questions about Commercial Real Estate, and review our Glossary of Common Commercial Real Estate Terminology.
LET’S WORK TOGETHER
OUR EXPERTISE INCLUDES:
Real Estate Strategy
Lease or Purchase Negotiation
Market Evaluation
Site Selection
Competitive Landscape Study
Portfolio Strategy and Management
De Novo Clinics
Team Assembly and more