REMAIN IN YOUR CURRENT SPACE
Do you really need to move? Or would reconfiguring the space you already have be a good solution for you and your team?
Determine if your current space continues to adequately meet your needs. Perhaps you are already satisfied with the amenities and labor force within your current local area. It may be a simple solution of rearranging the furniture and renegotiating the renewal lease terms. Whatever your reasons, they need to be defined.
You can save a great deal of time and trouble by determining if your current space continues to suffice with a few alterations and improvements. An architect or space planner may get involved. These professionals have the expertise to determine the most appropriate and efficient use of your space. They are also up to date with the latest technologies and strategies for maintaining the health and safety of those employees utilizing the space.
In most cases, a landlord is willing to make some accommodations for a tenant if doing so will result in a longer lease renewal. Even if you decide against looking at other spaces, it is still important to bring a real estate professional onto your team. He or she will assist in these negotiations because he or she knows the current market and should be able to help evaluate your rental rate as well as the other concessions offered, such as renovations and upgrades in security and amenities included within the building. That information should make the renewal discussions more productive.
A real estate professional can also help with your renewal options. These options are usually defined in the initial lease, but sometimes come up again during the renewal discussions. They may include tenant improvements, building improvements, right of first refusal, expansion, a contraction right, the rental rate, and a termination option. Tenant improvements refer to renovations made within a tenant’s leased space and the landlord may offer an allowance to go toward such renovations. These renovations may be prescribed by a space planner or interior designer who has made recommendations for the space to better suit the needs of the tenant. Building improvements refer to renovations made by the landlord to the common areas of the building. A landlord may decide to install amenities such as a café, cafeteria, daycare facilities or gymnasium in order to attract and retain tenants. Right of first refusal refers to an option which a landlord may give a tenant to have the first opportunity to lease additional space within the property or, under certain circumstances, to purchase the property. Expansion may be part of the right of first refusal, because the tenant may have such a right regarding an office suite directly adjacent to the space the tenant currently occupies. A contraction right refers to the tenant’s right to sublease its leased space. A tenant may want to sublease its space if a long term lease is in place and the space is no longer required, or if the tenant is using a small portion of the space and they would like to sublease the remaining space.
In negotiating the rental rate, a real estate professional will be able to determine the market value of a tenant’s space. By comparing the tenant’s space with other similar spaces available in the same market, the fair market rent may be determined. These other similar spaces are called “comparables” and they are commonly used in commercial and residential real estate to help determine value. Another aspect of a renewal lease is a termination option. This helps define the parameters of terminating a lease, on behalf of both parties. Termination may be a point of leverage in the negotiations, which a real estate professional can help maneuver.
Given all these aspects of a lease renewal, while staying in your current office space may be the easiest option, it may also take some time, consideration and negotiation. But this is not the only option. In our next post, we will address the option of remaining in your building, but leasing another, more suitable suite.
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WHPounds Commercial Real Estate, LLC is a commercial real estate agency located in Southern New Jersey. Founded and owned by William H. Pounds, II, its Broker-of-Record, the company has assisted in the leasing, purchasing, or sale of over 15 million square feet in Southern New Jersey. As a boutique agency, WHPounds provides a range of services, including asset management under WHPounds CRE Management, LLC.
Disclaimer: The information herein contained is in no way meant to substitute for competent, professional real estate and legal services and/or advice for the commercial or residential real estate market in your area, which may or may not conduct commercial or residential real estate transactions in a way similarly described in this blog series. WHPounds Commercial Real Estate, LLC and/or its agents is/are in no way responsible for poor decisions made or the making of poor decisions, which may or may not be based on the information contained within this blog series. WHPounds Commercial Real Estate LLC and/or its agents strongly recommend the employment of proper, competent, and professional real estate and legal services for the leasing or purchasing of a commercial or residential property.
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