Every tenant should have a ‘plan B’ in their back pocket when it comes to deciding on new space. Several factors should come into play before implementing, however, having a backup plan can ease tensions in negotiations and may drive more competitive terms.
A good tenant rep broker is always keeping track of specific dates in your current lease. Rich Commercial Realty uses a Lease Abstract, which outlines the critical information and key trigger dates in your lease to make it easier to track those important timeframes.
When renewing your current space is neither desirable nor possible, your broker should recommend that you start looking at the market anywhere from 12 to 18 months before your lease expires, depending on your market, size, and on your use. If you are a tenant needing a large amount of square footage (50,000+), you should give yourself even more time, generally 2 years or more before expiration. Because the market is always fluctuating, finding the right space to fit your needs can take time, and in real estate, time is leverage. We assist our client by developing a timeline so the tenant will not be forced to renew with unfavorable economic terms, have to renew short-term, or pay the holdover penalty, which can often times double the monthly rent!
While allowing yourself enough time to go through the process should hopefully prevent a tenant from having to implement a ‘plan B’, sometimes uncontrollable or unforeseeable issues do arise. Permitting or zoning issues with the municipality, natural disasters, tenants with expansion rights, or changes within your company may prevent you from being able to move forward with your first-choice space. From the beginning of the process your broker should advise you seek proposals from more than just your top options so that should one of these issues arise, you can be prepared to move forward with another space. Also, if landlord brokers know that you are taking serious looks at other spaces simultaneously, they may get more competitive with their terms in an effort to win you as a tenant.
In some cases it may also be advantageous to seek a proposal for renewal for your current space, even though that may not be your ideal scenario. Having a proposal to stay can act as a backup, worst case scenario option should even your ‘plan B’ fail. If you wait too late to get a proposal and seek one close to your expiration, the landlord knows that you are likely in a pinch and may not propose you market terms as they may have, had you gotten a proposal in advance.
With the market continuing to stay strong and competitive options in the marketplace becoming fewer and fewer, make sure that you and your broker make a clear plan of attack that includes a ‘plan B’ so that you are not putting your business and its operations at risk. If you do not have a broker, please give us an opportunity to come visit you. Our website offers several case studies for clients that we have recently assisted and we also have many letters of recommendation we can share. We would welcome the opportunity to assist you!