Very likely yes. Here’s a typical scenario for tenants of industrial property – you’ve been in the space for some time now, and it’s working very well. As the end of your lease term approaches, the landlord or his agent contacts you with a lease renewal. The space is great, you don’t want to leave and the landlord and leasing agent are nice enough. Why not just sign the renewal and cross it off your to-do list? Hold it right there – there are plenty of reasons you shouldn’t sign on the line.
- First Things First
You have a business to run, and bringing in a specialist to take over the hard lifting on the renewal review/re-negotiation process is a smart move. Delegating this important item to a competent experienced professional means you can focus on your business, secure in the knowledge that the process will progress rapidly with your interests well represented.
- The Standard Process
Generally speaking, here’s how a lease renewal will progress. The agent will produce both a lease review and written abstract, which outlines all of the critical business points in the lease. Rather than an intimidating 50-page document, you get 80% of the important facts in a single page document. The agent will look at terms previously negotiated that may now be dated as well as anything that needs updating, revising or eliminating. For example, he will review any tenant improvement costs amortized into the initial lease rate that may need to be adjusted or eliminated. Attention to this detail alone can be huge, so ask yourself honestly – are you capable of handling a review like that on your own? Even if the space has been working well for you, there may be other items that can be improved, updated or eliminated, things that may not have even occurred to you. An experienced agent will point these out for your consideration.
- Figuring Rates
Regarding the rate the landlord is offering, the agent will track your current rent compared to market rents over the same time period. The market has experienced wild pricing swings in the past three to six years and it’s critical to have current input on today’s rates when you renegotiate. Your agent should also be able to provide intimate details of relevant comparable transactions, including all the fine points that bring the comparable lease rates into sharp focus for you. These should be statistical facts, not approximations.
- Details, Details
Market facts should also be brought into the equation. Once again, you do not want generalized numbers but specific submarket vacancy and absorption numbers that are clear and accurate indicators of what your property type, size and submarket is experiencing today. These data points are essential for setting a realistic price/terms hurdle to shoot for on your renewal.
- The Rest of the Story
Your agent brings a credibility factor to your renewal process. When you have an agent on your side, a landlord understands that the renewal will need to be a market renewal – or be capable of clearly articulating why it is not. Your agent may also be able to offer some options that can expand your thinking a bit about where you are and where you may need to be in the next three, five, seven years. And as far as fees go, your agent is paid through a portion of the fee the landlord pays his agent to represent his interests in the transaction. In short, your agent provides a free, professional and timely service that you need. So do you really need an agent when you are just renewing your lease? The answer seems obvious.