How Important Are Renewal Options?

How Important Are Renewal Options?

Are renewal options important? 95% of the ones I’ve seen set the renewal option at market rate, and the other 5% are set at a rate I would deem as “important.” How do you know? Well, you start by taking a look at a CoStar report to see what the asking rates are in the market. If your rate is below that, than yes, having the option is good. However, there’s a bit of a catch: you don’t really know your rate is good until you go to market and try and replace your lease. Free rent, move allowances, and improvements are part of a package. Unless your renewal option is providing you with all of the above extras, it’s probably not all that fabulous, nor all that important.

As tenant advocates, we go to market on every single transaction. Don’t want to move? No problem. Our goal is to go to your landlord with a market rate deal—not to have the landlord dictate your options. In the last two years, we have reduced costs on renewals across the country by 10 to 30%. Think looking for a new space only to put the offer in front of your current landlord is a waste of time? Let’s do the math. If you’re leasing a 10,000 s.f. space, and paying $20/s.f., that is an annual rental cost of $200,000. That means saving between $20,000 and $60,000. No small potatoes! If your firm is happy with overpaying (and we can’t imagine you would be!), by all means, continue as you were. But if you think it’s worth taking a look at saving some money, give us a call. In most cases, our service is paid for by the landlord, not by you. What do you have to lose?

About the Author

Lynn Drake’s status is well known in the industry: She’s the commercial realtor focused on maintaining “true north” for her corporate clients. It’s a reputation built on 35 years of commercial real estate experience. Lynn became a commercial realtor in 2001 after 15 years in corporate real estate. Thus far in her career, Lynn has successfully completed over 1,500 real estate transactions ranging from small business tenant leases to the sale and purchase of industrial complexes.