Don't Let Your Lease Expiration Date Drive Your Business's Real Estate Decisions

Published Wednesday, October 9, 2019
by Vinny DiMeglio

If you were to poll a random group of commercial tenants from a variety of markets around the country and ask them what drove their real estate decisions, my guess would be that most would respond with their lease expiration date. After making more than 15,000 cold calls in my career,  I can tell you that whenever someone wants to push me off, they say it’s because their office lease doesn’t expire “for a while.” That might be fine for some because business is the status quo. But for many, a lease expiration is only a date that was determined when you signed your lease, nothing more.

Let Your Business Determine Your Real Estate

Imagine you have three years left on your lease. Your space is only big enough to accommodate 25 people. You’ve just hired employee number 23 and you expect that in the next six to nine months, you’re going to exceed your limit of 25. The last thing you’d want to do is ignore the need for more space just because you have three years left on your lease.

Just this year a client called me to say that they needed more space but had two and a half years left on their lease. I happened to know that the tenant next door in a smaller suite also needed more space. I arranged for my client to terminate their lease early, without penalty, providing the adjacent tenant signed a lease for my client's bigger space. Even though both tenants had several years on their leases, all parties, including the landlord, were able to make arrangements to accommodate everyone’s requirements. My client moved into a bigger space in a more desirable market, well in advance of their lease expiration. The adjacent tenant was able to expand into a bigger space early. And although the landlord is left with a vacancy, he secured a long-term lease with one tenant, when he likely would’ve lost both if he weren’t able to accommodate one. 

Market Conditions Can Be A Driving Factor

For this scenario, imagine again you have three years left on your lease. Your rent has exceeded market rates while vacancy has ticked up. You feel like you’re in a tricky position because you’re stuck paying too much for three more years. What to do?

Although this is more common in a down market, you can always approach your landlord and offer an early lease extension in lieu of an early rent reduction. Why would they accommodate this request? To secure a longer lease. A smart landlord knows that an unhappy tenant can lead to a vacancy.

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