When should you start evaluating your company’s lease expiration date?

Entering into a new commercial lease can be simultaneously exciting and scary. Ideally, start looking for space well in advance of your lease expiration because if a remodel is necessary, the process could take anywhere from about six months to a year. Most landlords will want rent payments to begin shortly after the lease execution, so a compromise may be necessary. A real estate broker and/or project manager can facilitate this negotiation on your behalf.

Every entity or company by size and scope would have varied time-frames for evaluating their locations and corresponding leases. For smaller tenants (2-15,000 sq ft), at least 12 months for a typical office lease is a good starting point. Smaller companies and organizations often need to get more focused on when and how to begin assessing and analyzing their location(s) and corresponding leases. In an economy that can be unforgiving, or at the least very tough to forecast, it’s more important than ever to get a hold of it as early as possible.

From an industrial perspective, large corporate entities with larger space utilization in a given market would want to start evaluating and discussing their existing leases 12-24 months out.

When working with clients that have portfolios of leases, they should be reviewing 24 months ahead. This gives them plenty of time to truly think strategically. Do they want to renew, move/relocate or close down this portion of their operation. By thinking 24 months out, they really are thinking more long term.

In today’s market, tenants should be proactive and start the process well in advance of expiration. Very often renewal provisions have higher rental rates than what is actually in the market today. Sometimes, just taking the time to look and be seen looking in the market, will create the leverage you need to convince the Landlord that you need a lower rate. So the analysis becomes whether to renew rather than find replacement space.

In many major office markets, landlords are willing to give concessions if the tenant is willing to do an early extension, so this is another reason to consider evaluating lease expirations sooner rather than later even if you have 2 or 3 years to go, an extension gives a landlord piece of mind and something to go to its bank with for bigger leases once it needs to refinance or extend its existing financing. An early lease extension can be a WIN WIN for that very reason.

Too many tenants don’t start thinking about the date their lease expires until it’s too late to effectively evaluate their market competition leaving quite a bit of money on the table when they renew their lease. Average time frames for leases being addressed throughout the country is 12, 18 and 24 months.


Timing before move

Develop facility / site criteria. 12 months minimum

Select a commercial real estate broker (in most cases). 10 months

Analyze and evaluate proposal responses. 4-6 months

Identify properties that best meet your requirements. 8-10 months

Tour buildings. 8-10 months

Narrow the alternatives. 8-10 months

Begin the space planning process. 8-10 months

Develop a Request for Proposal(s) and distribute to landlord(s) and architects. 6-8 months

Analyze and evaluate proposal responses. 4-6 months

Select property and request leases. 4-6 months

Architect performs test fit to ensure space program and workflow is consistent with requirements 4-6 months

Ensure any negotiated lease changes have been incorporated into document, sign leases 3-6 months

Check lease for accuracy, send to attorney for review. 2-3 months

Contact your insurance company to add the space to your policy. 2-3 months

Finalize space plan and interior color selections 2-3 months

1 Comment on When should you start evaluating your company’s lease expiration date?

  1. Before you sign any kind of commercial lease contract is to read everything in the deal. You need to read all of the details and make sure that you understand everything in the document because you do not want to be left out in the cold in case something goes wrong. As long as everything looks legit and you have had someone else look over the document as well, you should be fine with signing the lease.

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