Renewal Negotiation
Your Leasing Co. specialises in handling renewal negotiations on behalf of Tenants. We have negotiated more than 1,000 lease transactions over a period of 25 years. We understand the Landlords starting position in the negotiation and we bring the most current market data, combined with our industry knowledge and experience to unemotionally negotiate the best renewal deal for our clients. We understand the commercial value that you bring as a performing Tenant and what this means to a Landlord.
A lease renewal is a natural break in the legally defined terms of a lease. Most Tenants simply sign and renew at the passing rent, not knowing if the current rent is higher than the market. A renewal is an opportunity to review the rent with the Landlord and realign the passing rent back to the market.
Nearly all leases have an automatic annual increase clause. This means that your rent will increase by approximately 3-5% every year. It doesn’t sound like much, but these increases compound on the previous year and equate to an increase of 27.63% over a 5 year term based on 5% annual increases.
So, if you just renew your lease at the passing rent, the automatic rent increases just keep on going. By the end of the first renewal period in the 10th year, the increase will be 62.89%, based on compounded 5% annual increases. In the second renewal period at the end of the 15th year it jumps to 107.89%.
Are your sales growing at the same pace?
Tenants that just sign a lease renewal without checking the current market rent are accepting a risk of incurring an unnecessary and significant cost for the convenience of simply signing a renewal.
Landlords know this…. This means that there is a significant risk that a large proportion of Tenants are overpaying and not understanding that they have real value as a sitting Tenant at the negotiation table.
We work 100% for you and level the playing field when it comes to negotiating with your Landlord.
The process we utilise to recalibrate the rent back to market when it’s time to renew is as follows:
1. Information Gathering / Needs Assessment
This involves meeting with our client to understand their strategic objectives for the business and if it is appropriate to renew the lease in its current form or to renegotiate to market. It also involves getting an understanding from our client with respect to how the business has been performing in that location and the preferred terms to aim for in the negotiation.
2. Market Rent Appraisal
This step requires us to use our industry knowledge and expertise to investigate the local market by identifying comparable sites, as well as understanding the asking and recently achieved rentals, as well as leasing incentives being achieved in the area.
3. Evaluation and Determination
Next, we review recent sales performance information provided by our client, together with the evidence gathered during the market rent appraisal stage to determine the optimal leasing outcome for calculating a proposed renewal rental.
4. Initial Recommendation
We then calculate the current occupancy ratio (using current sales and rental information) and compare that to industry averages. We then apply the market rent to the current sales to see what the occupancy ratio would be.
5. Renewal Negotiation
The next step is to communicate with the Landlord and / or their agent and commence discussions in relation to negotiating the renewal terms with an objective of achieving the best possible commercial result for our client, keeping in mind the objectives of the assignment.
6. Documentation
Once all terms have been agreed, this final stage involves the review of all documentation provided by the Landlord or their agent, to ensure that they are consistent with the terms agreed during the negotiation stage.
Interested in finding out more?
Call our FREE phone hotline 1300 356 702.