“Stay Vs Go” Cost Benefit Analysis
At Your Leasing Co. the “Stay vs Go” analysis Saves Time, Saves Money and Adds Value for the business owner by providing a logical, step by step process of collecting market information and presenting a commercial business case that incorporates the key elements of renewing a lease in comparison to relocating to a new site.
At some stage in the business lifecycle, every business, large or small, needs to evaluate whether they “STAY” and renegotiate a renewal or “GO” and negotiate a new lease in a new location. This process is not something most business owners look forward to doing.
So, where do you start? There are a number of moving parts to this decision that include, how the economy is performing and if it’s a Tenant or Landlord’s market, the capital cost of closing one site down and opening a new one and the potential growth in sales and profit. See the key considerations to be worked through below.
“Stay” & Renew
The stay and renew decision relies on:
- The current rent vs market rent and the rent proposed by the Landlord.
- Economic conditions. Is it a Tenants market or a Landlords market?
- Vacancy rates, number of appropriate sites available.
- Cost of make good on potential exit.
- Does the current site fit future growth plans? Has the business outgrown the site?
“Go” & Relocate
Factors to be considered for a relocation:
- The cost of fitting out the new site, the incentives package available and the cash investment required.
- The new site better services clients, employees, access to transport networks, better parking etc.
- Fit for future business growth strategy, potential for increased sales and profit.
- Rent differential and how this will positively or negatively impact the cash flow.
Your Leasing Co. has undertaken more than 1,000 leasing transactions over a 25 year period and has a depth of knowledge and experience in assisting Tenants through this challenging decision. We utilise a decision framework that brings together the pros and cons of renewing or relocating in one place for our clients to consider all important aspects of the decision.
Our framework for assisting our clients through this challenging decision is set out below:
1. Review the Feasibility of the Renewal
Your Leasing Co. conducts an assessment of the renewal feasibility by reviewing:
i) Needs Assessment: Meeting with our client to understand their needs and assess the appropriateness of the renewal.
ii) Market Rent Appraisal: Understanding the asking and recently achieved rentals, as well as leasing incentives being achieved in the area.
iii) Analysis and Evaluation: Reviewing recent sales performance of the business, use this information to determine the optimal leasing outcome for calculating a proposed renewal rental.
iv) Lease Review and Make Good: Reviewing the lease with an emphasis on the make good requirements for a cost estimate to be prepared.
iv) Initial Recommendation: Providing a balanced overview of the stay and renew advantages and disadvantages.
2. Review the Opportunities for Relocating
This part of the assessment requires Your Leasing Co. to undertake a Site Search to identify appropriate options that fit the client brief developed in the needs assessment.
The Site Search: We distribute the brief to our network as well as conduct our own research for ideal sites that covers off market and advertised sites.
3. Negotiating the Renewal and Short Listed Relocation Potentials
We need to develop an understanding of the best outcome that can be expected at the existing site and at the same time, work up the best case of market rent and incentives packages at the short listed sites.
4. Present the Comparison and Analysis
Using our “Stay vs Go” Framework, we provide the analysis that reveals the option that best fits with the business owners defined needs and clearly outlines the optimal commercial outcome for the business owner to make the most informed decision.
Interested in finding out more?
Call our FREE phone hotline 1300 356 702.