Many companies believe that they must live with whatever terms are stated in
their existing lease until it expires. However, many property owners will consider a
proposal to change the terms of an existing lease if it provides long term
benefits. There are creative ways a tenant can renegotiate lease terms that will
provide security for the landlord while saving themselves a considerable amount
of rent at the same time.
If the market changes during the term of a lease, it might make sense for both
parties to negotiate a new agreement. If the current market rates have dropped
since the original lease was written, a landlord may be willing to reduce the
monthly rate in exchange for a longer term commitment. This creates security for
the landlord while providing potentially significant savings for the tenant.
If the market rates have increased or remain equal to a tenant’s current rate it
could be beneficial to both the landlord and tenant to reevaluate the need for
space. If a tenant can reduce their footprint in a building it will save them
unnecessary rent while offering the landlord the opportunity to lease the
unneeded space at an equal or higher rate. Like in the previous example, this
could be negotiated by extending the tenant’s term commitment or other
items within the lease agreement.
The renegotiated total financial obligation must exceed that which is remaining
on the existing lease for any proposed changes to make sense for the landlord.
It is wise for a tenant to conduct regular audits of their lease situation to
maximize the use of space and financial obligation.
Ryan J. Hartsell, SIOR, MRE, Principal, and Managing Partner of Oxford Partners LLC, focuses on reducing the cost and risk associated with leasing and purchasing office and industrial property. He is recognized by his clients for his attentiveness, market knowledge, and negotiation prowess. He holds a master’s degree in commercial real estate and a bachelor’s degree in finance. As a third generation Houstonian and Principal of Oxford Partners, he has a unique appreciation for the business owners’ challenges by way of his own personal experience, which translates into better representation and empathy for his clients.