The Lease Coach: May 2019
}Consider that your closest competitors may be going out of business, moving, downsizing, or struggling to stay open. Would this information change or affect your own lease-renewal plans? Photo: Adobe Stock
Even if you don’t plan to move, looking at other locations will help negotiate a better price on the place you’re in.
One of the most valuable exercises a bakery tenant can go through prior to negotiating their lease renewal is site selection. Typically, many years have gone by since you last looked at commercial properties available for lease and it’s time to do it again.
Many bakery tenants resist doing this task claiming that they don’t have the time, there are no good commercial spaces available for lease near them, or they have no intentions of moving anyway. Why waste time looking at other commercial locations? Actually, the converse is true. The more you think you want to stay in your current location, the harder you have to look at what other space is out there and available for lease – if you want to get a good lease renewal deal.
As we explain in our book, Negotiating Commercial Leases & Renewals For Dummies, an important first step is to check out what your competition has done over the past five years. Consider that your closest competitors may be going out of business, moving, downsizing, or struggling to stay open. Would this information change or affect your own lease-renewal plans? Of course it would.
Kicking the tires on other locations for lease takes time, but it’s free to do. You can look at much space as you want to, and remember that the more sites you look at and the more information you gather, the smarter you become and the wiser your decisions will be. We recommend that bakery tenants explore other potential sites in reverse order of preference – doing this will increase your confidence with dealing with other landlords and/or their agents as well as prevent you from making a hasty decision that you may likely regret.
Getting lease proposals on other sites can increase your renewal leverage. Ideally, you will do all of your site selection and receive multiple proposals (including a lease renewal proposal from your current landlord) within a few days. This makes it easier for you to compare all the deals on paper side-by-side.
A bakery tenant will want to start the lease-renewal process about 12 – 15 months in advance of their lease expiration date. Precisely, a bakery tenant should look at their renewal-option clause in their lease. If this states that the cut-off date for exercising your lease-renewal option is six months before the lease expires, the lease-renewal process should begin six months before that (or a total of 12 months prior).
Your strength or leverage may lessen the closer you get to your cut-off deadline, so the farther in advance you can find out what the landlord wants to do with your tenancy and rental rate, the more time you will have to react.
If you’re going to get bad news, you will want that information sooner rather than later. Keep in mind though that most landlords want and plan to have their tenants renew so you’re usually on the same page plan-wise anyway.
This also applies in cases where you don’t have a renewal option and want to remain in your same location. The closer you get to the end of your term, the less relocation time you have, and it becomes clearer to the landlord that you cannot or don’t intend to move. There’s also the peace-of-mind factor of putting the lease renewal to bed well in advance, if possible.
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