When your commercial lease is approaching expiration, it can be tempting to simply renew and stay where you are. But before making that decision, it is worth evaluating whether your current space and location still meet your business needs.
We asked Mike D’Amico: “Should you renew your commercial lease or relocate?”
The answer depends on several factors, including your space, location, total occupancy costs, current market conditions, and future business needs.
When Does Renewing Make Sense?
Renewing your existing lease may be worth considering when the location continues to work well for your business and the space meets your operational needs.
Staying in place can also allow you to avoid some of the costs and disruption associated with moving, such as relocating employees, updating signage, moving equipment, and building out a new space.
If the existing space needs improvements, tenants may also be able to negotiate changes to the space or other lease terms as part of a renewal.
When Should You Consider Relocating?
Relocating may make sense when your current space no longer supports your business.
For example, your business may need:
- More or less space
- A different layout or more efficient use of space
- Better parking or accessibility
- Greater visibility
- A different location closer to customers or employees
- Updated building features or amenities
- Different lease terms or overall occupancy costs
Exploring the market can also give you a better understanding of what alternative spaces are available before committing to another lease term.
Compare the Total Cost, Not Just the Rent
Whether you renew or relocate, the rental rate is only one part of the financial picture.
Consider the full occupancy cost, including operating expenses, tenant improvements, parking, moving costs, build-out costs, concessions, and other applicable expenses. The structure of these costs can vary significantly from one property to another.
Start Early
One of the most important steps is to begin evaluating your options well before your lease expires.
Starting early gives you time to assess your current space, research alternative properties, compare costs, and negotiate without the pressure of a rapidly approaching expiration date.
Even if you ultimately decide to renew, understanding the alternatives can help you evaluate the terms of the renewal more effectively.
Renew or Relocate?
There is no single answer that applies to every business. The right choice depends on how well your current space supports your business today, what your business may need in the future, and how the economics of renewing compare with relocating.
The key is to understand your options before your lease expires so you have time to make an informed decision.
Ask a Broker
Have a commercial lease coming up for renewal? Mike D’Amico with Property One, Inc. can help you evaluate your options and understand the commercial real estate market.
