Signing new lease, does it make sense to resign at higher rate?
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[{"id": "gw2f2v0", "text": "Do you have an option to extend? If you do, is it at Fair Market Value?  or at a fixed rate?", "replies": [], "depth": 1}, {"id": "gw2flag", "text": "You should be renewing at a lower rate than they are advertising for new deals because your renewal likely does NOT have broker fees and tenant improvement allowance.  \n\nIt will cost the landlord more to try to re-tenant your space if you leave so they should be willing to accept less than they are hoping for on new deals.", "replies": [{"id": "gw2o9f1", "text": "What broker doesn\u2019t include a renewal fee? Also, assuming they leave their current location it would also cost them more. Most advertised rents don\u2019t include a tenant improvement allowance because it\u2019s a moving number, it\u2019s just a rough estimate. You also don\u2019t know where they\u2019re located within the center or what their use is compared to the asking rate on the vacancy. I\u2019m not saying they shouldn\u2019t try to sweeten the deal, but we don\u2019t know the situation.", "replies": [{"id": "gw2qaad", "text": "In this case it sounds like 2% instead of 6% as this guy isn't being represented and renewals are only 2% for the listing broker.", "replies": [], "depth": 3}, {"id": "gw2vtzg", "text": "This", "replies": [], "depth": 3}, {"id": "gw32mzx", "text": "On the office space you may be correct.  I was originally thinking retail space.  I\u2019m not sure how office brokers get away with renewal commissions.  Easy deals.", "replies": [{"id": "gw360fb", "text": "There is a case by case aspect but they include it in the listing agreement, like every other broker.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gw2yy0b", "text": "renewals will usually go up, rarely down as you said.  it\u2019s easy to get a \u201cteaser rate\u201d, and once you\u2019re in, it\u2019s more of a PITA for you to move, vs accept the higher rate.  \n\nalso market dependent.  with covid decimating many businesses in the USA, my market (socal) has gotten much much tighter and more expensive for industrial space.", "replies": [{"id": "gw32hat", "text": "I agree rents go up.  But if he is paying more than they are advertising for a new deal then he has leverage.  Renewal rents should be lower than new deal rents due to new deals having build out, TIA, and broker commissions.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gw2fphg", "text": "It's common for landlords to attempt to keep you paying your most recent rate (or 3% higher in CA) on a lease extension. That being said, you don't have to necessarily give in to that. Would it be difficult and/or costly to move elsewhere?  Definitely use any leverage you have in that regard. Tell the landlord you're considering all of your options. Show them recent lease comps, other active listing rates in the area. Then try to negotiate the lowest possible rate and most favorable lease terms. Landlords are always enticed by length of lease term.", "replies": [], "depth": 1}, {"id": "gw2mp1t", "text": "Most LLs will try to get you to renew at your current rent or some % higher.  They assume TT may not pay attention to the leasing market and just sign or TT may think it's a hassle to pick up and move so they'll sign what's put in front of them.\n\nFrom a LL's perspective, it's definitely cheaper to renew a tenant even at a lower than having the space go empty for who knows how long and then pay TI/LC.  If for some reason you can't get the LL down to your acceptable rent, you might try getting some sort of concession instead (i.e. free rent, paint, carpet, ceiling tiles, small renovation to space, free parking, reset the opex base stop to renewal year, etc)", "replies": [], "depth": 1}, {"id": "gw2zurq", "text": "65/ft sounds nuts. What city is this?", "replies": [{"id": "gw30cuk", "text": "I was gonna ask the same thing. Has to be SF or Manhattan ?", "replies": [], "depth": 2}], "depth": 1}, {"id": "gw348wp", "text": "Find a stalking horse. You need an offer from another comparable building closer to the rate you want. Use it as leverage to get the rate you want at the building you want.", "replies": [], "depth": 1}, {"id": "gw35zrz", "text": "This depends on your market and current availability. How much space is currently available in the building you are leasing in? The less space available, the less likely it is you will get a lower rate. A majority of leases we work with have an increase year over year. Many options state market rent but no lower than current rent. Most leases do NOT pay the broker on renewals or options. I would recommend you get the data for the area to help substantiate your \"ask (same rent, lower rental rate, etc.). If the management company won't budge, you may want to hire a broker to come in and negotiate on your behalf.", "replies": [], "depth": 1}, {"id": "gw3c3ug", "text": "This is totally market and structure dependent, if you give more info the hive mind here might be able to give you a better educated guess.  \n\nWhat does your market look like right now?   Hot?  Dead?  Is $55 the going rate for a similar space?  or is that a \"teaser rate\" for the first year?  \n\nAre you in a corn field in Oklahoma or NYC?", "replies": [], "depth": 1}, {"id": "gw3scq6", "text": "If you are renewing an office lease in Manhattan you should have the LL\u2019s balls in a vice grip, so to speak! There isn\u2019t an office LL in any major urban market that has much leverage today outside of big tech or life science markets. Tenants are downsizing and fleeing in droves. In most cases, the best (and cheapest) tenant is always an existing tenant. Use that to your advantage. If you\u2019re not comfortable researching other options or negotiating engage a tenant rep broker which will signal to the LL you\u2019re serious. Doesn\u2019t cost you as LL pays the fee and could save you a lot of $ over the term. My two cents.", "replies": [], "depth": 1}, {"id": "gw3u4mo", "text": "Also is that a gross lease or a nnn lease?  If you\u2019re paying higher and it\u2019s gross, have him reset your base year too.   And if you\u2019re paying higher, maybe you could get some improvement $, at the very least ask to have him repaint and recarpet your space.", "replies": [], "depth": 1}, {"id": "gw44bvq", "text": "Try to get some months of free rent", "replies": [], "depth": 1}, {"id": "gwbwjsj", "text": "Yes, the rental rate typically increases year over year.  \n\nHow long of a lease term are you looking for?  The longer the term, the most likely the landlord is to reduce the rent or give you other concessions....", "replies": [], "depth": 1}]