lease negotiating questions. up for renewal and looking to get smarter
Hello,

I have owned and operated my restaurant for 12 years now.  The last 3 years under a month to month lease.

In an effort to get more secure and settled in for the next 12 years I want to get a lease in place.  Our current rate is $40 per SQ foot.  The market has had some changes and there is a property a few doors down being leased at $29/foot.   Another that rented just after covid started winding down leased for $27.  These are our closest comps and they do represent the surrounding area.  

I want to hire someone to help negotiate our new lease.  It is not something I am particularly comfortable doing myself.  We have a complex situation where our landlord leased the property from a charitable arm of medical system for 30 years and is in turn leasing to us.  The landlord was a portfolio manager for a giant realestate holding company.  He is now retired but by no means is he a slouch 

So my questions are:. Who should I hire to negotiate?  A lawyer, a business broker who does leases well?  Is it reasonable to expect a reduction in cost/foot?  

Really any advice as I start this process is appreciated.  I am smart enough to know when. I need help.   I am in south Carolina.

Thank you
[{"id": "i4pgaom", "text": "I think you need both an experienced retail broker who is up to date in your sub market to help negotiate your terms and a good real estate attorney to negotiate the lease.", "replies": [{"id": "i4ph86a", "text": "Thank you!", "replies": [{"id": "i4q0cfz", "text": "Adding on to that (and it may be different in some markets) but you should expect to pay your broker a percentage of the agreed to rent yourself. I am not aware of markets where landlords covering commissions on renewals of existing tenants is common, and if you are trying to get a reduction in rent, trying to get them to pay the guy telling your landlord he should take less rent from you is a tough sell. \n\nSpeaking as a broker, for bang for your buck on a renewal, a real estate attorney is often best.", "replies": [{"id": "i4rhk72", "text": "\ud83d\udcaf", "replies": [], "depth": 4}, {"id": "i4rtoaz", "text": "Thank you", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i4phcjl", "text": "Consider the following:\n\n1. If you hire a broker to negotiate the lease, terms will be higher because the Landlord has to pay the broker a commission.  Your lease will be less without a broker.\n2. While comps are important, since you have an existing built-out establishment you need to consider the cost of these comps along with build out cost.  A small restaurant build out averages $500,000.  If you relocate what is your true cost?  Include lose of income from time the business is not open, permitting, build out, etc.\n3. Equipment is significantly more expensive now versus what you have existing.  Keep it in mind during your process.\n\nI advise you speak with a local commercial attorney would deals with leasing.  They have a pulse on the terms in your area and should offer insight regarding rent rates.", "replies": [{"id": "i4poecv", "text": "Why are you trying to discourage OP from obtaining representation in a lease negotiation? Point number one isn't even true. Also, I'm sure they're well aware that moving has costs.", "replies": [{"id": "i4pquv2", "text": "My company owns/oversees almost 100 properties in DC/VA/MD/FL.  If negotiations involve a broker it impacts the terms.  Paying 3-4% over base rent of 5-10 years is significant.  Overall terms are always better (for the Tenant) if we deal direct with the Principle.  Majority of Landlords are this way.  Plus, this is a renewal not a new Tenant.  It is rare for an existing Tenant to obtain a broker to discuss a renewal.", "replies": [{"id": "i4pvdhb", "text": "Getting downvoted into oblivion by brokers.", "replies": [{"id": "i4q46wk", "text": "Free Shipping!", "replies": [], "depth": 5}, {"id": "i4rhm41", "text": "Some want information.  Others only want affirmation.", "replies": [], "depth": 5}], "depth": 4}, {"id": "i4qycx2", "text": "I am a retail LL with over 100 retail properties, and I agree with both you and the other posters. Yes, we factor into our budgets leasing commissions on new leases and renewals, but you\u2019re also right. You\u2019ll get a better deal from us if we don\u2019t have an outside commission expense. \n\nHowever, OP, you should hire a local, retail broker with extensive knowledge in your market to negotiate on your behalf as well as a local CRE attorney with experience with lease docs. Comps from the pandemic are probably no longer applicable. We LLs are not running scared any more. The current market probably looks more like the pre-pandemic one. I would also listen to the advice others are giving you to factor into your analysis the cost of relocating.", "replies": [{"id": "i4r8k87", "text": "Ask the realtor for a flat rate fee to negotiate. I've done that with realtors.", "replies": [], "depth": 5}, {"id": "i4rtyn9", "text": "Thank you. I have no intentions of moving.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "i4pr9ao", "text": "&gt;Also, I'm sure they're well aware that moving has costs.\n\nNot always.  Many operators only see the base rent amount.  Comparing comps is only one single element of a greater picture.  Operators forget the loss of income for 6-12 months, build out cost, NNN costs, etc.  \n\nNothing wrong with reminding the OP of these items.", "replies": [], "depth": 3}], "depth": 2}, {"id": "i4q193i", "text": "You\u2019ll be bent over a barrel without a broker. No truth to saving money without one. Landlord\u2019s pro forma brokerage fees in every asset.", "replies": [], "depth": 2}, {"id": "i4qjz1o", "text": "If this guy is a terrible negotiator and doesn't have good market data, they'll spend way more by not hiring a broker and negotiating a bad deal.", "replies": [], "depth": 2}, {"id": "i4r8ff1", "text": "You can do a flat rate with a commercial realtor. You just have to ask. \n\nThe build out is a good point but new landlords will often front that, right?", "replies": [], "depth": 2}, {"id": "i4ru0dm", "text": "I have no intentions of moving.", "replies": [], "depth": 2}, {"id": "i4s50u6", "text": "Your lease will not be less without a broker. That makes zero sense.", "replies": [], "depth": 2}, {"id": "i4tkpcx", "text": "As a landlord these are generally the things I think about when reviewing a renewal with a roll back of rent.  The others are the condition of your space (equipment/leasehold improvements), and  whether I have sales data on the tenant (reported or anecdotal).   \n\nIf I think you are profitable in a space, I\u2019m not rolling the rent back unless your threat to leave is credible.   As a restaurant your not walking away from a profitable market so the credible threat is a move within the market to equal or superior space that is offering you a large TI package (to cover the leasehold improvements  and unamortized equipment costs).  A broker can help you get the leverage you need to make that credible threat, but I still would not expect to roll back rents 25%+ as there is way more to a retail lease than what the next landlord is asking in rent.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i4pkayu", "text": "Broker", "replies": [], "depth": 1}, {"id": "i4s5d50", "text": "Drive around. Who has signs on the nicest retail centers nearby you. Call them. Likely they won\u2019t want to help you since Landlords won\u2019t want to pay a fee on a renewal. Offer to pay them 3% of your negotiated lease value. They will have comps to provide you. This is a huge financial decision and can impact you in a positive or negative way. Get help, expert help. You won\u2019t regret it.", "replies": [], "depth": 1}, {"id": "i4snz8j", "text": "We just renewed our lease after 10 years. Landlord gave a fair lease. It wasn\u2019t less but wasn\u2019t significantly more. Was like 97$ more each month. With the standard 3% increase each year. You could ask for a lease proposal and see how fair it is. If you don\u2019t think it\u2019s fair you could negotiate yourself. We tried but they were on a strict no negotiation. Maybe because it was very fair. You can call and speak to local commercial real estate agents to see if they are willing to help", "replies": [], "depth": 1}, {"id": "i4td8z7", "text": "From the prices psf you mention it seems like your looking to decrease your rent.  Which is a decrease in income for the landlord. Highly unlikely outcome. \nWhat is a very reasonable request is a renewal at your current rate but the owner pitches in for improvements, or rent concessions.\nGet some new windows, new signs, something that will help attract more business.", "replies": [{"id": "i4tmeau", "text": "Month to month for $40/ ft vs 30/ ft on a 5 year\u2026.", "replies": [{"id": "i4tqlyo", "text": "Im offering the asset management perspective.  You have to know the Equity position and short term goals of the owner.  Do you know if the property is mortgaged? What is the LTV? Is a refinance upcoming, because if so there is no shot at getting a rent reduction.  If the property is under a blanket loan it would be difficult as well.  It\u2019s the owners or managers job to keep the rent roll from dropping. \nEither way, a renewal at your current rate with a rent credit or improvement allowance sounds like the easiest deal to make.  Asking him to cut your rent 25% because of comps would be a non-starter for me.  The business is more at risk of losing money moving, rebranding, new build outs etc.", "replies": [{"id": "i4uezei", "text": "This is Reddit. We\u2019re going off assumptions. But I don\u2019t even think that LTV is going to a major factor in this negotiation. \n\nUnless you\u2019re in industrial right now, generally longer leases are more valuable.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i4tl1f5", "text": "You don\u2019t need a broker. Sorry. I am an agent and renewals are free to existing clients. \n\nThere\u2019s no cost to the landlord to renew you. If your current rent is affordable - just ask for same terms. Market rent is a term agents use to justify commissions. If you already had a lease and it was reviewed by a lawyer just ask for an amending agreement. If you need cash to reno ask for it - ask for some free rent. Get into a long term lease. Nickel and diming over a couple bucks just wastes time and honestly as landlord rep it\u2019s better to give out some inducements for higher posted rents for valuation purposes", "replies": [{"id": "i4tmeyl", "text": "Good advice thank you!", "replies": [], "depth": 2}], "depth": 1}, {"id": "i4tmj7h", "text": "I\u2019d just clarify don\u2019t expect your attorney to know pricing. That\u2019s the broker/client. \n\nAttorneys just ensure the legal documents reflect your understanding of the terms. Critical yes but we\u2019re not a replacement for pricing advice. \n\nGood luck OP!", "replies": [], "depth": 1}, {"id": "i78odp5", "text": "Definitely a commercial real estate broker to negotiate for you and make sure the landlord covers the cost of his or her commission", "replies": [], "depth": 1}]