If you’re a retail property manager or retail lease manager, you’ll know the high-value benefit that can be realized through careful negotiation of shopping center lease renewals. Lease renewal is something I would consider carefully. You have to know what the property is doing and where it is going. The renewal of the lease must be considered in balance with the overall plans and objectives of the property.
Obviously, the tenant is also very focused on the commercial lease renewal, as it is the defining moment for their business. Either they get a lease renewal and the business continues, or they vacate and have to move the business to another location.
Good planning and communication by the property manager prior to retail lease renewal is essential to property stability and control. The leasing or retail property manager is the balance between the investment plans of the owner, commercial tenants, clients, and the property function.
So, when negotiating a lease comes up, there are several alternatives:
- Don’t renew and let a vacancy occur. It could be that there is another plan for the property or the local area.
- Restore facilities as part of discussion for a new lease. Commercial property ages faster than office property, so it pays to have an ongoing renovation plan in place.
- Renovate the common areas adjacent to the tenancy. This helps integrate the property into the local community and optimizes sales or viewings.
- Relocate the tenant to a better position in the tenant mix. Sometimes a relocation proposal is good for the tenant and the property. As part of the relocation, the tenant may be offered incentives such as better rental incentives, bigger premises, better premises or a better location.
- Renew on terms consistent with existing lease agreements. If it’s preferable to maintain the status quo in the lease negotiation, that’s fine; you just need to relate that to the next few years that the lease will remain active.
- Negotiate new occupancy terms that are in accordance with new plans for the lease or property (or both).
- Demolish the property and build something else. Changes in the local community may indicate that this is a better plan for the future.
- Offer the tenant a proposal that involves improving their offer or presentation of the store.
Therefore, the renewal of a lease on a commercial property or in a shopping center is a great opportunity for change. It allows the landlord to help the tenant with his future plans, while optimizing the future of the property. Each lease renewal should be looked at for the entire balance of the property, not individually. Use lease renewal to improve your tenant mix and offer to the community. Both the tenants and the owner see the ultimate benefit.