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If your business’s lease is scheduled to come up for renewal in 2026, it’s time to prepare to negotiate a new lease if you wish to remain in your present location. Taking time to develop a focused negotiation strategy can help you secure a favorable deal for your company.
Review Your Current Lease First
First, you should review the terms of your current lease before entering renewal negotiations. Reviewing your current lease can help you understand your rights or options under essential provisions, such as renewal clauses, automatic rent escalation, common area maintenance charges, and repair obligations. These clauses in your current lease can affect your bargaining position or the terms that may need to go into a renewal lease, so knowing what these terms say can prevent surprises.
Assess Your Space and Business Needs
You should also consider whether your current space fits the present scale of your operations. For example, your business may have expanded or downsized over the course of your current lease, leaving you with unused space or squeezed into a space too small for your needs. Depending on the location and nature of your space, you may have the opportunity to negotiate for additional space or to give up a portion of what you currently have.
However, you should also evaluate your anticipated business needs. For example, if you plan to expand during the term of your next lease, you may want to consider leasing additional space or negotiating an option to expand your space during the lease term. Conversely, if you anticipate downsizing, you may want to negotiate the option to return a portion of your space to the landlord or an early termination option to relocate to a smaller space. The space you lease for your future needs should also align with your current and projected cash flow to ensure that your business can afford rent.
Research Market Conditions and Comparable Leases
Understanding the current commercial real estate market can help you negotiate a more favorable deal for your business’s next lease. Data points that you should know include:
- The occupancy rate at the property (for multi-tenant properties)
- Available inventory in the applicable real estate market
- Real estate market trends, such as rising or declining vacancy rates or rents
- Deal terms for recent leases of comparable commercial real estate, including per square foot rents, lease durations, and incentives
You may find this data through online listings or local business associations. Alternatively, you can work with real estate brokers and attorneys who can research this information and use it to negotiate effectively on your behalf.
Identify Negotiation Priorities and Deal Breakers
Before going into negotiations on a commercial lease renewal, you should identify your business’s priorities and red lines to help you guide your consideration of proposed lease terms and counteroffers. Knowing what your business “must have” or “would like” in the next lease can focus your negotiation strategy. Furthermore, setting “deal breakers” can help you reach an offer that’s acceptable to you.
Keep in mind that having deal breakers may also require your business to explore alternatives to renewing your lease. For example, you may need to sublease space from another tenant or relocate to a different property, which will give your company the leverage to walk away from the negotiating table if the landlord refuses to offer a deal that your business can accept.
Strengthen Your Financial Position
You can also improve your business’s bargaining position by getting your financials in order, including updating balance sheets, income statements, tax returns, and financial projections. Understanding your business’s current and projected financial situation can help you assess the affordability of a proposed lease renewal. It may also help you convince the landlord of your company’s financial strength, allowing you to negotiate more favorable lease terms.
Contact Our Firm Today
If your business’s lease expires in 2026, you should start the process of developing a comprehensive legal strategy to negotiate a renewal that puts your company in the best position for success. Contact Schneiders & Associates, L.L.P., today for a confidential consultation with a real estate attorney to discuss strategies for renegotiating your business’s commercial lease in 2026.