Do Not Renew Your Lease Without Speaking to a Broker

Lease renewals can seem straightforward; but landlords who negotiate without expert representation often leave significant money on the table. At the start of 2024, we worked with three landlords on renewals, and in each case, our involvement led to millions of dollars in increased property value.

• One tenant attempted to drop rent by over 20%, but through strategic negotiations, we secured a new lease with a 10% rent increase, resulting in a $1.6 million boost in value.
• Another renewal turned into a 10-year lease extension, adding approximately $1 million in value.

Had these landlords negotiated alone, they might have accepted lower rents, shorter lease terms, or unnecessary concessions; all of which could have drastically reduced their property’s worth.

Why You Need a Broker on Your Side

One critical mistake we see landlords make is assuming that the tenant’s broker or representative has their best interests in mind. This is rarely the case. A tenant’s representative is incentivized to cut costs, secure flexibility, and, in some cases, convince you that the tenant might leave.

You need a broker working for you, armed with market data, tenant insights, and strategic leverage to negotiate the best possible deal.

How to Strengthen Your Position Before Renewing a Lease

1. Understand the Tenant’s Financial Position
   • Use tools like Placer.ai and sales reports to get an accurate picture of the tenant’s performance.
   • In one case, we obtained bank deposit data to assess the tenant’s financial health before negotiating.
   • Don’t take their word for it when they claim they "can’t afford" an increase—verify their actual performance. I have seen many tenants say that they cant afford it and its one of their strongest stores in the chain.
2. Identify Other Interested Tenants
   • You have to always ask yourself; Are there other tenants actively searching for space in your market?
   • Knowing your alternative options allows you to negotiate from a position of strength.
   • Use competing interest as leverage—if your current tenant knows there are other businesses eager to take the space, they’re less likely to push for lower rent or excessive concessions.
   • By hiring a broker; they should immediately know who is active, who would be a good fit for it and get you some pretty quick feedback.
   • Are you able to market the property? If you know that this tenant leases is coming up; we think its always worth looking out in the market and seeing who might have slipped through the cracks.
3. Get Market Insights on Your Asset Type and Location
   • Speak with brokers who have access to recent lease comps in your market. We have had much more luck with this; especially when someone from out of state is negotiating with us. They don’t understand the activity tenants and brokers in the market; unless us where we can horse-trade infromation.
   • Understand what’s happening in your city or submarket that could impact your asset’s value.
   • If you own a drive-thru restaurant, for example, there may be multiple tenants competing for space, making it a landlord-favorable situation.
4. Avoid Rent Interruptions—But Be Strategic About Rent Increases
   • Is a temporary vacancy worth it for a better tenant, higher rent, or stronger credit?
   • Weigh the risks of losing a tenant against the long-term benefits of bringing in a higher-quality operator at market or above-market rents.
   • A well-structured lease can protect against future risks and ensure steady cash flow.

The Bottom Line

Landlords who enter lease negotiations without a broker risk devaluing their own assets. Understanding the market, evaluating tenant performance, and using strategic leverage can turn a routine renewal into a wealth-building opportunity.

Before you sign anything, talk to a broker who specializes in your market. The right advice could be worth millions.