What a renewal really costs when you do not test the market
Landlords price renewals against the cost and disruption of moving. The only way to change that arithmetic is to make moving credible.
Principal, Tenant representation, office
A renewal proposal is not priced against the market. It is priced against what your landlord believes it would cost you to leave, which includes the improvement cost at a new building, the moving cost, the technology cost, the overlap rent and the months of management attention.
That belief is usually well founded, which is why renewal proposals so often arrive two to four dollars above what the same landlord would offer a new tenant for the identical suite. The asymmetry is not bad faith. It is a rational read of your alternatives.
How the arithmetic changes
The only thing that reliably moves a renewal number is a credible alternative. Not a conversation about one, and not a threat. A shortlist, tours completed, and ideally a letter of intent in hand at another building.
That work takes three to five months, which is the real argument for starting twelve to eighteen months before expiry rather than six. At six months the landlord knows you cannot realistically move, and the proposal reflects it.
What to ask for in a renewal
- A refurbishment allowance, even if you are staying put. Carpet, paint and a reconfiguration of two rooms is a modest ask and a common concession.
- Free rent applied at the start of the renewal term rather than spread, which improves your cash position and your net effective rate.
- A reset of the base year in a full service gross lease. An old base year is a permanent tax on every year of the new term.
- Removal or reduction of restoration obligations that have accumulated across prior terms.
- An option to contract or expand at a defined notice period, which is worth more than most tenants realise and costs the landlord little.
When staying is right anyway
Often it is. Second generation space you already occupy carries no build-out cost, no downtime and no risk. The point of running a real search is not to move; it is to know what staying is worth and to be able to argue for it.
In one recent assignment the client stayed in the same suite and the rate came down four dollars per square foot, because we had a signed letter of intent at a building three blocks away. The search cost them four months of attention and returned roughly 380,000 dollars over the term.
This example and all figures in it are illustrative samples for a demonstration website.
