A few years back, I worked with a 110,000 SF manufacturer who was the very definition of a captive tenant.
Air lines, machine trenches, anti-static rooms and heavy cranes were all critical to this user’s operation – needless to say, the ticket on a facility relocation would have been onerous.
This tenant’s lease was expiring in the fourth quarter and we had only began renewal and extension dialogue with the landlord in the first quarter.
Given the timeline to lease expiry, and the sophistication of the landlord, it was no surprise when the landlord issued a five year extension proposal on the building. It was a bullish rental rate increase issued from a position of strength!
Before our next meeting with the tenant, we found out one of the reasons why: one week before the landlord submitted his proposal, someone from the tenant’s team had called the landlord to obtain approval to install solar panels on the roof, and T5 energy efficient lighting in the warehouse.
This was a textbook example of a tenant not being aware of their lease expiry and as a result weakening their negotiating power, resulting in years of extra facility costs.
The greatest signal you can give to a landlord that you are not planning on leaving is to make a significant investment in your building shortly before a lease expiry.
Don’t unknowningly give away negotiating leverage as your expiry date approaches. To learn more about negotiating your lease from a position of power, download my eBook Should I Stay or Should I Go?