A Lease Expiry is an Opportunity, Not Just a Date

By Tom Donnelly, Head of Commercial, NAI Harcourts

A commercial lease expiry can arrive faster than an owner expects. If the first serious conversation with the tenant happens shortly before the end of the term, both sides may find themselves making decisions under pressure.

Starting early gives the owner a chance to ask a more useful question than “Will you renew?”: does this property still work for your business?

The tenant may need more storage, different access or room for additional staff. They may like the location but want a different lease term. In some cases, the premises still suit the business, but improvements would make it easier for the tenant to commit to staying. Understanding those plans well ahead of expiry gives both parties more options.

It also gives the owner time to assess the property. Will it need improvements to retain the tenant or attract a new one? How does the rent compare with competing space? If the tenant leaves, what work would be needed before the property could be offered to the market?

That assessment is especially useful when a tenant has been in place for many years. A building can change, and so can the expectations of businesses looking for space. The property may still be well located, but its presentation, services or layout may need attention before it can compete effectively for a new occupier.

A renewal is often treated as a negotiation over rent. In practice, the length of the lease, proposed works and the tenant’s plans for the business can be just as important to the outcome. An agreement that looks attractive on rent alone may be less valuable if it does not provide the certainty the owner wants.

There is a wider investment decision too. An owner planning to sell may value the certainty of a renewed lease. Another may see an upcoming vacancy as an opportunity to improve the building or seek a tenant whose business is a better fit for the space. Neither decision should be made at the last minute.

For agents and property managers, an approaching expiry is an opportunity to give advice while there is still time to act on it. For owners, it is a prompt to consider what they want the property to achieve next.

The date on the lease matters. The conversations leading up to it matter more.