Tips On Managing A Commercial Lease Expiry

Commercial Lease Management FAQ

Question: Should we exercise our lease option?

Answer: Perhaps not!

Given the current tenant-friendly market conditions, we strongly recommend against exercising any available option periods on your current lease without first testing the market. Exercising your option may mean missing out on lower market rents and valuable lease incentives. By exploring alternative opportunities before your option exercise date, you can better understand your negotiating position and maximise value. Ideally, tenants should assess the market and make an informed decision well before their option exercise window expires.

Question: Is it cheaper for us to simply stay put in our current premises?

Answer: Not necessarily!

There has never been a better time for tenants to test the market. Investigating alternative premises creates market tension and can provide greater leverage when negotiating with your current landlord. With attractive lease incentives currently available across much of the office market, relocation may offer significant benefits. We recommend undertaking a structured "Stay vs Go" feasibility study to evaluate the financial and operational impacts of each option before making a decision.

Question: Should I appoint a tenant representative before engaging an architect?

Answer: In most cases, yes.

A professional tenant representative can develop a comprehensive business case outlining potential options and recommendations regarding your corporate real estate strategy. This enables informed decision-making before committing internal resources or engaging consultants. While architects, designers and project managers all play critical roles in workplace projects, a tenant representative can provide the strategic foundation by evaluating the key time, cost and quality considerations required to determine the best path forward.

Question: What should a tenant representative cost?

Answer: Tenant representatives are typically remunerated using one of three common fee structures:

1. A standard rate per square metre
2. A share of savings model
3. A percentage of the first year's rent

The most suitable fee structure will depend on the size of the requirement, business objectives and desired outcomes.

For many organisations, a share of savings arrangement can be particularly attractive as it aligns the consultant's fee with the success of the negotiation. This model allows the tenant representative to demonstrate value through:

1. Market knowledge and insights
2. Property analysis and evaluation
3. Lease negotiation expertise
4. Established relationships with landlords, institutional owners and agents across Australia and New Zealand

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