Five Tips To Help Navigate Commercial Lease Management

Last updated:
Jun 10, 2021
Commercial Real Estate


Hannah Feltham
Hannah Feltham

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Whether leased, owned or a combination of the two, a great commercial real estate portfolio accelerates business growth. However, with a mix of critical dates, projects, documents and key data to consider, managing one is anything but simple.

Here are five tips to help you minimise your risks, reduce costs and help realign your property portfolio with your business requirements and long-term objectives.

1.Start with a good overview

Take a detailed look at your entire property portfolio; map out lease expiries, notice periods and renewal options.

Stay acutely aware of landlord traps that can catch tenants out and lead to complications. For instance, rent review clauses often provide landlords with a relatively large window of opportunity to issue market rent review notices. And this can happen before or after the review date.

That means landlords can keep a close eye on market changes and only issue notices when it will lead to the best rental outcome for them. What’s more, commercial tenants usually have a relatively small window of opportunity to respond to the new rent notice with an alternative amount. By default, if a tenant does not respond within the allocated time frame or does not respond at all, it’s taken as a ‘tacit acceptance of the landlord’s proposed rate. (This is why landlords have an annoying habit of issuing rent notices during busy periods or around public holidays).

2. Keep in mind that the market will dictate when you need to act

If one of your sites has an upcoming lease expiry, give yourself enough time to canvass the market for more competitively priced spaces that you could relocate to or leverage in your negotiations.

But keep in mind that the amount of time you need for this exercise will rely heavily on the market. In a relatively tight market (e.g. the industrial market), where options are limited, you will need to act earlier than in a soft market (like office tenants are in now).

angular view of building to represent commercial real estate portfolio

3. Adapt your strategy for each site, depending on who you are talking to

Remember that no landlord is the same. Each will have a different portfolio, expectations and objectives.

For instance, a “mum and dad” landlord located in a regional area is likely to have a small commercial real estate portfolio. They will usually look for commercial tenants who will respect their investment and offer longevity.

These types of landlords are typically straightforward, easy to work with and more flexible. They are a stark contrast to corporate landlords in major cities, who are well versed in real estate, strong negotiators, less flexible with lease terms and looking to generate the highest amount of rent possible to maximise property value.

So, be sure to adapt your strategy according to each site and landlord.

Remember that the devil really is in the details

Ensure you are on top of the finer details of every lease, not just the lease expiry and the option term. For instance, stay abreast of things like:

  • When you are required to exercise options - Landlords can use impending deadlines to pressure tenants into exercising options or signing new leases. So, staying on top of these will allow you to explore suitable market alternatives or find comparable market options to aid negotiations.
  • Whether rent increases on the invoices are in line with the lease - For instance, if the lease says a 3.25% increase but the landlord applies 4% on the invoice, you’ll be paying more than you should. So, check that the numbers are consistent.
  • Whether the NLA documented in the lease stacks up with the actual area you are occupying - This will ensure you are only paying for the space you are using.
  • Who is responsible for carrying out and paying for repair works - Repairs and maintenance like cleaning often sit with the tenant. But the landlord should be responsible for fixing structural problems and repairs and maintenance to capital items, such as air conditioning systems. Be clear on who is responsible for what at each of your sites.
angular view of building to represent commercial real estate portfolio

5. Enlist the help of a professional

When it comes to managing your commercial real estate portfolio, working with a professional will support timely decision-making ahead of critical dates.

At Tenant CS, we represent commercial tenants and not landlords. We know the market like the back of our hand and offer years of experience in strategic negotiations with landlords. That means we can manage your portfolio, analysing your properties to provide you with a ‘snapshot’ of each location’s condition, operating costs, lease terms, space utilisation and risks. Whatever your business objectives, we’ll work with you to determine the best strategy for each site and strengthen your commercial real estate portfolio.

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