A commercial lease expiry can arrive faster than an owner expects, and if the first serious conversation with the tenant happens shortly before the term ends, both sides can end up making decisions under pressure.
That’s according to Tom Donnelly, Head of Commercial at NAI Harcourts, who argues owners should be asking a more useful question than “will you renew?” well ahead of time.
Starting early, Tom said, means finding out whether the property still works for the tenant’s business.
The tenant may need more storage, different access or room for extra staff. 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 ahead of expiry gives both parties more options, and it also gives the owner time to assess the property itself – whether it needs work to retain the tenant or attract a new one, and how the rent compares with competing space.
That assessment matters most when a tenant has been in place for many years.
“A building can change, and so can the expectations of businesses looking for space,” Tom said.
“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.”
Renewals are often treated purely as a rent negotiation, but Tom said lease length, proposed works and the tenant’s plans for the business can matter just as much 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,” he said.
There’s a broader investment decision at play too. An owner planning to sell may value the certainty of a renewed lease, while another might see an upcoming vacancy as a chance to improve the building or find a tenant whose business better fits the space.
Neither call should be left to the last minute, according to Tom, who said an approaching expiry gives agents and property managers a chance to advise clients while there’s still time to act on that advice.
“The date on the lease matters,” he said. “The conversations leading up to it matter more.”