Don’t Just Renew, Renegotiate: Get Upgrades When You Renew Your Lease

The Overlooked Opportunity at Renewal

When a commercial lease nears expiration, many tenants assume they only have two choices: renew as-is or relocate. But there’s a third, often better path: use your renewal as leverage to improve your space or negotiate upgrades that benefit your business.

Landlords want stable occupancy, especially in today’s mixed market. Retaining an existing tenant avoids vacancy downtime, re-leasing costs, and the risk of months (or years) without income. That gives you leverage, especially if your space is older, systems are aging, or nearby rents have softened.

With the right approach, you can turn your renewal into a win-win: a stable home for your business and meaningful improvements that justify staying.

Step 1: Know Your Leverage

Before asking for anything, understand what makes you valuable to the landlord. Things that strengthen your negotiating position include:

Strong payment history: You’ve paid on time and maintained the space.
Low vacancy market: Quality tenants are in short supply.
Above-market rent: You’re paying more than current averages.
Operational stability: Your business is healthy and likely to stay long term.

The key is to show you’re a “sure thing” worth investing in.

Pro Tip: Ask your broker or advisor for current rent comps in your area. If you’re above market, that’s your opening argument for requesting improvements instead of a rent reduction.

Step 1.5: Check Whether You Have a Renewal Option

Before you start negotiating upgrades, confirm whether your current lease includes a renewal option and what it says. This detail determines how much leverage you have.

If you have a renewal option:

You have the right to renew, usually at a rent tied to “market rate” or a pre-set increase.
Timing is everything. Begin renewal negotiations well before the deadline to exercise your option. Missing that date can cost you your renewal rights and put your space at risk.
However, the landlord isn’t automatically obligated to offer new concessions like a TI allowance or HVAC replacement. You’ll need to negotiate those as part of a side agreement or amendment.
Still, your guaranteed ability to stay gives you leverage if you’re willing to extend longer or sign early.

A renewal option defines your baseline—but it doesn’t lock you out of negotiating for improvements. It’s simply a starting point.

If you don’t have a renewal option:

You’re starting from scratch, which can actually give you more flexibility to negotiate upgrades, rent, or term.
The landlord could technically lease the space to someone else, but in most cases they’ll prefer to keep a reliable tenant rather than risk downtime.

Step 2: Frame Your Ask Strategically

Don’t just say, “We want improvements.” Tie your request to the landlord’s interests: renewal certainty and property value.

There are two common ways to structure your ask:

1. Tenant Improvement (TI) Allowance

A TI allowance is money from the landlord for you to make updates or repairs. It might cover flooring, lighting, paint, or minor layout changes. Typical range: $5–$15 per square foot for renewals, depending on market and condition.

Example pitch:

“We’d like to extend our lease another five years. To make that commitment, we’d need the space refreshed with new flooring and lighting updates. Could the landlord provide a modest TI allowance to support those improvements?”

2. Landlord-Performed Work (Capital Improvements)

Instead of giving you cash, the landlord might directly complete system upgrades like HVAC replacement, roof repair, or exterior work.

Example pitch:

“We’ve enjoyed being here, but the HVAC is reaching end of life. If the landlord could replace or service the system as part of renewal, we’d be glad to commit long term.”

Both strategies add value to the property and signal a longer commitment, an attractive tradeoff for landlords.

How Tenant Improvements and Rent Abatement Affect the Deal

Tenant improvement allowances and renewal incentives often influence rent structure. A TI allowance or landlord-funded upgrade is rarely “free”; it’s usually factored into the rent the landlord charges over the renewal term. Think of it as a prepaid investment that’s recovered through rent.

If you’re negotiating improvements, balance the cost of the TI with your rent and term length. For example, a landlord might agree to replace the HVAC or offer $10 per square foot in TI funding in exchange for a slightly higher base rent or longer renewal.

Another tool is rent abatement (free rent) at the start of the renewal term. This can offset downtime during construction or help you manage expenses while improvements are completed.

Keep in mind that landlords want their financials to look strong, especially if they plan to refinance or sell the property. To protect reported income, they may offer rent concessions as early-term credits or shorter free-rent periods instead of reducing rent over time. Ultimately, it’s about showing the highest possible income in the year of a sale or valuation.

Step 3: Align the Timing and Term

Your leverage peaks 6–12 months before your lease expires (or option critical date). Wait too long, and your options shrink.

Use that window to make your case:

Gather quotes for needed work.
Document HVAC issues or maintenance records.
Get market data on renewal concessions in your area.

Rule of thumb: The longer your renewal, the more likely the landlord will invest in improvements.

Step 4: Put It in Writing

Once you’ve agreed in principle, capture the details in your renewal proposal or Letter of Intent (LOI). Be specific.

Example LOI language:

Landlord shall provide a Tenant Improvement Allowance of $10 per rentable square foot, payable as a reimbursement for improvements completed by Tenant upon renewal execution.

Or:

Landlord shall replace the HVAC unit serving the Premises prior to the commencement of the renewal term at Landlord’s sole cost.

Avoid vague promises like “Landlord will consider improvements.” Get commitments in writing with timelines, cost responsibilities, and warranties spelled out.

Step 5: Keep the Relationship Collaborative

Negotiation doesn’t have to be adversarial. You’re both trying to protect long-term value.

Frame your requests as part of a shared goal: keeping the property in good condition and your business stable. For example:

“We’d like to make sure the space continues to reflect well on the property.”
“We’re planning to stay and invest in our operations here. An updated system helps ensure we can do that reliably.”

Landlords are more receptive when they see the mutual benefit.

Pro Tips for Success

Document issues early. Keep maintenance logs or photos of HVAC problems, leaks, or outdated finishes.
Be realistic about scope. Renewals rarely include full remodel budgets. Prioritize what truly impacts operations.
Leverage competition quietly. Mention that you’re evaluating other spaces if asked, but stay professional.
Engage a tenant-rep broker. They know what concessions are standard for renewals in your market and can help frame your proposal credibly.

Key Takeaways

Start early. Begin renewal discussions at least 6–12 months before expiration.
Check your renewal rights. Know whether you have an option and how flexible it is.
Understand the economics. TI allowances and free rent usually impact base rent.
Ask smartly. Frame improvements as value-adding, not favors.
Match term to ask. Bigger requests justify longer commitments.
Put everything in writing. Verbal agreements fade; clauses last.

Your renewal is more than a date on the calendar; it’s a chance to reset the relationship, improve your space, and position your business for the next chapter.