Playbook: Renewals and Expansions

Why Renewals and Expansions Matter

For most small and mid-sized businesses and nonprofits, the first lease is just the beginning. At some point, your organization will face a decision: should you renew your existing lease, expand into more space, or look elsewhere?

These moments are critical because:

• They determine whether you stay in a location your customers, employees, or community already know.
• They set the stage for the next 3–10 years of rent and occupancy costs.
• They present leverage opportunities: landlords want to retain existing tenants, but tenants often underestimate their negotiating power.

Handled well, renewals and expansions can secure stability, control costs, and align space with your future growth. Handled poorly, they can lock you into unfavorable terms, missed opportunities, or unnecessary moves.

This playbook walks you through the process step by step, with checklists, negotiation strategies, and real-world examples to help you navigate with confidence.

Step 1: Start Early

The most common mistake tenants make is waiting too long.

Rule of Thumb: Begin renewal or expansion planning 12–18 months before your lease expires.

Why?

• Landlords know time pressure reduces your options.
• Early preparation gives you leverage, even if you’re leaning toward staying.
• If you need to relocate, site selection and build-out can take a year or more.

Checklist:

• [ ] Review your current lease for renewal/expansion rights.
• [ ] Note your “notice window” (often 6–12 months before expiration).
• [ ] Engage advisors (broker, attorney, architect if expansion is involved).
• [ ] Benchmark market rents and concessions in your area.

Step 2: Review Your Lease Rights

Your current lease is the starting point. Look for clauses that address:

• Renewal Options: Do you have a right to extend, and on what terms?
• Expansion Rights: Do you have first right of refusal (ROFR) or first right of offer (ROFO) on adjacent space?
• Holdover Provisions: What happens if you stay past your term without a deal? (Often 150–200% of rent.)

Pro Tip: Even if you don’t have explicit rights, landlords may still negotiate renewals or expansions. The difference is leverage—options in the lease give you more of it.

Step 3: Define Your Space Needs

Renewals and expansions are more than a rent discussion. They’re an opportunity to align your space with your business plan.

Questions to ask:

1. Has your headcount grown or shrunk?
2. Has your operating model changed (hybrid work, customer traffic patterns, service delivery)?
3. Do you need more visibility, amenities, or specialized infrastructure?

Framework:

• Stay same size: Focus on cost, stability, and improvement allowances.
• Expand: Secure adjacent space or negotiate a relocation within the property.
• Right-size down: Consider subleasing or negotiating a smaller footprint.

Step 4: Understand Market Conditions

Your leverage depends on the market as much as your lease.

• Tenant’s Market: High vacancy, landlords competing for deals. Better chance to negotiate lower rents, more concessions.
• Landlord’s Market: Low vacancy, limited options. Leverage comes from your stability as an existing tenant.

How to gather data:

• Ask your broker for recent comparable deals (“comps”).
• Research average asking rents in your submarket.
• Look for landlord motivations—debt coming due, property on the market, or large vacancies.

Step 5: Build Your Negotiation Strategy

A renewal or expansion is essentially a new lease negotiation with a head start.

Key terms to evaluate:

• Base Rent & Escalations: Push for market-based rates or capped increases.
• Tenant Improvement (TI) Allowance: Even renewals can include funding for upgrades.
• Free Rent / Abatements: Ask for concession months, especially if renewing long-term.
• Operating Expenses (CAM): Clarify caps and exclusions.
• Flexibility Clauses: Subleasing, contraction rights, or future expansion guarantees.

Negotiation Levers:

• Threat of relocation (credible alternatives).
• Longer lease term in exchange for better concessions.
• Tenant improvements that increase property value.
• Stability of your business as a desirable occupant.

Step 6: Run a Financial Comparison

Don’t assume renewal is cheaper than moving. Always compare:

1. Renewal Economics: Base rent, escalations, CAM, concessions, TI allowance.
2. Relocation Economics: Rent at new site, moving costs, downtime, build-out expenses, brand disruption.

Pro Tip: Use “effective rent” (average annual cost over full term after concessions) to compare apples to apples.

Step 7: Execute the Renewal or Expansion

Once terms are negotiated:

1. Document in LOI (Letter of Intent). Clear, written outline before legal drafting.
2. Amend Lease or Sign New Lease. Expansion may trigger a new lease or a lease amendment.
3. Confirm Build-Out & TI Timing. Ensure landlord commits to schedules.
4. Update Insurance & Compliance. New space or extended term may require updates.

Case Example: Nonprofit Renewal with Expansion

A community nonprofit leased 8,000 sq. ft. in a suburban office park. Two years before expiration, their headcount grew, and adjacent space became available.

• Action Taken: They started conversations early, benchmarked comps, and worked with a broker to signal they were exploring relocation alternatives.
• Negotiation Wins:
  • Secured the extra 2,500 sq. ft. with a tenant improvement allowance.
  • Landlord paid for refreshed carpet/paint in the existing space.
  • Renewal rent set at 8% below asking rents in the market.
  • Received 3 months of free rent during the build-out.

Result: The nonprofit avoided disruption, secured needed space, and lowered effective rent by spreading TI and concessions over the larger footprint.

Conclusion: Key Takeaways

• Start renewal or expansion planning 12–18 months before lease expiration.
• Review your lease for renewal/expansion rights and key deadlines.
• Use market data and relocation alternatives as leverage.
• Compare renewal vs. relocation economics carefully.
• Negotiate beyond rent—TI, concessions, flexibility, and expenses all matter.

Handled strategically, renewals and expansions can be one of the most cost-effective real estate decisions your organization makes.

Quick Reference Checklist

• [ ] Timeline: Begin 12–18 months out
• [ ] Lease review: Renewal & expansion clauses
• [ ] Market comps gathered
• [ ] Space needs defined
• [ ] Negotiation levers identified
• [ ] Financial comparisons run
• [ ] LOI executed
• [ ] Lease amendment signed