Understanding Blend & Extend Leases 

Business owners who are searching for office space for rent have quite a few options available to them. Long-term leases, annual leases and month-to-month options are the most common types of leases. With that said, most leases are longer-term in the 3-7 year range, and they reflect the market conditions that were in effect at the start of the lease term. So, what happens when a company’s need for office space changes midway into its lease term? or what happens when market conditions change dramatically, but the company still has considerable time left in its lease term? Is he stuck? The short answer is: not necessarily. A relatively new type of lease has emerged which business owners have found to be advantageous to their leasing situation, and that is the blend and extend lease. These leases relate to tenants and landlords who are in a current lease relationship, and want to extend the lease for an additional term while in the midst of their current lease. When a blend and extend lease is initiated, the parties also get to alter the terms of the lease which is an additional benefit to such a lease. The following will highlight more information regarding the blend and extend office lease and cite the various pros and cons of such an office space rental agreement.

What You Should Know About a Blend and Extend Lease

The first thing which commercial property owners and renters need to know about is that there must currently be a lease in place between the landlord and business owner tenant. As the purpose of a blend and extend lease is to get an early renewal with lease term changes it goes without saying that there must be an active lease agreement at the time in which a blend and extend lease is discussed.

You should also be aware of why a blend and extend commercial property lease is desirable. Commercial office leases are often lengthy in duration and this makes altering terms more difficult as when compared to an annual lease. With that said, landlords do not like to take chances of having their office space be empty once their current tenant’s lease expires. With a blend and extend lease, tenants benefit by negotiating for a more favorable monthly rent and lease terms and landlords benefit by ensuring that their current tenant remains in the premises for years to come.

The Pros of a Blend and Extend Office Lease

There are many benefits on both sides of the lease relationship associated with an office space blend and extend lease. The landlord favors a blend and extend lease as it guarantees them that their office space will not be vacant for long periods of time. In today’s economy, office rental demand is on shaky ground as are many other business-related aspects and the landlord can have peace of mind knowing that its tenant will be in the office space for years to come. This will increase the chances that the landlord can cover the mortgage payment every month and not have to worry about paying a real estate agent to find replacement tenants for them.

For the tenant, a blend and extend lease works in their favor by providing them with the opportunity to renegotiate the lease terms and oftentimes renew the lease with a less expensive monthly rent. The rent is not the only thing which the tenant can renegotiate in a this kind of lease. Rental abatement, options to renew, expand or contract and office space improvements are also negotiable points in the new and revised lease.

The Cons of a Blend and Extend Commercial Office Space Lease

As with any negotiations, there may be some less than favorable aspects of a blend and extend lease. With regard to the landlord, although the blend and extend lease provides the landlord with a longer lease term in which the tenant is required to stay in the building, the landlord may have to accept a lower monthly rent payment as well as agree to office improvements and other concessions. As for the tenant, it may receive a more favorable monthly rent under the blend and extend lease, but it will be locked in to the office space for a longer period of time and not be able to move from the office should it desire to do so a few years down the road.

In The End A Blend and Extend Lease Is a Good Option

When all is said and done, a blend and extend lease can often be a good option for both landlord and tenant to consider. If the landlord/tenant relationship is a good one and the office building location works well for the tenant, then there really is no reason to ignore the blend and extend lease option. Even with the few potential negatives listed above, the pros often times outweigh the cons of this type of lease. A blend and extend office lease ensures that the office property remains rented and the tenant gets a better deal than it had previously. It is easy to see why blend and extend leases are becoming much more common in the commercial real estate market-place.

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Structure and Layout Will Dictate Price

When searching the various office space leases, keep in mind that the structure and layout will dictate how much you spend on the overall lease cost. You want to consider if you are going to embark on any structure changes and how much that will cost you. An office space which is ready to go and needs little revision to the structure or layout will save you money and be the most cost effective lease arrangement.

Location Is a Determining Factor with Lease Cost

Where your prospective office space is located will be a factor in how much you pay. Consider the desired location carefully when you search as this can save money. By moving a short distance away and refocusing your search on a neighboring area, but still one which is beneficial for your business, will oftentimes offer a reduced cost. How much an office space landlord charges for rent will depend on the location and the demands associated with it. If you are considering two different locations, where one will be more cost effective, consider the pros and cons to see if the less expensive location will be just as efficient as the pricier one. This will save money and leave you with an office space location which is reasonable in price and will serve your company just as well.

Lease Terms Can Coincide with a Reasonable Price

Chances are that the landlord will have a set price in mind for the lease. However, this doesn’t mean that terms are non-negotiable. The more beneficial the lease terms are for the tenant, the higher the lease price may be. With that said, the future commercial tenant must always negotiate for the best possible terms and still aim for a reasonable price. No lease terms are concrete and everything is up for negotiation when it comes time to discuss the lease. The tenant should always broach favorable lease terms and seek out an affordable lease cost while obtaining exactly what their company needs in an office lease.

Finding an affordable office lease is not an unattainable goal. It can be achieved by choosing an appropriate structure and layout for your office space, picking the right location which will also be cost effective and making sure that you get all of the lease terms to suit your needs and the needs of your company. Although commercial office space leasing may be competitive in certain areas, there are still plenty of options to choose the best office space lease which will accommodate your company or corporation perfectly without having to pay a fortune.

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Look Around at Other Office Space Leases in the Area

When the time comes to renew your lease, you don’t want to be scrambling trying to find possible alternatives to your current location. You should know what other options are out there in case you and your landlord cannot agree on favorable lease terms with a new lease. Also, by checking out the other alternatives, you are letting your landlord know that you are not 100% set on renewing the current lease, which may make the landlord more likely to offer new lease terms which are more favorable to the tenant in the leasing contract.

Discuss Future Lease Arrangements with Current Landlord Well in Advance

Another easy way to show your current landlord that you may, or may not, be renewing your lease with them is to sit down with your landlord and discuss the future lease terms. Before you commit to a new lease with your current landlord, you want to be sure that this will be the best move for you and your company. If your landlord feels as if you have no other option but to stay in your current location, they will be less generous with the lease terms which they offer. You don’t want to be put in that position so be sure to get a feel for what your landlord will be offering if you decide to renew your commercial office space lease.

Utilize the Services of a Tenant Representative

An additional way to let your landlord know that you are searching for other accommodations is to hire a tenant representative. When you utilize the services of a tenant representative, your landlord knows that you are not just going to settle for any and all terms which the landlord offers to you and you will be fighting for the best tenant-oriented lease terms possible. Your tenant representative can help out, no matter whether you decide to renew your current lease or venture out to find a new location in which to set up your company.

As a tenant, you still have flexibility when it comes to getting the best possible lease terms in a renewed lease. Just be sure to explore all options and don’t let your landlord believe that you will automatically renew your lease for lack of any other options as this will not help you to obtain the best lease terms should you choose to renew.

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Request a Shorter Lease Term

Just because the initial lease terms are on paper doesn’t mean that you can’t request a shorter lease term. Many landlords will opt for longer lease terms as it ensures that they will have a tenant in place for years in the future and provides them with security. However, there are times when the landlord may agree to a shorter lease term. You may have to pay a bit more for an office space lease which is shorter than a 5-15 year range, however, if you need the flexibility with regard to length of the lease, it may be worth paying a bit more to obtain such flexibility.

Ask for a Renewal Clause

Suppose you feel as if you will want to stay in your office space for many years to come and don’t want to risk being forced out when your lease term expires. The easiest way to gain security in this regard is to request that a renewal clause be added to the leasing contract. This will give you a documented right to renew your lease should you desire to do so in the future. It’s always good to have this type of safeguard in place and absolutely have it in writing.

Assignment and Sublease Options

There may come a time during the commercial tenancy where you have to vacate the lease ahead of the expiration of your current lease. Having assignment and sublease options in the contract will ensure that you will be allowed to assign or sublet the remainder of your lease term without penalty.

Inclusion of a Termination Clause

As with the prior section, should you need to move your business out of the leased office space prior to the conclusion of the lease term, you want to be able to do so without being penalized. Sometimes business owners don’t want to be responsible for subleases or assignments and this is where a termination clause will come in handy. Request that this lease term is also added to the contract and it will provide a flexible option for you as a commercial office space tenant.

Office space leases don’t have to be strictly structured nor do they have to benefit the landlord alone. Request that terms be included within the lease which will safeguard you as a tenant down the road.

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Growth

Does your current office space meet your projected long-term needs? If not, put a tally in the move column. Whether you are expanding or consolidating, your commercial office space must agree with projected work demands. If you bottleneck here, you hinder earning potential.

Convenience

Location, location, location, right? This element is true for your financial requirements just as largely as your client base. Long, arduous commutes are a deterrent for new hires and a hindrance for retention, so distance effects your employees as well. For this matter, consider parking. Difficulties with parking can lead to unwanted client and employee frustration.

Security

Leases are complicated. How can you be certain that your rental agreement is secure? What if you get to the end of your lease and your property owner wants to increase your rates? What if your office rental is out-bid on? These are all very realistic concerns. The best answer is to get a commercial real estate expert who can work in your favor to put limitations and restrictions on your lease.

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Commercial office space leasing is a highly sought after route these days for business owners, especially in the Chicago area. When company owners lease office space they are able to take advantage of various amenities and benefits which those who buy commercial real estate often go without. Before heading out on the search for the right office space to lease in the Chicago area, you simply must have tenant representation on your side. Tenant representation is when a tenant advisor or tenant representation firm guides the business owner tenant through the process and helps them with not only finding a commercial office to lease but also walks them through the leasing process to ensure that the tenant is well informed throughout the process.

Tenant Representatives Lead You in the Right Direction during Your Search

With the amount of commercial real estate options available these days, it is easy to stray off of the path and get lost in the options. With a tenant representation specialist by your side, you can be assured that you will stay on track until you locate the ideal office space to lease. Tenant representatives are well versed in this field and know how to take your helpful insight and what you want in a commercial office space lease and find that exact option for you.

The Help of a Tenant Representation Firm Makes Understanding the Process Easy

The commercial real estate leasing process is not always the easiest to understand. When you have a tenant representative by your side, any questions which you may have along the way will be answered. The tenant representative will walk you through the process and make sure that you get the commercial office space lease which will suit your business best.

Tenant Representatives Represent Tenants Only, Not Landlords

Another great thing about hiring a tenant representative to help you with the commercial office space leasing process is that these individuals represent tenants alone, never the landlords of the buildings. This ensures that your tenant advisor will have your best interests in mind the entire time. They are in the arrangement to help you to find the office space lease you need and get the best deal possible. Tenant representatives will be with you when you speak with the prospective landlords and make sure that at the end of the day, your best interests are served.

Going into the leasing process without a tenant representative by your side can be a troublesome event. When you lease commercial office space or start the search for an office to rent, you want to be well prepared. By having a tenant representative with you, the fact remains that you will be taken care of in your search for commercial real estate. Before you even start looking for properties, contact a tenant representation firm to see what services they offer. Your future tenant representative will guide you along the way and make sure that the future office space which you lease is one which you will be happy to have acquired.

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Commercial office tenants have a lot to think about when it comes time to secure a new lease on an office building or renew their current commercial office space lease with their landlord.  There is so much to consider that commercial office tenants sometimes become overwhelmed and due to such feelings may make mistakes in securing their commercial office space lease.  This is where tenant representation can help.  The following will highlight what tenant representation is and why you, as a commercial office tenant, need this on your side.

What Is Tenant Representation?

Tenant representation is when a tenant representation advisor helps commercial office space tenants with their commercial office space needs.  The tenant representation advisor will help the office space tenants find an office to lease, help them secure the office space lease and aid them in every step along the way when it comes to negotiating with the landlord and getting the office space needed.  They also help office space tenants with their lease renewal negotiations.  The tenant representation professional will discuss the various office space needs with the office space tenant and then narrow down the office space lease options in the area to the ones which meet the needs of the office space tenant.  Tenant representation advisors will also help the commercial office space tenant with the real estate documents and make sure that the office space tenant knows what they are leasing and getting the terms they deserve.

Why Do Commercial Office Tenants Require Tenant Representation?

There are quite a few reasons why commercial office tenants require tenant representation.  First, commercial leases can be a bit difficult to understand at times.  By having a tenant representation professional by your side, you will be able to rest easy knowing that your office space lease will be beneficial to you and be able to understand exactly what it contains within the document.  Secondly, those who are looking for commercial office space to rent may not know where to begin the search.  When you use the services of a tenant representation firm, you will get right to the best office space leasing possibilities and make it much easier to find the perfect office space to lease in a quick manner.

Also, tenant representation professionals will protect you from being overwhelmed by your future landlord or taken advantage of by your future landlord.  When the landlord of the office space you wish to lease sees that you have a tenant representation firm on your side, they will automatically know that you are a force to be reckoned with and everything should be on the up and up.  Finally, when you use a tenant representation advisor for all of your commercial office space lease dealings you will be able to have that peace of mind you deserve and be able to focus on other matters, such as carrying out your daily business dealings.

Tenant representation professionals provide commercial office space tenants with an easy way to get the lease they deserve quickly and efficiently.  These professionals know the commercial leasing business well and will help you in your future leasing dealings.

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An Office Tenant Representative Will Help You to Choose the Best Rental Property

Frequently, when a business owner is shopping for a rental office, they may not know exactly what type of property they need in order to properly fulfill their needs.  When you have an office tenant representative on your side, the tenant rep will be able to look at the different office buildings with you and help you to choose the best one for your business needs.  The office tenant representative will take into consideration your line of work, need for space and number of employees which you will have in-office at any given time.  With a reputable office tenant representative on your side, choosing an efficient and proper commercial rental property will be as achievable.

Office Tenant Representatives Help Commercial Tenants Understand and Negotiate Leases

Another extremely important aspect of having an office tenant representative is that this individual will help you to understand the lease and negotiate the lease terms so that they benefit you the most.  Oftentimes leases, especially commercial leases, are so full of legal lingo that the commercial tenant will find it difficult to understand what it really states.  With office tenant representation, you will have an advisor to help you understand the terms, leasing process and current market terms, you as the future office tenant will have fewer? as your office tenant representative is well-versed in this area and highly capable of explaining it all to you easily and quickly.  This will help you to negotiate the terms of the lease so that it is fair to you and will benefit you best in the end.

With Office Tenant Representation You Are Safeguarded Throughout the Lease Term

Once you sign the office lease, the relationship between you and the office tenant representative should not end there.  When you have experienced and qualified office tenant representation, you should have that rep by your side the entire term of the lease.  This is helpful should any issues arise during the lease term, as your attorney and office tenant rep can speak with the commercial landlord on your behalf.  The office tenant representative can help be the mediator and ensure that your rental relationship with your landlord is as amicable as possible.

Office Tenant Representation Is a Wise Move

When you review all of the benefits associated with office tenant representation, it is easy to see why this type of safeguard is simply a wise move to make.  With an office tenant representative by your side, you can make the best rental decisions and ensure that your office rental situation is as good as it can be.  Again, your office tenant representative will protect you and your business by helping you to choose the right office setting and negotiate the best office space terms.  When you have a qualified office tenant representative at your service, you can focus on other business-related duties while the office tenant rep deals with office rental issues for you.  All in all, office tenant representation is the way to go when embarking on renting commercial property.

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1. Be Ready, Willing and Able to Walk Away

The biggest mistake many tenants make is not developing legitimate alternatives to their first choice, whether a new space or a lease renewal.  If a landlord believes you’re not willing to switch to a different property, you lose your negotiating leverage.

2. Start the Process Early

Time should be your ally, not your enemy during negotiations.  Landlords know that the managers of other buildings can take six to eight months to create a space plan, get construction pricing, agree on a rental rate, prepare a lease document and ready the space for occupancy.  If you wait too long before asking for a renewal proposal, you’re telling the landlord that you’re not considering any other options.

3. Know the Whole Picture Before You Start Negotiations

Is the office building being sold?  Is the largest tenant moving out?  How much free rent did the last tenant get?  Does the building have HVAC or parking problems?  What is the landlord’s financial situation?  Candid, complete answers may not be forthcoming from the landlord or his broker.  Expert research can make sure that what you don’t know won’t hurt you.

4. Make Landlords Compete For Your Business

The key to a successful negotiation is creating competition between your current landlord and other landlords in the area.  You should have an experienced advisor providing the proper market research, lease comparables and the negotiating skill to use that information to create leverage for you.

5. Its In Your Best Interest To Have A Tenant Representative Negotiate For You

Unless you’re a real estate professional, it’s not a good idea to negotiate a lease deal directly with the landlord’s broker.  An experienced tenant representative will help ensure that you receive the best possible rates, terms, incentives and lease clause protections.  Remember, the landlord’s representative negotiates leases every day; you may do it once every 3 to 4 years!

6. Hiring A Tenant’s Representative Doesn’t Cost You More Money, But It Can Save You Money

Occasionally a landlord will “try to save you some money” by discouraging you from engaging a tenant representative.  Don’t be fooled.  He’s not doing this out of the goodness of his heart.  He knows that without a tenant representative you’re more likely to be in the dark about market rates and terms, and less likely to shop the market, or consider other alternatives.  That means more money in the landlords pocket.

7. Make Sure You Are Comparing Apples To Apples

Business owners who are not experienced with commercial real estate often find it difficult to perform a true “apples to apples” comparison of different facility choices.  Lease terms such as full service gross, modified gross, triple net, tenant improvement allowances, rental abatement, escalations, base years, operating expense stops and loss and load factors can obscure the true amount you’re paying and make legitimate comparisons difficult.  A good tenant representative will sort through all this for you.

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