Tips On Managing A Commercial Lease Expiry


Leaders from the PCG team discuss some of the key considerations and insights driving their work.

Commercial Lease Management Checklist by PCG


Question: Should we exercise our lease option?

Answer: Perhaps not! Given the current ‘tenant friendly’ market conditions, we strongly recommend against exercising any available option periods on your current lease. Exercising your option essentially forgoes your access to current market rents and lease incentives. We recommend testing the market well before your option exercise date approaches to ensure you extract the most value out of the commercial leasing market. Ideally, a tenant should have tested the market and made a decision well in advance of the expiry of their option exercise window.

Question: Is it cheaper for us to simply “stay put” in our current premises?

Answer: Not necessarily! There has never been a better time for tenants to test the market. In fact we strongly recommend it. Investigating just how green the grass is on the other side helps create a level of ‘market tension’ and provides greater leverage to negotiate more favourable leasing terms with current landlords. Additionally, with the considerably high lease incentives currently being offered by landlords throughout the national office market, now is the perfect time to consider a relocation option. We encourage a carefully managed ‘Stay vs. Go’ feasibility study to assist any decision.

Question: Should I appoint a tenant representative before an architect?

Answer: In the majority of cases, yes! A professional tenant representative has the capacity to compile an insightful and comprehensive business case presenting options and recommendations on corporate real estate (CRE) strategy enabling insightful decision making in advance of mobilising any internal or external project resources. Whilst we acknowledge the critical contributions of designers and project managers to CRE strategy and implementation, a professional tenant representative will have adequate insight and experience to draw upon the necessary time, cost and quality metrics to undertake the initial strategy paper.

Question: What should a tenant representative cost me?

Answer: Traditionally, tenant representatives are remunerated by one of the following three methods;

  1. Standard rate per square metre; or
  2. A ‘Share of savings’; or
  3. A % of the first years rent.

The appropriate remuneration structure for our clients vary and is generally dependent on both their business model and size / space requirements.

For some of our clients, PCG’s ‘share of savings’ fee structure is the most attractive option. This structure transfers the majority of the risk on to us. Our fee is effectively bound to the result of our negotiation, and allows us to demonstrate the following core competencies:

  1. Market knowledge and understanding;
  2. Property analysis;
  3. Lease negotiations; and
  4. Strong relationships with key institutional owners, landlords and agents across Australia and New Zealand.

AuthorProject Control Group

PCG is an independent corporate real estate and project services firm. We provide end-to-end delivery of your new commercial or industrial workplace from needs analysis, tenant representation, office and workplace design and construction management.

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