The lease renewal process can be a time consuming and repetitive task, often requiring a large percentage of a corporate real estate team’s time. For companies with dozens or hundreds of properties, the challenges of managing the ongoing lease renewal processes can drain valuable resources that would be better directed elsewhere.

Following a traditional approach, large companies will manage the real estate lease renewals for each location in-house, based on the rationale that lease renewals are easy and inexpensive when managed internally, and that outside brokers will impede or cause problems with the process. But when you factor in the time for each negotiation, including internal staff discussions and meetings, research into current market values per location and the back-and-forth with the landlord’s agent, a corporate real estate team will quickly find itself extremely busy. And when nearly 100% of the team’s time and efforts are dedicated to lease renewals, the team is unable to focus on higher corporate priorities like strategy, acquisitions and dispositions.

Companies often discover that time dedicated to lease renewals is better spent on strategy and that trusting the renewal process to a trusted advisor can free up scarce internal resources for maximum corporate benefit.

Selecting the Right Partner

Whether it is designing a new headquarters, IT, asset management, human resources or a new product line launch strategy, outsourcing discrete projects provides a neutral, outside perspective and allows companies to maintain focus on core business strategies while addressing internal needs.

Companies outsource every day – from accounting and administrative support staff to janitorial and food services to financial and marketing strategy – accomplishing the same goals without sacrificing internal staff on a time-consuming, sometimes repetitive or short-term, project.

Lease renewal is a time-intensive process that may also be managed by an expert to avoid incurring unnecessary costs at each renewal. The challenge is even greater when spread across dozens, if not hundreds, of locations per annum. Managing each location’s renewal can become all-consuming.

When renewing a lease for a specific location, the best outcome is a commercial agreement that utilizes the leverage of the firm, maintains a positive relationship with the landlord, provides flexibility for the future, and includes incentives or value-add for necessary or cosmetic upgrades, or reduced rent. Companies want each lease renewal handled with care to a favorable result, so finding the right trusted advisor is a critical success factor.

When managing real estate assets across multiple properties, regions or even countries, a company’s ideal partner is a preferred provider with multi-market experience. Although each lease renewal situation is unique, the right partner should meet specific criteria, including:

· Commercial Skill – Partner (or expert team) should have experience in the commercial market, and possess good judgment and experience in contractual matters..

· Communications and Diplomacy – Partner should communicate the needs of the client to the landlord and then communicate the position of the landlord in a respectful, courteous and business like manner, as if the partner was an employee of the company.

· Results Oriented – Each renewal should be managed in an accurate and timely manner, letting the results-oriented partner successfully complete the assignment, minimize disruption of the operation and move on to the next task.

· Analytical Ability – Every negotiation presents its own set of options and alternatives for the company. The partner should be able to present all reasonable options to the company, with a strategic recommendation for how best to move forward. Analytical skill for lease versus lease, lease versus buy, along with the many concessions (landlord and tenant) and incentives, is an important trait.

Stay tuned for part two, where we will discuss the hidden costs behind outsourcing and tips on managing the process.

-Ted Parcel

Ted Parcel is Executive Vice President of Corporate Services for NAI Global.
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