I am always surprised by the amount of trepidation and angst tenants experience when it is time to renew the lease. To begin with, most tenants don’t realize when renewing a lease that they, in fact, are in a place of competitive advantage. Many tenants act as if they have very little leverage at all— and the majority of them will accept the first proposal that they receive from the Landlord without attempting to negotiate anything. Does this surprise you?

Renewing the lease does not have to be a stressful time. In fact, renewing the lease can be a downright fun experience. Here are some of the most common myths you may hear and how we debunk them.

MYTH NUMBER ONE: “We like you so much we’re only going to raise the rent by ten percent. Before you quickly say, “Yes, thank you for only raising my rent by ten percent”, you might want to know something about amortization and escalation.

AMORTIZATION: Looking back just five or ten years ago, it was standard when tenants first occupied a new office space that Landlords would build out the space to a tenant’s specifications. The cost of this work, known as the tenant finish allowance, back then, used to be in the $25 to $35 per square foot range for a turnkey office for a typical five-year lease term.

When we amortize the allowance, it looks like this:

$25 psf to $35 psf /5 years = $5 to $7 per square foot per year.

Today, in 2025, it costs much more to construct an office turnkey.  In 2025 we are seeing costs that are $80 per square foot to over $100 per square foot. These huge increases are due to the high cost of building materials and the shortage of labor in the Northeast.  Because of the increasing cost of construction, a standard five-year lease term is now a seven-year term or a ten-year term or even longer.

RENEWAL:  The first thing to know when renewing the lease is that the finish work we just described above has now been fully “amortized” on the Landlords books. If you choose to renew the lease for another term, the Landlord may now only need to provide you with a new paint job and possibly new carpet. This minimal work costs only about $10 psf or $1 or $2 per square foot per year for a new five-year lease term. So, by renewing the lease the Landlord is now going to be making $4-$6 psf more in profit starting on day one of the new lease term. He also doesn’t have to provide a new $80-$100 per square foot allowance that he would for a new tenant.

ESCALATION: Most office leases are gross leases (full service) and have an escalation provision to pass along the increasing costs of operating expenses and real estate taxes over the base year. Over a term of five or ten years, the rent may have escalated by several dollars per square foot or more. Therefore, if the Landlord keeps the base year the same and does not update the base year to a new base year, then you have another potential increase in your rent of several dollars per square foot or more.

As you can see, with escalation, you may have hidden increases in rent that make your costs much higher than you think.

MYTH NUMBER TWO: “Hiring a real estate broker/advisor will simply add cost to the transaction.”

In many cases, when a lease is renewed and there was a real estate broker representing the landlord and/or a broker representing the tenant for the initial lease transaction, these brokers are now entitled to collect a commission upon renewal. However, when you, the tenant, hires a new broker to represent you in negotiations to renew the lease, all of that changes and your broker now is entitled to collect the fee that would have gone to others who no longer represent your interests. When you hire a broker there is no new or additional cost to the transaction whatsoever.

In fact, as you have seen above, a broker who represents a tenant in negotiations to renew a lease, can usually identify ways to save many dollars in the transaction, far more than the cost any brokerage commission would be.

MYTH NUMBER THREE: “If I hire a broker my landlord will be upset with me.”

Really! Landlords are real estate professionals. They do this every day. Would they really get upset if an expert shows up to represent your interests? Having an advisor who is a skilled and experienced advocate for your position, actually makes the transaction much easier for the Landlord and the Tenant to negotiate.

By hiring a real estate broker/advisor, it is true that you are sending the Landlord a signal that he must compete for your business. You are also sending him a signal that you are prepared to quickly arrive at a fair bottom line, as you have done your homework. He will spend far less time trying to educate you about the transaction as you have a skilled representative to help guide you through the process, a true win-win.

SUMMARY: To sum it all up, you have a right to be represented by an expert who can help guide you through the entire process. You need to have the information necessary to equal the playing field in any negotiation, and renewing the lease, the second highest cost a business owner has right behind the cost of personnel, is no exception.

Renewing the lease does not have to be stressful and knowing that you are doing your due diligence can provide real peace of mind.

Regards,

Lawrence Dickstein