This question is for an office tenant nothing short of the famous “to be or not to be”, but also for the landlord, who is concerned with keeping the vacancy rate in their building as low as possible.

Relocation (changing the current location) and renegotiation (extending the existing contract on new terms) are two of the main options when a lease agreement is coming to an end. Sometimes, they are combined with consolidation (combining several local units) or business split (relocating individual departments in an efficient way from both a financial and logistical perspective).

The vast majority of companies decide to renegotiate their leases, although with new office supply entering the market, companies are keeping up with the times and climbing the ESG ladder towards buildings that offer the most “green” solutions.

Which solution should you choose?

If the main goal is to reduce costs and the company is flexible regarding the location, relocation may prove more cost-effective. However, if stability and minimising disruption to business operations are the priorities, renegotiation will be the better choice. Before deciding whether to search for a new location or remain in the current one, we should analyse the following areas:

• conduct a workplace assessment;
• review the contracts and prepare appropriate tabular summaries;
• verify the needs of departments and employees;
• analyse how frequently our employees come to the office;
• assess the technical possibilities for refurbishing the office and the building itself;
• create a comparative analysis of the options available on the market against the current contract.

Who benefits more and from what?

There is no universal answer to this question. Each decision requires individual consideration, calculations and analysis in relation to the market situation. One thing is certain: in order to approach the matter reliably, appropriate actions should be planned with your advisor well in advance. Making a decision at short notice may result in:

• loss of employees’ trust;
• slowing down the company’s growth;
• administrative and financial chaos.

The recommended solution is to run both processes in parallel. Does this mean twice as many advisors? It should. A good advisory firm has the resources to allow teams to work independently in two areas: while the first team represents the tenant in discussions with the landlord, the second team analyses the market in terms of exit options. At the end of the day, the goal is to find the best solution for the given moment.

Taking simultaneous action in the area of renegotiation and searching for a new office, with the support of a real estate advisor, is a strategy that allows companies to maximise benefits and minimise the risks associated with the decision on whether to continue leasing office space. With this approach, companies can:

• increase their negotiating power through having alternatives;
• maintain time flexibility and avoid deadline-related pressure;
• compare the available options more thoroughly and make a more informed decision;
• reduce the risks associated with choosing the right option.

The role of a leasing advisor in the process of analysing the options

The role of an advisory firm in analysing the risks associated with making the decision (relocation or renegotiation?) is crucial, as it has an extensive database of currently available office spaces and knowledge of the latest market trends. Thanks to their support and experience, a company can obtain better offers and terms.

Advisory firms can provide detailed cost analyses, enabling a company to make the right choice. They can help assess different locations in terms of transport accessibility, amenities, infrastructure and future growth potential, which is crucial for the company’s long-term success.

Strong negotiation skills provide solid support for data-driven activities. It is worth remembering that the culmination of months of work is the agreements that your advisor should deliver, verified and ready for signature by the decision-makers.

Who is relocation better for, and who is renegotiation better for?

Relocation is more cost-effective for companies looking for savings, functional flexibility and modern infrastructure, as well as for those not afraid to manage the relocation process without disrupting their operations.
Renegotiation is more beneficial for companies that value stability and manage large teams of local employees with strong ties to the surrounding area. A limited budget for additional costs associated with relocation may ultimately determine the choice.

The final decision should be made after a thorough analysis of needs, opportunities, risks, benefits and costs.

Summary

Have lease renegotiations become a solution to macroeconomic challenges? Undoubtedly, discussions about changing the terms of the agreement should begin well in advance. This will give us the time needed to choose the best strategy for our organisation. If we have doubts about which path to choose for our company, it is advisable to obtain an opinion and market analysis from a leasing advisor at BNM – Real Estate Advisory.

We invite you to take advantage of our services both when searching for new locations and when renegotiating an expiring lease agreement.

Our team consists of experienced professionals who help tenants relocate stress-free and secure the best possible leasing terms. We take care of every aspect of the relocation, from finding the ideal premises and organising transportation to supporting you with the formalities. Get in touch with us – together we will create a space where people and business can grow.

RELOCATION

Advantages

• Lower rental costs. Moving to a new location may mean lower rents, especially if the new location is less prestigious, is outside the central area of the city or if we move to a smaller office. The savings may also be related to an environmentally friendly building that requires less energy and is well managed.
• Better infrastructure. New offices may offer modern facilities, better technology and more efficient or flexible layouts, adapted to changing conditions and the organisation’s expectations.
• Lease flexibility. If a tenant decides to locate its organisation in a serviced office, its lease agreement may be more flexible and adapted to the company’s current needs, particularly in terms of the contract length.
• Better commercial terms. The possibility of negotiating more favourable lease terms with a new landlord, for example due to rent indexation in the expiring contract.
• New “fresh office” = new productivity. Moving to a new office, the smell of new carpet, clean walls and an overall new interior can be a driving force for teams, increasing their productivity and motivation to work.

Disadvantages

• Relocation costs. Moving an office involves logistical costs that can be significant (transport, fit-out works, new furniture, interruptions to work).
• Business disruption. Relocation may affect the continuity of business operations, causing disruptions and downtime.
• Employee turnover. A change of location may be inconvenient for some employees, which may result in them leaving the company.
• Building relationships from scratch. The need to build new relationships with neighbouring companies and adapt to the new surroundings.

RENEGOTATION

Advantages

• Time and cost savings. Renegotiating lease terms does not involve relocation costs or interruptions to business operations.
• Business continuity. The company can continue its operations without disruptions associated with relocation.
• Better lease terms. The possibility of negotiating a lower rent or additional benefits (e.g. better terms regarding refurbishment) in a location that is already familiar and convenient for employees.
• Retaining key employees. Not changing the location means a lower risk of losing employees due to an inconvenient new location.

Disadvantages

• Limited scope for change. Renegotiation may not deliver the expected benefits if the property owner is unwilling to make concessions.
• Lack of modernisation. Staying in the same office may mean having to accept older infrastructure and fewer opportunities for modernisation.
• Dependence on the landlord. The company may remain dependent on the property owner, which may limit its flexibility in the future.
• Lower incentive to invest. A landlord who knows that the tenant wants to stay may be less willing to invest in improving the lease conditions.

Co-author: Monika Rogucka