Situation: A company has been looking at alternatives for expansion but would be willing to stay in their present site if the landlord is willing to lower their rent without requiring more time on the current lease. Another option would be to purchase a building and lease out extra space until they need to expand. The CEO seeks advice on how to move forward. Do you more or negotiate a lower rent?
Advice from the CEOs:
- Much has to do with the current real estate market. If the market is slack, there are more options whether the decision is to move or renegotiate the rent with the current landlord. However, if demand for space is high then landlords and sellers have the upper hand. This is a classic demand-supply situation.
- Investigate lease buy-out options if the decision is to move. Better yet, if the decision is to move ask the new landlord to pay off the old lease.
- For the money required to move an operation of substantial size, why not buy? In this case, the decision is balancing the size of the down payment with the company’s current cash position.
- If the decision is to buy, consider creating an LLC to purchase the property and fund the purchase through a Small Business Administration loan.
- The Devil’s Advocate Perspective while you make the decision: don’t worry about the least until it runs out. Instead focus on making as much money as possible and prepare for a move closer to the end of the lease. Renegotiating a lease and looking for a building at this time can consume a lot of time.