Timing: Market and Lease Renewal

We are currently reviewing first quarter numbers and, along with a few office users in the market, it has prompted me to think about timing from a market perspective.

The Waterloo Region office market is in good shape. It is currently a tenant’s market as a function of the economy and general landlord concern about losing good tenants to poor economic conditions. Vacancy hasn’t increased and rental rates haven’t gone down, and we have not seen a significant increase in the amount of sublet space, all of which indicate a healthy market.

So what are tenants doing in this market to manage their real estate? The table below shows the direction of three tenants in the Waterloo Region.

The obvious points to make here are the importance of starting your renewal process early or to outline the benefits Office User #2 derived by being proactive, but if you got this far in this post, I would like you to consider Office User #1 as having created the most benefit for themselves.

Office User #2 did a great job and is very strategic with regards to their real estate, but they lucked out on the timing. The fact that their expiry is two years away and we are in a tenant’s market worked out beautifully. Office User #1, on the other hand, knows that they cannot rely on luck and cannot control the market so they focus on what they can control. Some may say “but they got nothing for their trouble” and they would be wrong.

Office User #1 has set themselves up perfectly for future real estate requirements by setting a tone. They have set a tone that they are on top of their real estate situation at all times; real estate is a big cost and they are always looking for reductions; our real estate firm is engaged and is in the market, keeping us apprised of opportunities on a regular basis. This approach will benefit Office User #1 in the future, whether they are negotiating in a landlord’s market or a tenant’s market.
Office User #3 will be fine in the long run. They are a good company and with a plan in place, they will achieve their real estate objectives with time.