Print your rent roll and circle every lease that expires in the next eighteen months. Those are the conversations you should already be having. Not twelve months, and not the notice date in the lease, because a commercial tenant who decides to move starts that process long before you know they are thinking about it.
This is the eighth article in a series on how to read your own building. The fifth article put a number on a dark month. This one is about the calendar that decides how many dark months you get.
A tenant who leaves does not leave on the expiration date. They decide months earlier, and the decision is followed by a sequence that takes the better part of a year: touring alternatives, negotiating a letter of intent and then a lease, then designing, permitting and building out the new space. Each step has its own delays, and the tenant starts the clock on all of them early, because they have to.
Count backward from a lease expiring in June. To be in a new space by June, the tenant signs by the previous autumn, which means they were touring in late summer, which means they decided to look in the spring, fifteen to eighteen months out. By the time the lease's notice provision requires them to tell you anything, often six to twelve months before expiration, they have usually seen three other buildings and have a number in their head. If that is the first time you talk about renewal, you are negotiating against a plan you did not know existed, and every concession you offer is compared to a space the tenant has already walked.
Starting at eighteen months does not mean asking the tenant to sign at eighteen months. It means the owner, or the manager, knows the tenant's situation before the tenant has a reason to look: whether the space still fits, whether the business is growing or shrinking, whether something about the building is wearing on them. Most of that is a conversation, not a negotiation, and it is the conversation that decides whether a negotiation ever has to happen.
The circled leases do a second job. Count how much of the building's rent sits inside any one quarter. Three leases expiring in the same quarter is rollover risk, and two parties price it whether or not you do.
Your lender reads the rollover schedule when sizing a loan or a refinance, and a year in which a large share of the rent can walk is a year the lender underwrites at a lower occupancy, which means a smaller loan or a higher rate. A buyer does the same thing in due diligence, and the discount on the price is their estimate of the cost of the vacancy that might arrive.
The fix costs nothing. At renewal, offer one tenant a slightly shorter term and another a slightly longer one, so that the expirations spread across years instead of stacking in one. Tenants rarely care about the difference between a four-year and a five-year term. The rent roll cares a great deal.
The figures are illustrative, not a property we manage.
A 30,000-square-foot office building with eight tenants. Three leases expire in the same quarter next year: a 5,000-square-foot tenant, a 4,000-square-foot tenant and a 2,000-square-foot tenant, 11,000 square feet together, about 37 percent of the building and about the same share of its rent. All three pay around $24 per square foot, $264,000 a year between them.
In the first version, the owner has done nothing with the eighteen-month circle, and the first renewal conversation happens when the largest tenant sends its notice at six months. That tenant has already toured, and leaves. The other two renew, but late, at the market rate the first tenant's broker had already quoted them. Using the method from the fifth article, six dark months on the departing 5,000 square feet cost about $80,000 in rent and unreimbursed operating costs, and the new lease that eventually fills it carries about $120,000 more in commission, improvement allowance and free rent than a renewal would have. Call it $200,000, for one lease that could have been renewed.
In the second version, at eighteen months the manager sits down with all three. The largest tenant is growing and worried about space, so the owner offers it the adjacent 2,000 square feet when the small tenant, which is shrinking, gives it up a year early with no penalty and moves into a smaller suite on a three-year term. The middle tenant is content and renews early for five years with a modest allowance. The large tenant signs for seven. Nothing goes dark. And the three expirations that used to land in one quarter now fall in three different years.
The difference between the two versions is not the rent. It is the date the first conversation happened.
Build a one-page expiration schedule: tenant, square feet, expiration date, option and notice dates from the lease, current rent, and a column for the date the renewal conversation started. Sort by expiration. Draw a line at eighteen months from today. Everything above the line should have a date in the last column, and if it does not, that is this week's job.
Then look at the schedule by quarter and by year. Any quarter carrying more than a quarter of the rent is a staggering decision to make at the next renewal, not a fact to live with.
Review the page every quarter. The line moves, and so do the tenants above it.
Gain Property Group manages office, retail, industrial and multifamily property across Hillsborough, Pinellas, Pasco, Polk, Manatee and Sarasota counties. We also own commercial buildings ourselves, in other markets, so we read these numbers the way an owner does.
If you own commercial property in Tampa Bay and want someone to walk your rent roll eighteen months forward with you, request a free management assessment. In writing, no obligation, whether or not you change managers.
This article is general information about commercial property operations. It is not investment, legal or tax advice; your leases govern.