Renewal vs relocation: how to compare them on the same basis

Renewal versus relocation is the choice between staying at a location on renegotiated terms and moving the operation to a new one. It arrives on the lease’s schedule rather than the business’s, and it is decided badly more often than it is decided wrongly, because one side of the comparison is mostly contractual and knowable, and the other is mostly estimated and routinely incomplete.

Put both sides on net effective rent#

Net effective rent is the total consideration paid over the lease term, net of concessions such as free rent and tenant improvement allowance, expressed per square foot per year. A relocation offer with twelve months free and a generous allowance can carry a higher face rent and a lower effective rent than a renewal with neither. Run both sides over the same term length; comparing a five-year renewal to a ten-year relocation compares two different commitments.

The full cost of each side#

The two costs that are almost always missing#

The undepreciated improvement balance is written off when you leave, and it sits in the fixed asset register rather than the lease file, which is why it rarely reaches the analysis. It depends on the treatment applied to leasehold improvement depreciation. The make-good obligation is often not quantified until someone reads the clause, and it can be negotiated at renewal, itself an argument for reading it early.

Anchoring the fit-out estimate#

JLL’s U.S. and Canada Office Fit-Out Costs Guide 2026, released 13 May 2026 using Q1 2026 pricing, puts the regional average for a medium-quality corporate office fit-out at $295 per square foot, within a typical range of $230 to $375. By layout, national averages run from $255 for open and agile progressive space at baseline quality to $355 for structured traditional space at high quality. These are office figures and do not transfer to a store, restaurant, clinic, or distribution site, where the cost drivers are equipment and compliance fit rather than workplace typology.

Find the indifference point, not the winner#

The more useful output is the indifference point: the net effective rent at the alternative location at which the total cost of moving equals the total cost of staying. That converts a binary question into a negotiating number, and there is no reason it has to stay private. A landlord facing vacancy, re-letting cost, and downtime has its own reasons to move, and a specific figure is a better negotiating instrument than a vague threat to leave.

What tips it when the numbers are close#

• Location performance: for any revenue-generating site, trade area and access decide the outcome
• Physical fit: whether the new premises can actually take the operation is a drawings question, settled before the offer
• Licence portability: many operating licences attach to premises, and the re-application clock can exceed the lease window
• Lease quality, not just lease price: existing exclusives, caps, and expansion rights have value a lower headline rent can quietly cost you
• Timing risk: permitting and construction sit on the critical path, which is the constraint behind

Reading the same lease well ahead of the notice deadline is covered in reading every lease before the renewal clock runs out. More on the decision at contract renewal, and on the neighbouring call at when to consolidate a location.