The Fine Print That Decides Your Future: Understanding Renewal Options

As frequent readers of my column know, most of my commercial real estate practice centers around family owned and family operated manufacturing and logistics companies. Generally, these legacy businesses are experiencing a transition such as selling the company that leads to a real estate requirement. Recently, I counseled a family in such a position. They had operated from owned real estate for a number of years. Once the company was sold to a competitor, a family member retained ownership of the building. An option to extend was granted to the occupant which now must be exercised.

 

Situations like this are far more common than most business owners realize, and they often expose a surprising lack of understanding around options to renew. An option is not an automatic extension. It is a contractual right that must be exercised precisely and on time. Miss the window and the option may evaporate, leaving the tenant exposed to market forces or, worse, a requirement to vacate.

 

This brings us to the phrase “time is of the essence.” In plain English, it means deadlines matter. Very much. Option notice periods are often narrowly defined, sometimes requiring written notice delivered in a specific manner within a defined time frame. A late notice, an email when certified mail was required, or notice sent to the wrong address can invalidate the option entirely. Courts tend to enforce these provisions strictly.

 

Equally important is understanding how rent is determined during the option term. Many options call for rent to be set at market rate. That sounds reasonable until one realizes that market rate is rarely defined with precision. Does it include concessions. Free rent. Tenant improvements. Operating expense structures. Who determines the market rate. Is there an appraisal process. What happens if the parties cannot agree. Without clarity, market rate can quickly become a source of friction rather than certainty.

 

Other options rely on CPI based increases. While these can provide predictability, they also come with nuances. Some leases include caps and floors. A floor ensures the rent increases by at least a minimum amount even in a low inflation environment. A cap limits how much the rent can increase during periods of high inflation. Both can materially impact the economics of the option term, particularly in today’s volatile economic climate.

 

There are also practical considerations that are frequently overlooked. Does the option require the tenant to be in full compliance with the lease at the time of exercise. Even minor defaults can technically disqualify a tenant from exercising an option. Are there personal guarantees that survive into the option term. Do operating expenses reset or continue on the same basis.

 

In the case I referenced, careful review and timely counsel allowed the family to navigate the option properly and preserve both the tenancy and the value of the real estate. That outcome was far from guaranteed without attention to detail.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.

 

 

The Most Expensive Clause in Your Lease Isn’t the Rent

When tenants review a lease proposal, their attention almost always goes to the same place first: the rent.
 
That’s understandable. Rent is easy to see, easy to compare, and easy to negotiate. It feels like the most important number in the deal.
 
But after decades of representing commercial tenants, I can say this with confidence:
 
The most expensive clause in your lease is rarely the rent.
 
In fact, I’ve seen tenants negotiate aggressively on rental rate, only to give back far more value through clauses they barely noticed, didn’t fully understand, or assumed were “standard.”
 
Rent is obvious. The real cost of a lease is often hidden.
 
The Clause You Don’t Notice Until You Need It. One of the most expensive clauses in a lease is the renewal option, or more specifically, how it’s written.
 
A renewal option that calls for rent to be set at “fair market value” sounds reasonable. Until you realize who determines that value, how disputes are resolved, and how much leverage you actually have when the time comes.
 
I’ve seen tenants assume they had a strong renewal right, only to discover later that the landlord controlled the process or that the language was so vague it was nearly unenforceable. By the time they learned the truth, their leverage was gone.
 
Operating Expenses: The Silent Escalator. Another clause that quietly becomes expensive over time involves operating expenses. You know, those pesky additional charges such as property taxes, insurance on the building, and maintenance. 
 
Tenants often focus on base rent and treat operating expenses as secondary. But over a five or ten year lease, uncontrolled expenses can easily exceed modest rent increases.
 
Common issues include:
    •            No caps on controllable expenses
    •            Poorly defined expense categories
    •            Administrative fees buried in the fine print
 
I’ve reviewed leases where tenants thought they secured a “great deal,” only to watch operating expenses rise faster than inflation, with no meaningful protections in place.
 
Assignment and Sublease: Flexibility Matters. Businesses change. Space needs change. Markets change.
 
Yet many leases severely restrict a tenant’s ability to assign or sublease, sometimes requiring landlord consent that can be withheld at the landlord’s sole discretion.
 
That clause may seem harmless on day one. Years later, it can become costly. I’ve seen tenants forced to carry unused space, sublease at a loss, or pay to exit a lease that could have been transferred if the language allowed it.
 
The cost wasn’t in the rent. It was in the lack of flexibility.
 
Termination Rights: Options Have Value. Early termination rights are another area tenants often overlook.
 
Yes, termination options usually come at a cost. But like insurance, the value isn’t in whether you use it, it’s in having the option. I’ve represented tenants who never exercised their termination rights but benefited from the leverage and protection those clauses provided.
 
Why This Happens. Most tenants sign a lease every five to ten years. Landlords do it every day. The imbalance isn’t intelligence, it’s repetition.
 
Tenants negotiate rent because it’s familiar. They overlook clauses because they assume the rest is boilerplate. It rarely is.
 
Final Thought. Rent is easy to see. Clauses are easy to ignore.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Predictions for 2026

Happy 2026 dear readers. I trust the end of 2025 came and went peacefully and that you are restored, rested, and ready to tackle the year ahead. 

2025 marked a personal milestone for me with the launch of my first book, The SEQUENCE, a Personal Journey and Proven Framework for Commercial Real Estate Brokerage Success. I have been both humbled and encouraged by the response. It has found favor with commercial real estate professionals around the globe, which tells me that the principles of structure, discipline, and long term thinking resonate no matter the market.
 
Looking ahead, 2026 promises another book entitled Holding the Keys, Commercial Real Estate Decisions That Shape Family Business Success. It is already in the works, and I am excited to share it with you. This book will read much like this column has for more than eleven years and is written for those of you who run family businesses or advise them. Real estate decisions inside family enterprises carry a different weight, and this book is designed to address that reality.
 
But aside from new reading material, what do I see unfolding in commercial real estate this year. Allow me to offer a few predictions.
 
Prediction One. Patience Will Continue to Be Rewarded
 
The frantic pace of decision making we saw in prior cycles has cooled. In 2026, thoughtful buyers and tenants will benefit from slowing down. Pricing expectations are still adjusting in some sectors, and deals that make sense tend to favor those willing to wait, ask better questions, and negotiate deliberately. Urgency will still exist, but artificial urgency will be exposed quickly.
 
Prediction Two. Family Businesses Will Revisit Ownership Conversations
 
With interest rates no longer whipsawing and lending standards better understood, many family owned businesses will once again evaluate whether ownership makes sense. Some will decide to buy. Others will decide to lease longer term. What matters is not the outcome, but the intentionality behind the decision. I expect more owners to separate emotion from strategy when it comes to owning the building they operate from.
 
Prediction Three. Relocation Decisions Will Be Driven by Efficiency, Not Just Cost
 
For years, rent dominated relocation conversations. In 2026, efficiency will reclaim center stage. Workflow, labor access, power, yard, parking, and functionality will matter as much as rental rate. Businesses that optimize operations often outperform those that simply chase lower rent. I expect more relocations to be framed around productivity rather than savings alone.
 
Prediction Four. Industrial Remains Resilient, but Not Uniform
 
Industrial real estate will continue to be a bright spot, but not all industrial properties will perform equally. Buildings with functional obsolescence, excessive office, limited loading, or poor access will struggle. Well located, efficient facilities that serve modern logistics and manufacturing needs will continue to attract interest. Selection will matter more than ever.
 
Prediction Five. Sellers Will Learn the Value of Preparation
 
Owners who prepare their properties for sale before exposing them to the market will outperform those who do not. Clean documentation, realistic pricing, and a clear understanding of buyer motivation will separate smooth transactions from frustrating ones. In 2026, buyers remain cautious and informed. Preparation will not be optional.
 
Prediction Six. Advisors Who Bring Clarity Will Win
 
Finally, I believe 2026 will reward advisors who bring clarity rather than noise. Clients are tired of conflicting opinions and endless data without context. They want thoughtful guidance, clear frameworks, and honest conversations. Those who listen well and explain better will earn trust and long term relationships.
 
As always, markets will surprise us. Headlines will distract us. Predictions will be proven partially right and partially wrong. But the fundamentals remain. Commercial real estate decisions are rarely just about property. They are about people, timing, and long term consequences.
 
Here is to a healthy, productive, and thoughtful 2026. I look forward to continuing the conversation with you each week.
 
Happy New Year.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

CRE Twelve Days of Christmas

Christmas 2025 is in the books! 2026 is around the corner. The credit card bills are coming. But today’s column is a bit of diversion and fun. Please enjoy my take, as a commercial real estate professional, on the real twelve days of Christmas.  

On the first day of Christmas, my market gave to me - a deal that’s contingency free. 

 

On the second day of Christmas my market gave to me - two phone in leads and a deal that’s contingency free. 

 

On the third day of Christmas my market gave to me - three escrows, two phone in leads and a deal that’s contingency free. 

 

On the fourth day of Christmas my market gave to me - four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the fifth day of Christmas my market gave to me - FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the sixth day of Christmas my market gave to me - six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the seventh day of Christmas my market gave to me - seven sellers selling, six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the eighth day of Christmas my market gave to me - eight buyers buying, seven sellers selling, six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the ninth day of Christmas my market gave to me - nine tenants leasing, eight buyers buying, seven sellers selling, six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the tenth day of Christmas my market gave to me - ten lawyers feuding, nine tenants leasing, eight buyers buying, seven sellers selling, six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

On the eleventh day of Christmas my market gave to me - eleven brokers golfing, ten lawyers feuding, nine tenants leasing, eight buyers buying, seven sellers selling, six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

But on the twelfth day of Christmas my market gave to me - twelve LinkedIn likings, eleven brokers golfing, ten lawyers feuding, nine tenants leasing, eight buyers buying, seven sellers selling, six lenders lending, FIVE NDAs, four closing dates, three escrows, two phone in leads and a deal that’s contingency free. 

 

Happy holidays dear readers!

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.

 

 

Finding Balance When the Holidays Arrive

Well, the holidays are upon us, and I always relish this time of year. The pace slows, if only a little, and I find myself with more moments to spend with family, reflect on the year that was, and imagine the year that is coming. It is a season that encourages gratitude and perspective, something that can be hard to maintain during the other eleven months when deals stack up, deadlines tighten, and our calendars appear to have a life of their own.
 
Looking back on my career, especially those early decades when I was brokering full time while also husbanding and parenting three amazing kids, I am often asked how I kept any semblance of balance. Let me be clear. It was not easy. There were sleepless nights, missed cues, and more than a few days when I felt stretched too thin. But I made it through, and more importantly, I grew through it.
 
As you wrap gifts, close year end transactions, or simply catch your breath, I want to offer three lessons that helped me navigate the overlapping worlds of work and family. These are not theories. These are practices that held me together.
 
 
1. Focus on what is important
 
 
In commercial real estate, deals can feel monumental. They demand our attention, our creativity, and often our weekends. But here is the truth I learned, sometimes the hard way: Your family will not remember that deal you made. They will, however, remember your absence from the dance recital, the league championship, or the Scout outing.
 
Those moments do not get replayed. You do not get a second chance at your child’s childhood. As brokers, we pride ourselves on being present for our clients. Being present at home, truly present, is what builds a life. Deals close and commissions fade. Memories linger.
 
 
2. Spend your working time working
 
 
Over the years, I have had the privilege of observing many top producers. They come in all styles and personalities, but they share one trait. They have a laser like focus during their most productive hours.
 
When it is time to work, they work. They are not polishing paper clips, reorganizing desk drawers, or scrolling their way into distraction. They use their productive hours with intention. Because of that discipline, they earn the right to unplug without guilt.
 
That discipline gave me margin. It allowed me to coach, to carpool, and to sit at the dinner table without my phone buzzing like a brainstem. If you want balance, you cannot waste the hours that are meant for production.
 
 
3. Keep perspective. We are brokers.
 
 
Let me say something that may sound a little bold. We are brokers. We are not performing heart surgery, saving souls, or sending astronauts into space.
 
What we do is important. We help businesses grow, communities evolve, and owners invest in their future. But what we do is not a matter of life and death. Once I accepted that truth, an enormous weight lifted. The pressure I placed on myself did not always match the stakes.
 
Keeping perspective helped me show up at home as a calmer and steadier version of myself. It allowed me to step away when needed, without the world collapsing or without me imagining that it might.
 
 
 
As this year comes to a close, I hope you find space to pause and consider how you balance the roles you play as a broker, a spouse, a parent, a friend, and sometimes a mentor. Our profession asks much of us. Our lives ask more.
 
The deals will still be there in January. The people you love are here right now.
 
Take care of them. Take care of yourself. And enjoy this season of slowing down.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Hawaii Trip

I am penning this column from the bridge of a fishing charter. Our oldest grandson is beside me, wide eyed, focused, and convinced that fishing is the highest and best use of any waking moment. I am not entirely sure where his passion for the sport began, but I can say this with certainty: when I was his age, I loved to fish as well.
 
The difference is simple. I grew up roughly a thousand miles from the closest ocean. My angling adventures were confined to small freshwater creeks and quiet Midwestern lakes. The biggest variable was usually the weather, not whether a twelve pound yellowtail might decide to make your morning interesting.
 
You may be wondering what any of this has to do with commercial real estate. Indulge me for a moment while I draw a few parallels.
 
Fishing, at its core, is an exercise in patience. You prepare your gear, choose your bait, study the water, and position yourself where the fish are most likely to be. After that, you wait. Brokerage works the same way. We research the market, gather the right tools, identify promising targets, and then we work the phones and email lines with steady persistence. Sometimes the activity is nonstop. Other times the sea goes quiet and nothing seems to bite. Successful fishermen and successful brokers share the same understanding. You cannot force a fish to take the hook and you cannot rush a deal that is not ready to happen.
 
Another similarity is the importance of reading the conditions. Fishermen pay attention to tides, currents, water temperature, and the behavior of the birds above the surface. Brokers pay attention to interest rates, construction costs, vacancy levels, and tenant demand. Both professions require situational awareness because the environment affects the outcome more than most people realize. A fisherman who ignores the tide will come home empty handed. A broker who ignores the market will do the same.
 
There is also the matter of preparation. On a fishing trip you tie knots, organize tackle, check fuel, pack food, and make sure you have everything from sunscreen to a functional radio. In brokerage the preparation involves research, financial analysis, property tours, marketing materials, and countless conversations in advance of any signed agreement. When the moment finally comes and a fish hits or a client is ready to move forward, preparation determines who lands the opportunity and who watches it swim away.
 
Finally, there is the thrill of the catch. Whether a fish is on the line or a deal is in play, you feel the same surge of energy. Your focus sharpens. Your movements become precise. The stakes rise, but so does the satisfaction of knowing that your patience and preparation are paying off. The best brokers and the best fishermen know that the reward is not only in the result. It is also in the process of showing up, putting in the work, and staying ready.
 
As my grandson reels in yet another bonito, I am reminded that fishing, like commercial real estate, is never about guaranteed outcomes. It is about persistence, awareness, and a willingness to cast again even when the last few attempts came up empty. The ocean does not owe you a bite and the market does not owe you a deal. But if you prepare well, put yourself in the right waters, and keep your line in play, good things will happen.
 
That is as true out here on the Pacific as it is back at my desk in Southern California.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Before the Ball Drops: Key CRE Strategies for 2026

December. The last month of 2025. Soon, families across Southern California will be lighting candles, trimming trees, gathering for Hanukah, Christmas and Kwanzaa, and counting down the seconds to a brand-new year. It’s a festive season - one that always seems to arrive earlier and earlier, but I digress.
 
December also brings something else: perspective. A reminder that 2026 will be here before you know it, and with it a new set of opportunities and challenges for commercial real estate owners and occupants.
 
While many industries begin to slow down as the holidays approach, December is one of the most consequential months of the year for anyone who owns, leases, manages, or invests in commercial property. The final weeks of the year serve three essential functions:
 
Planning for the Year Ahead.
This is the time when landlords evaluate rent rolls, upcoming renewals, debt maturities, and operating expenses - and make strategic decisions for the coming year. Occupants, meanwhile, revisit headcount projections, space needs, and whether their current footprint still aligns with how they operate in a post-pandemic hybrid world. In short, December is when next year’s real estate strategy is set into motion.
 
A Meaningful Recap of 2025.
Every year tells a story, and 2025 was no exception. For owners, rising construction costs, fluctuating interest rates, and evolving tenant expectations shaped the narrative. For occupants, efficiencies, supply-chain recalibrations, and shifting labor patterns influenced real estate decisions. A December recap helps frame what worked, what didn’t, and what trends are likely to carry into 2026.
 
Preparing for Critical Deadlines.
From tax planning to lease notice periods to budgeting cycles, December is full of dates that matter. Missing one can mean financial consequences - or missed opportunities - well into the new year. Many companies don’t realize that decisions made (or delayed) in December often determine whether next year’s real estate costs rise gently, or spike dramatically.
 
As we turn the page on 2025, December offers a rare moment to pause between what was and what will be. Whether you own commercial real estate or occupy it, the decisions you make in these final weeks set the tone for the year ahead. Take the time to assess, adjust, and anticipate. With thoughtful planning and a clear-eyed view of the market, 2026 can be a year of opportunity rather than uncertainty. Until then, may this holiday season bring you peace, perspective, and a prosperous start to the new year.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.