Posts by John Jarvis

The Lease Renewal “Loyalty Premium”

on June 26, 2025

The Lease Renewal Loyalty Premium Featured Image

Commercial real estate is an inefficient marketplace. It is also a bit of a relic, unchanged in the last hundred years and largely dominated by landlords and their brokers, which has resulted in an industry where long-term, loyal, repeat customers are repeatedly expected to pay a premium. I call it a loyalty premium. The mechanism for this is the renewal option, which unsuspecting corporate tenants use all the time to simply extend the term of their office and industrial leases. It certainly looks like an Easy Button, with language about adjustment to a “market rate.” Except it doesn’t work that way at all. It is a siren’s song, and you must resist the temptation. Because the spread between “renewal” rental rates and the actual “price-clearing” market rental rates has never been wider than it is today, sometimes by a factor of 2X or greater.

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john jarvis

John Jarvis

John Jarvis is a managing director at Hughes Marino, a global corporate real estate advisory firm that specializes in representing tenants and buyers. Contact John at 1-844-662-6635 or john@hughesmarino.com to learn more.

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