Commercial Lease Renewal After COVID: What Tenants Should Know Before Their Next Decision

Many tenants who signed commercial leases during COVID-19 and are now approaching renewal decisions or entering the pre-renewal window are facing a very different renewal conversation. The market has shifted significantly. What once looked like a favourable deal may no longer reflect today’s commercial lease renewal conditions in Canada, making early preparation critical.

COVID-Era Leases Were Signed in an Uncertain Market

Leases signed between 2020 and 2021 were heavily influenced by uncertainty. Rental rates were often discounted, tenant improvement allowances were elevated, and landlords offered extended free rent periods to secure occupancy.

Today’s market conditions are more stable in many regions, and landlord leverage has generally improved. As a result, tenants should avoid assuming that historical deal terms will carry forward into a renewal. A commercial lease renewal strategy should be based on current market data, not pandemic-era concessions.

Operating Costs May Have Shifted Substantially

One of the most overlooked components of lease renewal is operating costs. Since signing, expenses such as property taxes, insurance, utilities, and maintenance may have increased significantly.

Before entering renewal discussions, tenants should:

• Review full operating cost reconciliations from the current term
• Confirm how base year or recovery structures were applied
• Identify any cost increases that exceed original assumptions

These adjustments can materially impact total occupancy costs over a renewed term.

Your Space Needs May No Longer Reflect Your Lease

Business operations have evolved since COVID. Hybrid work models, workforce changes, and return-to-office strategies have all impacted space utilization.

As tenants approach renewal, common mismatches include:

• Over-leased space due to reduced headcount or hybrid work
• Inefficient layouts that no longer support operations
• Space constraints driven by business growth

A renewal period is an opportunity to realign your lease footprint with actual usage.

Review Built-In Flexibility Before You Commit

Leases signed during COVID may include negotiated flexibility such as:

• Early termination rights
• Rent abatement or deferral periods
• Contraction/expansion options
• Subleasing provisions with fewer restrictions and favourable assignment rights
• No continuous operation clause

These terms are often overlooked but can provide meaningful leverage during a renewal decision window. Understanding what flexibility already exists is a key part of commercial lease negotiation strategy.

Market Leverage Has Shifted Since COVID

The tenant-favourable conditions seen in 2020–2021 have generally normalized. In many Canadian markets, vacancy has tightened and landlord competition has stabilized.

Before making a renewal decision, tenants should understand:

• Current vacancy rates in their submarket
• Availability of comparable space nearby
• Recent leasing activity and achieved rents

Without this context, tenants risk renewing above current market levels.

Use Renewal Timing as an Opportunity to Modernize Your Lease

A lease renewal is not just a continuation of existing terms. It is an opportunity to modernize the agreement to reflect current business priorities.

Key areas to revisit include:

• ESG and sustainability provisions
• Operating cost definitions and exclusions
• Renewal, expansion, and contraction rights
• Long-term flexibility and exit options

Don’t Assume Market Terms Will Be Offered Automatically

Landlords typically do not proactively reset leases to reflect current market conditions. In most cases, renewal offers are structured to protect existing revenue, not necessarily to align with market averages.

That’s why benchmarking is essential. A tenant-focused review of your lease against current market conditions can help ensure you are entering negotiations with clarity and leverage, not assumptions.

Key Considerations for Commercial Lease Renewal Decisions

As tenants approach upcoming lease renewal decisions, COVID-era agreements should be reassessed in today’s market context. Reviewing costs, validating space needs, and understanding current leasing conditions are key steps in securing fair and flexible terms.

How Tenant-Focused Transaction Management Can Support Your Renewal

Approaching a lease renewal requires more than reviewing your current terms. A dedicated transaction management service can help tenants understand current market conditions, benchmark rental rates, assess space needs, and build a stronger negotiation strategy. Our team supports tenants through renewals and restructures by ensuring decisions are based on up-to-date market data rather than landlord-driven proposals. If you are approaching a renewal or evaluating your options, you can learn more about our Transaction Management service or speak to an advisor.

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