Renew or relocate? A Canadian commercial lease decision framework

Protect the renewal right without letting it dictate the strategy

Recover the executed lease, amendments, option language, prior notices, commencement confirmation, plans, operating-cost history and current condition records. Have qualified counsel identify the earliest and latest notice dates, delivery method, address, required content, eligibility conditions, rent-setting process and interaction with default, transfer and occupancy provisions. Do not calculate a legal deadline from the expiry date or assume that negotiation preserves an option.

Run a separate business workstream with a decision owner, internal approval path and target dates that occur before the contractual notice window. Ontario's current commercial-property guidance says fixed-term parties should take steps to renew or amend before expiry and emphasizes that the signed lease and legal advice matter. That Ontario guidance is not a Canada-wide rule; the executed documents and governing jurisdiction control the actual right.

Decide whether the current premises still deserve to win

Rebuild the next-term operating requirement before comparing dollars. Test area, layout, loading, parking, power, access, labour reach, customer proximity, expansion, accessibility, building systems, maintenance burden, signage, zoning, permitted use and resilience. Separate non-negotiable requirements from preferences and identify which current deficiencies can be corrected through landlord work or tenant capital.

Score renewal and relocation alternatives using the same criteria and evidence standard. A relocation should not receive credit for an unverified listing claim, and the incumbent premises should not receive a perfect continuity score if recurring constraints are merely familiar. Keep qualitative ratings visible beside the financial result; do not invent a dollar value for safety, operational control or strategic flexibility unless the organization has a supportable method.

• Capacity: current, forecast and surge space by functional area
• Flow: people, product, vehicles, customers and waste through the site
• Infrastructure: power, loading, floor, HVAC, life safety, technology and security
• Location: labour, customers, suppliers, freight, transit and emergency access
• Control: hours, signage, parking, yard, alterations, expansion and transfer rights
• Condition: deferred work, recurring failures and end-of-term restoration exposure

Put renewal and relocation on one common horizon

Model both proposals for the same number of months and with the same discount rate. Include base rent, scheduled escalation, additional rent and its entered growth, parking, recurring charges, free-rent scope, TI allowance, landlord work, other incentives and tenant project capital. Keep area visible: a larger new premises can have a lower rate and a higher total occupancy obligation at the same time.

Then add transition costs outside the lease cash flow. Renewal may require legal and advisory work, refurbishment, swing space or temporary operations and business interruption. Relocation may require search and design, due diligence, double occupancy, moving and rigging, decommissioning, restoration of the old premises, new technology and furniture, permits, storage and disruption. Excluding these costs does not make them zero; it makes the comparison incomplete.

Find the assumptions capable of changing the decision

Do not settle for one deterministic result where important inputs remain uncertain. Solve the relocation starting rent that would equal the renewal present value while holding all other inputs constant. Test the maximum whole-month overlap and the maximum entered downtime days that relocation can absorb. Review the remaining transition-cost headroom if relocation is currently lower cost.

A threshold is not a forecast or negotiation recommendation. It is a control point. If the decision flips after one extra overlap month, schedule certainty deserves executive attention. If relocation remains favourable across a broad rent and downtime range, the team can focus more heavily on operational fit, document risk and delivery capability. Maintain conservative, base and supported upside cases without calling any of them market data unless sourced.

• Rent threshold: the relocation base rent that equals renewal PV
• Overlap threshold: whole double-occupancy months before the PV advantage disappears
• Downtime threshold: entered daily business impact the relocation case can absorb
• Capital threshold: additional transition cost remaining before the strategies cross
• Schedule sensitivity: possession, permitting, construction and move-readiness dependencies

Convert the decision into either a continuity plan or a move plan

For renewal, reconcile the option or negotiated amendment with the final rent, term, work, allowance, access, construction phasing, commencement and future option dates. A renewal document should not leave the operating team to reconstruct whether old provisions continue, which amendments survive or when the next notice window begins.

For relocation, connect the executed new lease to the current-lease exit file. Control new-premises possession, plans, permits, construction, allowance draws, commissioning, insurance, utilities, data migration, inventory and equipment movement, staff and customer communications, old-premises restoration, inspections, keys and surrender evidence. Keep contingency plans for delayed possession and buildout rather than assuming the entered overlap is guaranteed to be sufficient.

Commercial leases and inducements can carry GST/HST consequences. CRA guidance says commercial leases from registered landlords are generally taxable and explains different treatments for rent-free periods, cash inducements and landlord-paid leasehold improvements. The workspace excludes tax and input-tax-credit treatment; obtain accounting advice for the actual renewal or relocation structure.