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Case Study

Achieving short-term lease renewal at below market rates for Microsoft Shanghai

Technology company Microsoft Corporation has been occupying 10,000 sqm in Metro Tower Shanghai for a number of years, benefiting from very low rental rates. With its lease expiring in September 2008, the company planned to move its business groups located in the tower to a new campus and CBD facilities; however, the date for the relocation was still uncertain.

Consequently, Microsoft appointed Jones Lang LaSalle to negotiate with Metro Tower for a lease renewal agreement that would meet its goal of having a flexible lease term at competitive rates. To achieve this, Jones Lang LaSalle worked with Microsoft’s CRE team to come up with a strategy and communication plan around the renewal. The Firm leveraged Microsoft’s key advantages, such as creating the impression that the business groups may move out of the facility at short notice, but at the same time, used Microsoft’s long-standing relationship with the landlord.

Ultimately, we negotiated for a one-year renewal agreement with rental at 5% below market rates. We successfully negotiated no premium in rental for the renewal even when market practice for short-term leases normally includes a 20–100% premium. The new lease was also structured to account for the uncertainty in the relocation timing and allowed maximum flexibility.

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