Net lease glossary
Renewal Options
Tenant rights to extend the lease for additional periods, typically on pre-set terms and rent increases.
Renewal options give the tenant, not the landlord, the right to extend the lease for additional periods, commonly multiple five-year terms. Options usually specify rent for each extension period, often with increases. Because the tenant decides whether to exercise, options benefit the tenant: they renew when the location performs and leave when it does not. Investors generally value options modestly and focus on whether the location is strong enough to make renewal likely.