What to Consider as You Negotiate Your Office Lease

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Landlords want good tenants for their office spaces. You can’t blame them. Nor can they blame you for trying to secure the best possible deal for your business.

Leasing office space is a great solution for businesses that are moving into their first office. You might also be seeking an office relocation because your business is growing too rapidly to know precisely what your needs will be in a year or two. Because you’re not purchasing the property, the risk for your business is substantially lower, and you’ll have a property manager on speed dial to handle much of the regular maintenance and regulatory concerns.

Negotiating your office lease can be a fraught, competitive affair, but with persistence and grit you can arrive at a lease that satisfies both parties equally. An advantageous lease can save your office thousands of dollars in the long-term, so knowing what to consider as you enter negotiations is crucial. While, understandably, you’ll have a lot of plates to keep spinning as you work out the details, keep the following things in mind as you negotiate your lease. Above all, ensure that DB Interiors or another commercial fit-out company prepares a test fit so you don’t lease space you may not need.

Negotiating rates vs negotiating terms

We’re naturally inclined to focus on the rates of any lease contract, but the length of the lease term deserves as much—if not more—attention. Fluctuations in the market demand for rented office space could put you in a position down the road to negotiate for lower rates, but this won’t be possible if you agree to too long a lease term. Additionally, rapid expansion of your company could result in you outgrowing your office space. If you’ve backed yourself into too long a term, you could cost your business dearly by hampering your growth or pushing ahead with early termination fees.

Assignments and subletting

Businesses experiencing sustained growth often move into a new office with room to accommodate further growth in the future. This often means, however, that some excess floor space is available when they first move in. This excess floor space is an opportunity to generate income for the business through sub-leasing. Your business may also find itself undergoing a company merger, a comprehensive reorganisation, or an entire ownership change that would classify as a new assignment on your lease contract.

Landlords often include assignment and subletting clauses in their contracts that allow them to reject proposed assignments or impose subletting fees. Be aware of these stipulations in your contract and seek some compromise if you consider these outcomes possible for your business within the lease term.

Rent hikes, cure clauses, and termination fees

Most landlords make clear that they will not raise rent on a property during a lease term, but it’s always handy to get such a promise in writing. Some landlords prefer to make annual changes to rent proportionate to the Consumer Price Index (CPI) to keep their property value in line with the market. If you can’t negotiate rent escalation out of your lease entirely, try to negotiate a fixed rate increase so that you can plan accordingly.

The time you are given to make amends for any breach of your contract is known as a cure period. The most common example of cure periods is the window of time within which you can make a late rent payment without incurring a penalty. Negotiating the best possible cure period in your lease can save you money in the event of a simple bookkeeping error.

You should also pay attention to any termination fees in your contract if you think there’s a chance you’ll need to relocate before your term expires.

HVAC, maintenance, and tenant improvements

Some maintenance duties are always (as they should be) the responsibility of the tenant. You wouldn’t expect your landlords to clean your toilets, for example. However, some maintenance duties should be shouldered by the landlord. Chief among these responsibilities is your building’s HVAC (Heating, Ventilation, and Air Conditioning) system. If possible, try to get this stated clearly in the lease.

If, in the future, you wish to make changes to your office space, like office furniture for a soft office fit out or new partitions as part of an updated spatial planning setup, you’ll need to know which tenant improvements you’re allowed to make. Be sure to negotiate the necessary freedom to make tenant improvements in your lease.

Make the most of your new location

Once you’ve secured the best possible lease for your new office, you must then design the perfect interior to maximise productivity and impress your future clients. DB Interiors works closely with clients throughout New Zealand to provide affordable, high-quality office fitouts. Make the most of your new office location. Contact DB Interiors today to arrange your no-obligation consultation.

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