Avoid these Common Tenant Mistakes to make your lease work harder for you.
Office space is more than a box where you do business. An office lease is often the second-greatest expenditure for a business after payroll. Make sure your office lease is more than a cost centre but a competitive advantage by avoiding these common tenant mistakes:
The #1 most common mistake is starting the lease renewal or relocation process too late. Don’t put off searching for new office space until the last minute.
For tenants with space under 10,000 square feet, Industry wisdom says that tenants should start searching a minimum of 6-12 months ahead of time. It could take at least that long to search for the right property, perform due diligence and draft and negotiate the lease. If the space needs remodeling or construction to fit your business needs, it can stretch to 12 months or more.
For office space needs over 10,000 square feet, businesses should be looking 12-18 months ahead of the lease expiring. Office space options could be paltry with a short searching window, and waiting too long could result in settling for the best that is available, rather than finding the best possible fit.
Even for tenants that are aware of how long the process takes, it can still be a challenge to make something a priority that is so far in the distance compared to the fires that need to be put out on a daily basis.
2. Not assessing long-term priorities.
Look beyond the immediate needs of the business and factor in long-term needs such as obtaining lease terms that allow the company to expand, downsize or relocate as circumstances dictate. Review your lease for these terms to ensure the future of your business.
- Expansion Rights
- Cancellation Rights (Termination Right)
- Extension Rights
- Sublet Rights
This is also a great time to define the company image, the budget, type of workspace (private offices v. open-concept) and the amount of space required. An architect will develop a space plan that considers layout, growth forecasts, and floor load capacity. Don’t be stuck with expensive empty space or unhappy over-crowded employees. Take the time now to assess long-term company priorities.
3. Inadequate representation.
A landlord’s core business is commercial real estate; yours is making widgets. Therefore it can be assumed that the landlord has the edge on crafting leases that benefit their bottom line. Don’t show up without representation. An experienced and specialized Tenant Representation Broker is invaluable for finding the right property, negotiating a fair lease, providing market data and ensuring an optimal office location is selected for you. Brokers not only save the tenant time and money, but create leverage and help you use it effectively to negotiate the best rates, terms and incentives.
Business owners will not be aware of all the office space location options without using a Tenant Representation Broker. An experienced Broker Team like Chris and Adam have a database of every property on the market, an extensive network, and know of options which are not yet vacant or even on the market.
Best practice dictates that you keep your Tenant Representation Broker involved in expansions, contractions, renewals and extensions that occur so they can ensure informed decisions are made and no opportunities for optimization are lost.
4. Paying too much rent.
Do your homework. Companies and/or Tenants that do not obtain accurate and current market research may pay too high a rental rate. Landlord flexibility changes constantly depending upon many factors including current occupancy rates in the building and competitors nearby, length of lease, tenant’s use, parking requirements, financial strength of tenant, etc.
Negotiations are especially important with lease renewals, since Landlords are most competitive when the space is placed on the open market.
5. Bottom line over location attributes.
The value of office space to a business is more than its rate per rentable square foot. As with all real estate it comes down to location, location, location. Location of clients, location of resources and location of employees.
A budget is always important, and you should never enter into a lease that’s unaffordable. However, an office building reflects the company image and stands to impress clients and help recruit and retain employees. Location is paramount–it can be the property’s biggest plus or biggest minus. Location effects employees commutes and talent acquisitions. Amenities should be considered as well, since happy employees are productive employees and never underestimate the power of natural light on worker productivity.
Finally, be proactive and plan ahead, be clear about objectives, do your research, pay attention to the details and get a team of experts on your side. Once it’s over you can go back to business as usual confident in a good lease and great office space.