Getting a commercial lease tied down is a serious business - the signing of a new lease really should not be left to chance.
Real estate cost usually accounts for a substantial chunk of an organisation's operational expenses – second-largest expenditure after payroll – thus it is important for business occupiers to know and understand the company's growth plans and real estate needs.
Companies at varying stages of growth, from start-ups to global multinational corporations, will have different space requirements. Regardless whether a firm decides to stay or to relocate, discussions around lease negotiation should start early, beginning with an honest assessment of the company’s growth plans and real estate needs.
If you are in the market for a space to lease, here are 10 leasing tips to know and avoid:
#1 Running out of time: Beginning the negotiation for a renewal or a relocation too late
If you start speaking to your landlord about renewing your lease a couple of months before the lease expires, they know you do not have time to move out. They are, therefore, unlikely to offer you an attractive rent for you to stay and you will be forced to accept whatever they put on the table.
#2 Not considering business goals before implementing real estate strategy
Before making a real estate decision about whether to renew or relocate it is crucial to understand your business goals. For example, if the firm is concerned about staff retention, a consideration would be to modernise the office to attract millennials or relocate to be closer to amenities or public transport.
#3 Only considering the financial impact
It’s important to understand the cost of a particular option, but the cheapest does not always mean the best for you and your business. Savings from being in a cheaper building can be quickly eliminated if your operations are negatively impacted by being in that location.
#4 Too many cooks!
A real estate decision of whether you should stay or move will impact all staff, even if only because of the change in commute time. Clearly it makes sense to get opinions on what is important to the various business lines and stakeholders that will occupy the office. However, once the key selection criteria have been determined, it is important to identify a project leader.
#5 Not considering future growth needs
Be sure to factor in anticipated head count growth and potential changes to the business’ needs during the lease term. By obtaining lease terms which will allow the company to expand, downsize (or even relocate within a landlord’s portfolio) as circumstances dictate, businesses can avoid the unnecessary headaches, loss of business and costs associated with relocating.
#6 Not clearly understanding space metrics
Space is measured and defined differently across the Asia Pacific region - from market to market and sometimes from landlord to landlord. It is important to understand the difference between lettable, net, gross, carpet area etc. and exactly how much useable space you are paying for so that you can compare options on a comparable basis.
#7 Not “pre-selling” the plan internally
Multinational firms often have drawn out corporate approval processes which may involve many layers of approvers. Many landlords in Asia will not hold a space while waiting for the formal approval from HQ to sign a lease, so we often see tenants losing their preferred option to another company who is able to move faster. To mitigate this, we recommend the project leader is clear on the corporate approval process and “pre-sells” the project internally to the key decision makers at regular intervals during the process.
#8 Relying on the landlord’s word
Too many times we see negotiations carry on in good faith with certain issues being agreed to verbally. Either through an oversight, lack of time or purely because it is assumed the landlord’s word is good, items are not incorporated into the lease. Even if the landlord’s word is good, people move on from one company to the next and memories fade. Ultimately, if it matters to you, get it in writing.
#9 Accepting that clauses are non-negotiable because they are “standard”
This is what landlords might tell you, however, there is really no such thing as a standard lease. Leases are negotiable, clause by clause. Just make sure that you negotiate what you want before anything is binding or before you run out of time and have no leverage.
#10 Not understanding the elements of value and design
Even though two options may appear to be comparable, normally there will be a reason why an option is cheaper than another. Be sure to ask questions about location, accessibility, specifications, facilities, design, management, environmental factors, sustainability, wellness, certifications, ownership and tenant mix. All of these can drive up or hold back rental rates.
Working with an experienced office leasing consultancy team will help to ensure that the transition runs with minimum disruption, and that the occupier has access to the right real estate solutions which meets its business and financial strategies.
Need further recommendations before you lease that office space? Reach out to our office leasing experts.
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- Key considerations when choosing an office space
- Flexible Workspace: A strategy to cope with uncertainties
- Does coworking work for you?
- The Big Move: Managing an office relocation
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