It is important that you know exactly what you want or don't want, in a lease before you begin looking for office space or initiate the negotiating process. What is the maximum lease that fits your needs? Your ideal timeframe? Do you know the basics of leasing and how to analyze the cost of the lease? It is equally important that you go into the process prepared and with reasonable expectations.
The process of locating usable space with a knowledgeable real estate agent is the real start. Have you determined the location that is best for you? Your search will help prepare you and temper expectations greatly. Even if you are contemplating renegotiating a lease at an existing location, or moving to a different space with the same landlord, it is a good idea to comparison shop just to familiarize yourself with what the market trends and prices are.
Know what you want and what you must have.
You must know the maximum and minimum amount of square footage that fits your needs, as well as
the floor requirements. Does the nature of your business make the groundfloor a necessity? Is a
panoramic view from the conference room important to you? Do you want a build-out of the office
from the concrete, meaning totally new floor, carpet, walls, etc.? Is there a security system
in existence at the office space? Do you require one? Is the heating and air conditioning
individually maintained? If not, how will you be charged for it?
The more that you require, the less negotiating room you will have. On the other hand, make sure you, or the realtor, find out important information like the occupancy ratio over the last year. Is there square footage available where a lease has fallen through? There are instances in which large corporations rent entire floors, then do not need as much or decide to rent elsewhere. In these cases, the management company of the building will sublet the space - often for less than the going rate for office space in that building. All of these things could be negotiating points in getting the best rent.
Determining the length of the lease.
One year leases are few and far between, with the most typical being three (3) years. It is
important that you take your growth potential into consideration. It will not be smart to sign
a 1,200 square foot, five (5) year lease when you anticipate tremendous growth and will need
2,500 square feet in three years. It might not be a bad idea to put a clause in your lease that
addresses this if much growth is anticipated. This can be done in a variety of ways, which your
realtor can address for you.
Have a monetary range in mind.
During the negotiations, you will need to have the amount of rent that you can afford every
month. Your search and your realtor should be able to provide you with the current market
rental costs for the area in which you want to relocate, or even for renegotiating at your
present location. The national average for rent has been noted to be between four (4) and five
(5) percent of your total operating costs.
Determine all costs of the lease.
It is essential that you determine the other costs associated with the lease of the space. For
instance, what portion of the heating and air conditioning are you responsible for; and what is
the average monthly cost. Get types and figures on associated costs, from the landlord and the
realtor - it can't hurt to have them from two sources. As you plan your finances, you don't
want any unexpected expense surprises.
One cost that is often overlooked is the common area factor. The common area is all parts in the building that are used by or for all tenants of the building. Usually included are: building lobby, all corridors, janitorial and electrical closets, elevator rooms and rest rooms. The owner determines what percentage of the building these areas represent and adds that percentage to the amount of space, you, the tenant occupies. So, while your rent per leaseable square foot may be $18.00, if there is a 15% common area factor, you actual cost per square foot is going to be $20.70.
Although the previous tasks may seem arduous, the real task is getting final lease approval - that is all parties agreeing on the finer points. You should write down all the things you would like to see in the lease and any specific time frames. You do yourself an immense favor by having a clear cut idea of what you want, which things are negotiable and which things are not.
Be ready to compromise, as it is highly unlikely that the lessor will tailor the lease to your exact specification. It is important that you have a clear idea of those items which you can easily give up, as flexibility is essential to successful lease negotiations. Equally important is not being desperate, or you can end up with a lease on a property which does not fit your needs at all and it will give the lessor all the bargaining power. It is an excellent idea to have your strongest negotiator handle this area, or brush up on your negotiation skills before going in.
At the very least, being knowledgeable about the current market trends for your area, the particulars of the real estate you are looking at and what you want is crucial to obtain a successful lease.
There are many options and terms available when leasing office space. You should always be ready to walk away if the terms are not acceptable to you. In order to make sure you have this option, you must start your search early enough and be thorough. You should have a couple of properties which might work for you, ranked in order of most desirable. successful negotiations are easiest when you have prepared yourself and really know what your needs are.
More about Leasing:
Office Leasing Basics
The Cost of Leasing an Office
Legal Terminology in Leasing Office Space
How to Lease Office Space
