Do you know how your employees get to work? Attitudes towards the commute have shifted. While employees are reconsidering the time and money it costs for them to get to the office, businesses must also be considering the role of the commute.
When you look to renegotiate your current lease or secure a new lease, you may come across both tenant advisors and landlord agents offering lease negotiation services. Let’s start by clarifying what each of these are and the roles they play:
Landlord agent: A landlord agent is a real estate agent that represents a landlord. When you enquire directly on an advertised office space, it is typically the landlord agent with whom you speak. They can also introduce you to other spaces owned by other landlords that they represent, but they do not represent you as a tenant.
Tenant advisor or representative: A commercial tenant advisor or representative advises and negotiates on behalf of a tenant during negotiations with an existing landlord or potential new landlord (or their representing landlord agent).
Some tenants decide to work directly with landlord agents, without the use of a tenant representative, researching and finding their own space and then negotiating a commercial lease or commercial lease renewal with the landlord agent directly.
In some circumstances, like a straightforward and uncomplicated commercial lease renewal, this is pretty easy to do and has the added benefit of saving you from having to pay an additional fee to use a tenant representative.
In other cases, however, having a tenant advisor on your side comes with some worthwhile advantages, including saving you time, ensuring you get the best commercial terms possible – saving you considerable money in the long term, and providing access to spaces that may not yet be on the market (due to their market knowledge and network).
Your representative will start by matching your company’s business objectives to options on the market. They will consider things like your need for flexibility or your business’s expected growth rate.
Next, you will receive a shortlist of options that match your requirements. This list could also include off-market options thanks to your tenant representative’s industry contacts. Once you’re ready, the tenant advisor will be by your side throughout the process of inspection, offer and negotiation of a deal.
Even if you’re not moving office spaces, and you’re just renewing your current lease, a tenant representative can be brought on in a smaller capacity to help you negotiate a new, more favourable deal with your landlord, and save you from tricky or uncomfortable conversations with your landlord.
1. An expert in your corner
With most commercial leases lasting between three to five years, it’s unlikely in-house real estate expertise exists within your company. And with leases being such a significant transaction, running easily into the millions of dollars over the lifetime of the contract, it makes sense that you would want an expert on board. A tenant representative has years of specific experience in their field, making them a valuable asset when it comes to ensuring your lease is ‘right-size’ and the best deal available.
2. Professional lease advice on what is appropriate for your needs
A tenant representative will work with you on matching your business objectives to different options on the market. For example, if you are looking to attract and retain talent, you may need to find a location near public transport, with good amenities and in a character building. As an expert in this area, your advisor can objectively view your requirements and help you stay focused in the excitement of finding a new space, always bearing in mind your overarching company values and goals. They will also be able to advise you on what you really require, not what you think you require (i.e. you may think you need more space than you really need).
3. Access to more commercial properties and a network of contacts
Thanks to a great real estate network and years working in the business, tenant representatives have unique access to properties. Some of these options may not even be listed publicly. An advisor might be able to work out creative options for you as well. For example, they may know of a tenant that is outgrowing their space but still have three years left on their lease. In this case, they might be able to coordinate an office shuffle in which they help relocate the other tenant to free up this office space (and then have it subleased by you).
4. Save time and keep your focus on core business work
You have a job to do and it probably isn’t just office relocation or tenancy. With leases only coming up every few years, it’s unlikely there are dedicated resources for this within your company; rather, there are business-as-usual tasks to complete and core business work to be done. By working with a tenant advisor, you can save yourself both time and hassle, allowing you to get on with what boosts your business revenue.
5. Negotiating power
A landlord rarely comes forward with their best offer upfront. There is typically room to negotiate, and an experienced tenant representative has the knowledge and expertise to get you a first-rate deal. Whether it’s knocking off dollars or working out favourable incentives, rent review periods and ‘make good’ clauses, you can proceed with confidence that you signed a good deal.
6. Saving your tenant / landlord relationship
Sometimes negotiations require playing hard ball or having tricky, uncomfortable conversations in order to secure your best deal. This is a delicate dance when you are negotiating with your landlord or future landlord with whom you need a good working relationship. A tenant advisor can step in as the go-between so you can accomplish both objectives: negotiating a great deal and having a great relationship with your landlord.
Now, what is better than having a tenant advisor or representative in your corner? Having a tenant advisory team that includes a tenant representative as well as a workplace design partner. This team will give you the complete picture of both the lease contract terms and costs as well as the fitout options and costs for each office space. For example, option A may have lower rent, but when you factor in an extra $500K of fit out work, option B might actually be the more suitable and cost-effective choice.
So how do you get this power tenant advisory team in your corner? Select a workplace design partner early in your lease expiry process. Invite them along to view potential office space with you and your tenant advisor. They can give you valuable insight early on that will save you big bucks down the road.
To learn more about choosing the right workplace design partner for your strategy, download our free ebook today.
While new business models, fresh ways of working, and an increasingly tech-enabled ecosystem have shifted the workplace needs of companies, one thing remains crucial throughout the disruption: the commercial office lease.
A commercial lease is a binding agreement between landlord and tenant which sets out both parties’ obligations. The lease spells out terms and clauses for both landlord and tenant, so you, as the tenant, can better understand exactly what you’re entering into. Seeking out advice from trusted partners throughout your entire lease expiry process is smart, but when it comes to commercial office lease, advice from a tenant representative or legal advisor can help to ensure your lease agreement is favourable and fair.
All commercial leases include what is known as ‘essential terms‘. As the name suggests, these terms are essential to the contract and without them, it may not exist at all. Essential terms are things like payment of rent, names of the parties involved and a description of the premises to be leased.
Outside of the essential terms, there are a number of clauses that can be included when it comes to your office lease. In this post, we will unpack six commercial lease clauses you can’t afford to NOT know about.
The option to sublease part of your property to a third party can be helpful if your company’s space requirements are likely to change over the course of your lease. For example, if your business is downsizing, subletting some of your space can support cash flow by making use of unused floor space.
The option to sublease will need to be written into your lease agreement from the outset. Know that your original lease remains in effect even when a new sublease has been signed.
Maintenance and repair obligations should both be set out in your commercial lease. Generally, as a tenant, you are responsible for the ‘rented premises’ like floors, walls and fixtures, and are therefore required to repair and maintain them during your lease.
On the landlord side, maintenance and repairs to the structural parts of the premises, building systems and common areas like lobbies or the lifts are usually included. Check your lease carefully though as sometimes these items can be inserted under the tenant’s obligations.
Including a ‘break clause’ allows you to terminate the commercial lease earlier than the specified term. Most break lease clauses include a notice period where you must let your landlord know of your intention to break the lease.
If your lease agreement doesn’t include a break lease clause, and you end up needing to leave your lease earlier than the anticipated term, you may be required to buy out the term of your lease, assign it to a third party or otherwise negotiate an early exit with your landlord.
A ‘make good’ clause is a standard inclusion in many commercial leases. The make good provision is negotiable but basically requires the tenant to return the premises back to their original condition, regardless of any improvements that have been made during the lease period.
Before you sign on the dotted line, ensure the make good clause is clear for both parties and you understand your obligations at the end of your lease. You’ll need to consider this additional cost when you decide whether to move at the end of your lease.
Furthermore, complete a thorough condition report including photos and videos of the office at the start of your lease. This will help you to avoid nasty surprises at the end of your lease agreement by providing clear evidence of the original condition of the premises.
The ‘rent review clause’ explains the process for increasing the rent as the term of the lease proceeds and is common in many commercial leases. The common methods of rent review include:
Ensure you are aware of the type of rent review clause your lease includes and that it suits your business requirements.
An ‘option clause’ gives the tenant the option to renew their lease at the end of the initial lease term. Usually, the option needs to be exercised within a certain time period (eg. six months before lease expiry), and the tenant must not have breached any terms in the contract during the lease period. An option clause isn’t mandatory, so check your lease before signing.
As you can see, a commercial lease is complex and, as a legally binding document, you want to ensure you’ve got all the bases covered. But the lease terms are just one part of the lease expiry process. To negotiate the right terms for your needs, you need to consider every aspect of the process and develop a robust workplace strategy. For more commercial lease advice and to learn more about choosing the right workplace design partner for your strategy, download our free ebook today.
An office lease expiry is one of those things that can easily get put on the backburner until suddenly it’s right in front of you. But without forethought and planning, it can end up being costly and very inconvenient!
Getting a start early is crucial whether you’re planning on staying in your current premises or relocating offices (if you are relocating, here is a helpful relocation checklist). Depending on the number of your employees, the size of your office space (current and into the future) and the complexity of your current commercial lease agreement, you should start planning at least 15-18 months before the lease expires.
Some things to remember:
So, what do you need to consider when deciding to stay and renew the current lease or move out and relocate to a new office? Let’s review the key factors:
If you’re satisfied with your current office and location and have no intentions of outgrowing the space in the imminent future, it might be more beneficial to stay and renew your lease (if you have that option available to you).
Ask these questions:
Also, think about the costs of office relocation and factor this into your decision. Consider: planning, fit-out, ‘make good’ costs, moving expenses and any loss in productivity. Weigh these up against the benefits of moving to a new location eg. lower overheads or a better location.
If you do decide to stay put there is still a need to negotiate to ensure your company gets the best deal. Consider negotiating for things like base building improvements, new interiors, rights of first offer for adjacent space for growing into or contraction rights if you see downsizing in your future.
An office lease expiry might just be the perfect time to consider how your workplace strategy fits in with your overall company goals and objectives and how your office space can support them.
Ask these questions:
The type and amount of space you require post lease expiry depends heavily on the nature of the work being carried out so considering the company’s objectives is key.
Examine your future business plans closely to help you decide whether to renew a lease or relocate your office. Think about how these plans might impact your current workplace and what they will mean for future space requirements. Reflect on whether staying put will allow your business to evolve in the right way, or if moving office will offer your business a better chance at future success.
If it looks like the future holds a dramatic change in the way your company works, or a large scale merger of departments from different offices into one, it’s best practice to engage with a change management consultant early on. Your consultant will help guide you through the process for a seamless transition with as little employee anxiety as possible.
As with most things, when it comes to an office lease expiry you need to consider the costs. Beyond thinking about lease or rent costs, it’s important to factor in all the many and varied relocation costs if you decide to move. Naturally, there are also costs associated with staying where you are, as your lease agreement may change for example.
If you’re feeling overwhelmed with all of these considerations, you’re not alone. This is where a workplace design partner can help. Companies like Axiom specialise in helping you design a workplace strategy, find your next property, manage the interior design, and transition your workforce.
Bringing in the experts ensures your business is taken care of, from start to finish. To learn more, download our free ebook How to choose a workplace design partner now.
