Plan ahead for your commercial lease expiry
Whether it’s 6 months or 3 years away it’s important to be prepared.
Whether it’s a building, commercial space, retail outlet, warehouse or a shared business space, your office is vital to your staff wellbeing and to the success of your company now and in the future. So, great care needs to be taken when preparing for your commercial lease expiry.
Time is your friend.
When preparing for the end of your office lease, time is your friend. It’s important to give yourself as much time as possible to plan ahead. Depending on the size of your office space and the complexity of your current commercial lease agreement, you should start planning at least 12-18 months before the lease expires. Here are some of the advantages of starting early:
- You can carefully consider your options.This is probably the biggest benefit of planning for your lease expiry well in advance. It’s important to take the time to assess your locational needs, review your company growth plans, revisit key business objectives, and of course, consider whether to stay in your current premises or move to a new one. You can also use the time to research the commercial office market, consult with a workplace design partner, and get legal and financial advice.
- It gives you more negotiating power.Whether you are entering into a new contract for a new office or exercising your option to renew in your current premises, planning early provides you with more negotiating power. If time is on your side, you would be in a better position to negotiate the terms of the lease. However, if you leave things too late, it’s your landlord who would have the upper hand during negotiations. So, plan early and negotiate for the best lease arrangement for your business.
- If you are moving, this gives you more time to plan your new office.Once you’ve decided to move to a bigger office or to a better location, you need a considerable amount of time to plan out your new office before actually moving in. This way, you can create a workplace that would not only boost staff health and wellbeing, but also improve productivity, efficiency and innovation in the business.
- You can better prepare your employees.Last, but definitely not the least, you need to carefully consider the impact of your office change to your staff – whether you’re staying in the current premises or moving to a new one. Any change can be difficult for some people. Make sure you prepare your staff for any changes in the workplace – new fitouts, breakout and meeting rooms, technologies, and especially, a new location! Bringing your staff on the journey is essential to the success of the project.
Should you stay or should you go?
As you can see, there are numerous benefits in starting early when preparing for your office lease expiry. Remember to give yourself at least 12-18 months to consider your options and plan ahead. One of the biggest questions you need to consider is: ‘Would it be better to stay and renegotiate the current lease or move to a new office?’
To make the right decision, you need to review your current space (and current lease agreement), think about your business objectives and growth plans, plus consider market conditions, costs involved and any potential change management issues.
In this article, we will help guide you through the decision-making process and focus on the following:
StayOption 1: Renewing your current office lease
If you’re happy with your current office and location, and have no plans of outgrowing the space in the near future, it might be better to stay and renew your lease. There are a few options you can consider when deciding to stay in your current premises:
- Do you have the option to renew?It is worth noting that not all lease agreements have the option to renew or extend the contract for another term. Take the time to review your current lease agreement or seek legal advice to better understand your options when your office lease expires. If you do have the option to renew, it’s important to start early and give enough notice to your landlord. Most contracts would specify a timeframe to give the notice of renewal.
- You may need to renegotiate the lease.If you do not have an option to renew as part of your current lease contract, but you would like to stay in the same space, you could look to renegotiate a whole new lease agreement with your landlord instead. Again, time is critical in this option. The earlier you signify your intention to stay in your current premises, the sooner you can negotiate a new contract and lock out any other company or companies that are trying to compete for the same space.
- Go on a month-to-month lease.Most businesses would find this quite risky as you may find yourself out of lease and need to find a new office within a month. But this option would be worth considering if you are negotiating or renovating a new office in a different location. The month-to-month lease could cover your office needs while you wait to move to the new premises.
Improving the current office
Once you’ve decided the best option is to move forward in your current premises – and while you’re renewing or renegotiating your lease contract, this may also be a good opportunity to think about improving the office.
Redesigning your workplace can do wonders for staff morale and take your business to the next level. It can:
- Boost productivity.Ergonomic furniture and flexible workspaces can help staff work more efficiently and provide better workflows to enable greater office productivity.
- Enhance creativity and innovation.With better team coordination and efficient workflows, people have the opportunity to be more strategic and creative in the workplace - focusing on the more important aspects of their roles.
- Increase collaboration.Interactive office technologies, meeting spaces and breakout rooms can significantly increase collaboration and teamwork across departments within the business.
- Improve employee health and wellness.Increased productivity, collaboration and innovation in the workplace definitely leads to happier and more fulfilled employees who deliver the best results for the business.
So, how do you include office improvements when renewing your lease contract?
Here are some of the steps you can consider:
- Understand your business objectives
- Align objectives with the workplace needs of the staff
- Review how your current office environment supports your business objectives
- Engage a workplace design partner to plan the office improvements
- Seek legal advice to include expected landlord contributions in the lease agreement
- Seek financial advice on tax advantages and engage a Quantity Surveyor to organise a depreciation report
- Organise budgets and timelines
- Notify the landlord of your plans and get the necessary approvals
MoveOption 2: Moving to a new office
In this section, we will focus on the things you need to know when deciding to leave your current premises. The decision to move to a new office can be driven by a number of factors:
- Company objectives and future plans.What are you aiming to achieve as a business in the future? Are there changes you need to implement in the workplace to improve productivity, efficiency and collaboration? Understanding your future goals and needs will help firm up the decision to move offices.
- Issues with the current office space.Are you running out of desk or storage space in the existing premises? Are you beginning to cram desks and people into already crowded working areas? Is the space being fully utilised? Do you have eight-person meeting rooms that are rarely being used by more than three people at a time? What about your future plans for expansion? Are your staff currently split across multiple floors, or even worse, non-contiguous floors with small floorplates? If so, you could potentially find a building with bigger floorplates where you could fit the whole team on one level, or connect the floors by way of an interconnecting staircase. These are some of the questions you need to consider when evaluating your current office space. How you answer these questions can be sure signs that you need a new office.
- Location is not ideal.Are your staff and customers having a difficult time getting to the office? Does it involve more travel time? Location can be a major factor when deciding to move to a new office – especially if you want to attract and retain good talent.
- Your office culture needs a revamp.Building the right company culture is an essential ingredient to your business success. Are your staff highly motivated to work? Do team members effectively collaborate with each other? Are people working in a creative and innovative environment? Having the right workplace design can support and even enhance your office culture.
Considering ending the office lease early?
Once you’ve decided to move to a new office, you can either wait until the end of your current lease term or look at ways to get out of the agreement early. However, a word of caution – your commercial lease contract is a legally binding agreement. Trying to end the lease early can be very complicated and would require legal advice.
If you are considering ending the current office lease early, here are a few of your options:
- Early termination clause.Does your lease contract include an early termination clause? If it does, this usually outlines the circumstances that allow you to end the contract early and the specific steps to take.
- Surrender of lease. You can have the option to ask for a surrender of lease with your landlord. However, they do not have the obligation to agree. If they do agree to the surrender of lease, you can enter into a mutual agreement to end the lease contract early. Please note that you may be required to pay for your landlord’s legal fees.
- Assignment of lease. You also have the option to assign or transfer the lease to a new party or tenant. Check your existing contract to see if there are any restrictions or guidelines regarding the transfer of lease. You would of course need the approval of your landlord to make this happen.
Again, if you are considering ending your office lease early, make sure you properly review the existing agreement, consider your options, and seek legal advice.
Before moving out: Make Good on the current office lease
Whether you’ve decided to end the lease early or leave at the end of the term, it is part of the lease agreement that you ‘Make Good’ on the current premises. The ‘Make Good’ clause dictates your obligations as a tenant to return the office or property to its original state. This involves:
- Stripping out the additional office fittings and amendments done during the lease term. You may want to check this first with the landlord - as they may agree to keep some or all of the amendments (since it improves the whole office).
- Possibly paying the landlord for any ‘Make Good’ work that needs to be done (often known as a “cash settlement”).
- Removing any trash and unwanted furniture - and leaving the place clean and tidy.
Moving out of the current office
Moving or relocating an entire office can be difficult and overwhelming. It has a lot of moving parts – from physically moving out of the old office and sorting out any technical issues to signing a new lease, planning the new office and dealing with any change management issues.
Without careful planning and preparation, the move can be very stressful for everyone and you could find yourself suddenly out of time and out of budget. Here are some useful tips to make the office move a lot smoother:
- Determine your business objectives.
- Start planning and reviewing your options ahead of your current lease expiry. The more space you need, the earlier you should begin planning. Below is a guideline:
- If you need less than 500 sqm, begin planning 12 months in advance
- If you need 500-2,000 sqm, begin planning 12-18 months in advance
- And if you need over 2,000 sqm, begin planning 18-24 months in advance
- Work with a reputable workplace design partner.
- Properly communicate the office move to all staff.
- Sort out any issues with the existing lease and ‘Make Good’ on the current premises.
- Finalise the terms of the new lease 9-12 months before the existing one expires.
- Plan your new office.
- Work with IT to sort out all technical issues in the old and new offices.
- Understand the objectives for the move and determine budgets and timelines.
- Make an inventory of everything that needs to go to the new office and what needs to be left behind or discarded.
- Plan out the logistics of the actual office move and work with a professional moving company.
Make sure you check out the complete office move checklist to give you a list of things to do for each stage of the relocation.
Get HelpWho can help you through the end of lease process
Whether you’re renewing your existing contract or relocating to a new office, preparing for the end of your office lease expiry can be a very complex process. It requires a lot of planning, negotiation, research and, of course, legwork to get things done. Luckily, there are a number of support channels that can help you through the process:
- Workplace design partner. Whether you’re looking to refurbish, relocate or fully redevelop your office, a workplace design partner goes beyond the pure design or aesthetics of the physical office – and considers your specific needs, goals and culture to create the best workplace for your business, now and in the future. A company like Axiom can assist in every stage of your workplace transformation journey:
- Developing the workplace strategy
- Analysing the current work environment
- Establishing budgets and timelines
- Managing all facets of an office relocation
- Conceptualising and planning the office design
- Project management and construction
- Measuring ROI of your workplace design
- Providing technology support and training
- Providing an aftercare program post-occupancy
- Tenant representatives. They can help with selecting sites for your new office and facilitating lease negotiations with your landlord on your behalf. Even if you do not plan to move, a tenant representative can help you with the renewal of an existing lease or the exercising of an option.
- Legal advisors. As with any legal contract, your lawyers can provide valuable legal advice about the terms of a new or expiring commercial lease.
- Agents. If you choose not to use a tenant representative as an intermediary, you may deal directly with a landlord’s agent. They can help you find and inspect available sites, but remember that, ultimately, they are an advisor of the landlord and conflicts of interest may arise.
Preparing for your office lease expiry requires planning, research, and hard work, but if you get started early, prepare well, and use good advisors and partners, you can avoid costly mistakes.
Whether you are renewing the existing contract or relocating to a new office, make sure you give yourself enough time (at least 12-18 months before the lease expires) to consider your options, properly negotiate with your landlord, and plan the move forward.
If you need help at any stage of the process – from understanding your end of lease options to creating a workplace strategy for your new office or simply to figure out the next steps, Axiom is here to help. Book a consultation with one of our workplace consultants today!