In the fast-paced world of commercial real estate, securing the ideal office space demands strategic finesse.
This article dives into seven indispensable leasing tips tailored to empower you in navigating the complexities of lease negotiations. From allocating ample time for thorough evaluations to leveraging negotiation prowess and understanding nuanced clauses like market rent reviews and make-good obligations, we give some insights to help you secure favourable terms.
Tip 1. Give yourself enough time
Ensuring you allocate adequate time when negotiating a lease is paramount for informed decision-making and securing favourable terms. Taking your time allows for thorough evaluation of the property, market conditions, and lease terms, facilitating informed comparisons and strategic negotiation.
Time also enables you to do a thorough legal and financial review, due diligence, and contingency planning, safeguarding against potential risks and liabilities.
Find out when you should start planning for your office lease expiry
Tip 2. Be ready to negotiate
Unlike a residential lease – which is generally presented as “take it or leave it” – a commercial lease can be negotiated. Tenants have the right to negotiate on any and all terms and conditions.
It’s important to remember that lease terms are set by the landlord and usually in their favour. So, it’s it vital to negotiate terms that are suitable for both parties rather than simply accepting the first offer the landlord puts forward.
Tip 3. Compare lease offers
This one is essential – even if you’re renewing a lease – if you want to get the best deal on your office space!
Compare lease offers from multiple landlords to assess the competitiveness of terms and identify opportunities for negotiation. Request proposals from multiple landlords and carefully review each offer, considering factors such as rental rates, incentives, outgoings, make good clauses, and terms and conditions.
Use this information to negotiate the most favourable lease terms for your business.
Tip 4. Market rent reviews
Market rent reviews are provisions in lease agreements that allow for the periodic adjustment of rent based on prevailing market conditions.
When it comes to market rent reviews it’s good to avoid a “rachet” review – a clause that typically prevents the rent from decreasing, even if market rents have gone down.
A better option is a “cap and collar” review, which sets upper and lower limits (caps and collars) on rent adjustments during rent reviews. The cap prevents rent increases beyond a certain threshold, while the collar limits decreases in rent below a specified minimum.
Tip 5. Look closely at the make good
Make good – the tenant’s obligation to return the office space to its original plan and design at the end of a lease – is a common source of disputes between tenants and landlords.
Tenants should make sure that their make good obligations are understood and clearly stated in both the heads of agreement and the lease.
Always request a ‘make good scope’ from the landlord and review the scope carefully so that you know the extent of your liabilities before you sign your lease.
Tip 6. Negotiate flexibility
Aim to negotiate flexibility within the lease agreement to accommodate potential changes in your business, such as expansion or contraction. Look for provisions that allow for subleasing, lease assignment, or early termination with reasonable notice.
Tip 7. Seek professional advice
Consider seeking guidance from an independent tenant representative who can provide valuable insights and assistance throughout the leasing process. Their expertise can help you navigate complex lease agreements and make informed decisions.
Following these leasing tips can help you effectively navigate the leasing process and secure a space that meets your needs while minimising risks and maximising value.
But if you need some help researching the market or negotiating lease terms, we’re always here to help
