Looking to lease some office space? Here are some tips to help you get the best deal.
How to get the best office deal when leasing commercial office space
I was just asked yet again by a business owner for my top tips on how to get a great deal on leasing a commercial office. For lessees seeking CBD or suburban office space, there are a few things you can do to maximise your outcome.
Look for space that is already “fitted”, having been left by the previous tenant. This is often available to an incoming tenant at little if any rent, and can save huge start-up costs. In the suburbs where parking is still at a premium, keep your parking requirement to a minimum to make it easier for the owner to deal with you rather than other tenants who require full parking ratios.
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If possible, be prepared to seek accommodation, which, although well located, may be a little out of date or “tired”.
A huge premium is paid for brand new space and thus you can lower your overhead by being prepared to accept something that is a little bit older. Not much expenditure is required to improve internal décor and amenity and it can certainly be a lot cheaper than paying a maximum rent.
Owners also love long leases, so give as long a lease as possible and you will get better “incentives”, typically a rent-free period, or contribution to fitout. Even in the current reasonably tight market, which has low vacancies, you should achieve incentives equivalent to 15–20% of the total net rent payable under the lease. Carefully consider rental review provisions, preferring minimum annual indexation to periodic “market” adjustments, which can result in significant increases.
Avoid being made responsible under the lease to “make good” when you vacate. Some owners are expert at extracting huge penalties from outgoing tenants on this basis, yet some are unaware of the provisions. Be insistent; if you agree to most other requirements, most owners will soften this requirement yet if you get stuck with it, it can cost a fortune.
As with any negotiation try and remain “lukewarm” and seek at least a couple of real alternatives so that the various parties you are dealing with know that they are up against competition.
Consider using an expert property representative to conduct your negotiations. Tenancy advocacy is big business and an expert representative can not only seek a wider range of accommodation but will usually be able to save you more and arrange better terms than somebody inexperienced in property could achieve for themselves.
To read more Scott Keck blogs, click here.