So your business
has grown and you’ve decided to relocate your office or even open a new office
for your business. You have found some space to lease that you think will suit
your needs and then you think…
What do I do next?
How do I do it?
How do I find someone to help me?
Here we share
information on selecting premises and getting you through the process as
quickly and efficiently as possible whilst avoiding the common pitfalls along
the way.
How much space will you need?
Prior to
contacting agents and looking at potential sites for your business premises
have a think about the size of your business now and the potential size at the
end of your lease term. You should also consider the likely size of the business
at the end of the lease options should you take them up.
As a rough guide
you should allow approximately 15-20 square metres of floor space per staff
member. This varies according to your business type and the requirements for
the office such as the size of your workstations, the number of offices
required, conference and meeting facilities and the shape of your tenancy.
The potential
growth of your business can impact on the amount of space you are searching
for. If you currently have 10 staff, and therefore find 150-200 square metres
of office space with a 3 year lease but your business planning and growth
projection indicate you will have 20 staff in 18 months, how will you
accommodate the additional staff?
Termination of
your lease and relocation to new premises can be an expensive exercise, as can
the rental payments on office space that will not be used if your growth does
not occur or you significantly downsize your business. This was a particular
problem for IT Companies in the 1990’s.
Possible solutions
to these dilemmas include:
- Look for office space that has
tenancies adjacent that you could expand into in the future if your growth
exceeds expectations. Make sure that your lease states that you can have
the option to take up that space if it becomes vacant. This is known as
‘first right of refusal’.
- Make sure your lease allows you to
sublease some of your lettable area in anticipation of business growth
during the lease term or in the event of your business downsizing. If you
are thinking subleasing may be an option for you take this into account in
the design of the premises to allow separate access for the other tenants.
Leasing premises
When you are
about to lease new premises you will need to assess the present and future
needs of your business, as you would with other major decisions regarding
planning for your future.
The leasing
process can be a minefield for those who have not experienced it before,
particularly if you are dealing with major property investors who have standard
leases and potentially expensive clauses within these leases. Make sure you get
legal advice regarding the lease from a solicitor experienced in commercial
leasing before you sign anything.
When you and your
legal representative start discussions with the agent regarding the lease of
the proposed space there are many areas that can be negotiated to ensure that
you get the best deal for your financial circumstances.
Lease Options
Leases are often
agreed with a set initial term, say 5 years, with an option to extend the lease
for another term, say 3 years, and perhaps another. This gives you flexibility
to stay or leave at various stages depending on the growth of your business. It
also gives you security of tenure in your leased space to know that you can
operate from those premises for up to 11 years.
Generally a lease
with options and/or longer terms will have a beneficial rental agreement.
Lessors works
Some tenants
prefer to ask the Landlord/Lessor to complete works on the tenancy before they
take possession of the site. These works may include:
·
supply
and installation of carpet
·
Installation
of new ceiling and lighting
·
Painting
throughout
·
Blinds
on the windows
This usually
increases the rental of the property over the term of the lease, however it
decreases the initial capital cost of the fitout of the premises.
Alternatively,
tenants may opt for the empty shell with bare concrete floors & block walls
for a lower rental. Your accountant or financier should be able to advise you
as to which of these options is the best for you.
You may also be
in the situation of assessing two different properties where the leases are
based on either the Lessor undertaking substantial works or receiving a tenancy
where all fitout works are to be undertaken by the tenant. Discussion regarding
initial capital costs versus higher rental with your financial advisor may
assist you in selecting the right property for you.
Ruth Newman
Architect can support you in deciding how much space you require, to source
premises and maximise your space through effective design & fitout. Contact us today on 02 9540 9959.
