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How to negotiate the best office lease

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Office accommodation is one of the biggest expenses an expanding company has to consider. Every cent counts and negotiating the best deal possible can save your business enough to launch a marketing campaign or perhaps hire extra staff.

Here are a few useful tips that should enable you to get more for less:

Tip 1: Evaluate the permitted uses of the leased space. Are you planning to expand in a few years time? Do you intend on subleasing any of the space to a third party? It’s advisable to ask for an option to be able to sublet the premises in case you have to downsize or move part of your team to another office.

Tip 2: How long is the lease for? It’s generally easier to get discounts and concessions if you plan on signing a long-term contract. However, in the current economic climate you may be able to successfully negotiate a short-term deal with bonuses that would normally only be available to long-term tenants. Always investigate lease renewal terms and conditions, especially if leasing short-term.

Tip 3: Be aware of rent increases. Typically, fixed rent is not available over long lease periods. Landlords increase the rent once a year according to the Consumer Price Index (CPI). Try to negotiate a rental contract where the CPI increase does not affect your lease for at least 2 years, and after that get a cap on each year’s increase.

Tip 4: What are the operating costs? As well as common area maintenance, operating costs are sometimes passed on to you by the landlord. While negotiating the deal, try to get a cap or a fixed fee on the amount.

Tip 5: Office improvements. New workspace may require some remodeling, improvements or adjustments. Always ask for a contract clause that states the business can make improvements and alterations with the landlord’s consent, and that consent will not be delayed or withheld without a reason. If you do make replacements and improvements, be aware that the contract may state you have to return the state of leased premises to the original order.

You will also need to address the following key issues when negotiating an office lease:

  • The total rental cost;
  • The particular office space leased;
  • Responsibility for office repairs and general maintenance;
  • Right to renew, cancel or leave;
  • Insurance details;
  • Payment process, security deposit.

Before signing the lease, always go through it with your real estate broker, an attorney and perhaps an insurance broker. Always remember that the flexibility of the landlord and how good a deal you will get usually depends on the current commercial real estate market. At the moment, the odds are in your favor so take advantage and secure a great deal!

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