So your business has grown and you have 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.
