Many fast-growing companies looking for quality office space these days are finding that the search can be frustrating, to say the least.
In many areas around the country, quality space is snapped up before it’s even marketed publicly, and finding space that doesn’t require a complete rebuild is extremely challenging.
There’s no denying that having the right office space is extremely important for a company’s success. Despite all the talk about more people working from home, a quality office environment can help a company achieve its goals. More and more, workers cite a collaborative and inviting office environment as something they look for as they consider different options for employment.
With this in mind, here are six tips for office tenants as they attempt to locate the perfect space. The overarching theme: It’s never too early to start thinking about a business’ future needs. Planning ahead can save money and headaches later.
- Start early in your search. The old rule was to start looking for new space a year before your current lease runs out. But now, two years ahead isn’t too early. Being proactive is the best way to ensure all your needs are met. Also, needs can change quickly when a company hires more employees or wins a major contract, so there may be a need to take action in the middle of the lease term. As a company considers how many people it wants to have in a certain space, that leads to the need to also consider parking availability. In turn, more people in an office space means more demands on an HVAC system.
- Know the market, and know the shadow space. Which of a building’s tenants will be moving in the near future, possibly creating options for more space? What is coming available in other nearby buildings? Obtaining this information requires leveraging a strong network of landlords and brokers who know the market inside and out. At the same time, it’s important stay up to speed on what landlords in the submarket are looking for. Some will want to offer free rent at the beginning of the lease term to keep the stated rental rate up, knowing they plan to sell the building. Some will want to charge a relatively lower rate, but with a smaller allowance for tenant improvements. The toughest challenge can be when a tenant wants a large contiguous space. In this market, that often means getting creative. We recently worked with a landlord to shuffle tenants around in his building to create one contiguous large block of space. The hassle of making all of his tenants happy in the process was worth it, resulting in a major long-term lease with an extremely creditworthy tenant.
- Understand all the details of your tenant lease. In this competitive environment, it’s important to know all your options as your current lease is scheduled to expire. What do renewal rates look like? When should you provide notice if you are going to move? Also, many leases have arbitration clauses related to determining how a tenant’s lease rates should match up with current market rental rates. As with everything else, figure out these details early, so you can factor them into the decision-making process.
- Be ready to adjust if timing of a current lease doesn’t match up with the availability of a desirable new space. Sometimes, the right space might not be available until several months after your current lease expires. In this case, it may be worth paying a holdover penalty to stay in the current space while waiting for the new space to become available. At least one-third of the leases we handle involve negotiating free rent on the front end of the lease term, so there may not be a need to pay rent at two offices at the same time in this scenario.
- Manage expectations in a tight market. Make sure you have the architect lined up and know how many square feet are needed. Have your financials ready to deliver as part of the negotiation process. And work with other providers who can move fast if needed. If a real estate lawyer tells you that it takes three weeks to review a document, for example, that often won’t work. Don’t do the hard sell unless you need to, but if you have found the perfect space, make sure you don’t miss the opportunity. By working with an expert with knowledge of the market, you’ll know when that time arrives.
- Evaluate alternate solutions. If the right space just isn’t available for lease, should you consider buying a building? Or is subleasing space a possibility? In some cases, tenants are paying for space they aren’t using. Think about backfilling that space by paying rent to the current tenant, and then work with the landlord to see if you can convert to a direct lease.
Converting such a sublease may be easier than you think. Corporate America doesn’t want the hassle of a sublease, so a major corporate landlord will often be interested in changing the relationship into a direct deal with a longer lease term.
The bottom line with all these tips? Work to be prepared before you need a new space, so you are ready to move quickly when the right opportunity comes up.
Bill Reeves is Executive Managing Director of Office Services with Colliers International Tampa Bay. Throughout his career, Bill has represented some of the country’s largest companies in commercial leasing, and has developed expertise in lease and sale negotiations, strategic planning, site selection, data/technology centers, and disposition of surplus real estate.