In a softening property market, landlords often seek to secure tenants beyond the expiry of their current leases. To do this, they may offer incentives for tenants to either remain in their existing space or take on additional space within the building.
However, it’s important not to view these incentives in isolation. There could be broader opportunities to enhance your workplace, secure better commercial terms, or reduce costs.
Below, we outline a few key considerations when reviewing your leasing options, including opportunities for other experts within TwentyTwo to add value.
Does your current space meet your future needs?
Before committing to a lease renewal, assess whether your current workplace aligns with your long-term business requirements in terms of space, quality and amenities. If it doesn’t, renewing your lease might not be the best option.
Take the opportunity to explore other options in the market. A soft market often favours tenants, leading to more leasing opportunities with competitive terms. If you can’t find a suitable new space right away, consider negotiating a short-term extension on your current lease while you search for more appropriate premises.
Before considering how your current space could work or alternatives, developing a robust brief, including considering the optimal workstyles, occupancy assumptions and space requirements is critical. This type of brief will allow you to make objective and informed choices.
WORKPLACE22
Creating workplaces that support high performance teams and employee experience
Is your fitout optimised for your business?
If the size of your current premises is suitable but the layout or fitout isn’t, consider whether improvements could better support your business operations. Upgrading your office space may offer more tangible benefits for both staff and clients than simply reducing your rent. Again, having accurate data and employee/stakeholder insights is critical for good decision making. Our Workplace22 experts can help facilitate these conversations across your teams and also deploy our Utilisation22 tools to make sure you understand your current occupancy patterns.
Integrating workplace technology including improved meeting room technology is often a key part of any solution. Our Technology22 team can provide independent advice to integrate these decisions with your workplace planning.
Once you are clear on your requirements, talk to your landlord about the possibility of contributing to the cost of fitout improvements. A capital contribution from the landlord may be a better long-term solution for your business than a reduction in rent, particularly if the improvements can enhance efficiency and morale.
TECHNOLOGY22
Integrating building and workplace technology with business and property project
Are there lease changes you should be negotiating?
A lease expiry is an ideal time to renegotiate terms that better suit your business needs. Review your current lease and identify areas where you might want changes, such as:
- Lease-end obligations
- Rent review provisions
- Release from guarantees or bonds
Understanding the costs, risks, and obligations you’re currently under will help you assess what’s negotiable and where you can improve your lease terms. Don’t hesitate to discuss these with your landlord – lease renewals often present opportunities for more favorable terms.
Consider the length of your lease renewal
If your lease includes a short-term renewal option, consider whether a longer-term commitment would be beneficial. While a 3-year renewal might offer flexibility, a 5-year or longer lease could provide more stability, especially if your business plans to stay in the same location long-term.
A longer lease term may also help you secure better incentives. Landlords tend to offer more attractive deals for tenants willing to commit for a longer duration, so it’s worth negotiating for terms that align with your business strategy.
ADVISORY22
Applying independent commercial acuity to real estate projects and transactions
Need advice on your lease renewal?
If you’re facing an upcoming lease expiry or have received an offer from your landlord, it’s important to assess the full range of options available. Get in touch with us for advice on how to navigate the lease renewal process and ensure you secure the best possible outcome for your business.
By considering factors beyond just the rent reduction, such as workplace improvements or lease term adjustments, you can make a decision that supports both your current and future business needs.
