Mistakes Tenants Make When Leasing Office Space

The decisions made before a lease is signed can affect cost, schedule and operations long after the search is over.

We all make mistakes. When it comes to leasing office space for your business, those mistakes can equal dollars — sometimes big dollars.

Here are nine common mistakes tenants make when renting office space, along with ways to consider them before making a commitment.

1. Not Hiring a Project Manager

Companies often find that handling construction and move management alongside their daily responsibilities can be overwhelming.

Tenant project managers should understand site selection, space planning and build-out requirements. They can help identify installation and integration issues, coordinate vendors, oversee construction and develop a detailed move plan designed to minimize disruption to employees.

2. Lack of Planning

Believe it or not, many tenants aren’t clear on exactly what they need.

If you’re looking for 10,000 square feet but actually need 12,000, you’ve got problems.

A project manager and architect can help develop a space program and determine how the business will use the space. Consider issues such as floor load capacity, whether a slab or raised floor is required, HVAC needs, electrical requirements and technology infrastructure.

Understanding those requirements early can save time, money and aggravation later.

3. Lack of Tenant Representation

A tenant representative can help identify suitable properties, negotiate on the tenant’s behalf and provide advice during the transaction.

A tenant rep who understands the market can also help the tenant evaluate alternatives and maintain negotiating leverage throughout the search.

As with any professional adviser, tenants should understand whom the broker represents and how that relationship is structured.

4. Lack of Document Inspection

Leasing office space involves a considerable amount of paperwork.

Tenants should understand what they are signing, including the lease, work letter and other documents that define responsibilities between landlord and tenant.

The physical space also deserves careful review. Existing conditions, building systems and infrastructure can affect the cost and feasibility of the proposed build-out.

Engage appropriate legal and technical advisers before making the commitment.

5. Rent and Security Deposit

Tenants should understand the economics of comparable properties and how the proposed transaction compares with alternatives in the market.

The security deposit also may be negotiable depending on the tenant’s financial condition, the landlord and the transaction.

Understand the full economic commitment rather than evaluating the deal solely on the quoted rent.

6. Not Checking Lease Terms

Read and understand the lease terms carefully.

Can the landlord require you to relocate to another floor or space within the building? How much notice is required? What happens if the lease says 30 days and you realistically need considerably longer to relocate your operation?

Questions that appear remote during negotiations can become very real once the lease is in effect.

7. Underestimating Negotiating Leverage

Tenants sometimes assume the landlord holds all the leverage.

Market conditions, vacancy, lease term, tenant credit, the amount of space and other factors can all affect the negotiation.

Understand the alternatives available to both sides before assuming which party has the stronger position.

8. Working With a Biased Broker

Understand who your real estate broker represents.

A broker representing the landlord has a duty to the landlord. A tenant should know whether its adviser is representing the tenant, the landlord or both parties in the transaction.

That distinction matters when evaluating recommendations and negotiating business terms.

9. Too Little Time

Tenants frequently underestimate how long it takes to find, negotiate, design, build and occupy new office space.

The appropriate lead time depends on the size and complexity of the requirement, the condition of the space, lease negotiations, design, approvals, construction and the move itself.

Start early enough to preserve choices and avoid allowing the calendar to make decisions for you.

Leadership Takeaway: The lease establishes more than rent and term. Decisions made during the search and negotiation can determine the cost, schedule, responsibilities and flexibility of the project that follows.

Portions Republished Courtesy of Bert Rosenblatt & Andrew Stein, Vicus Partners, LLC