Oct 21, 2020

9 Things to Do For a More Flexible Office Lease

By Don Catalano


9 Things to Do For a More Flexible Office Lease
Especially in uncertain times, a long-term office lease can be a tough pill to swallow. After all, who knows what the future will bring? With this in mind, there are many ways to get a more flexible office lease structure. Here are nine to consider.


1. Get Some Help

First things first, the best way to get the best possible office lease is to go in with help from a professional tenant representative. Your tenant rep knows which spaces are available, what the market will bear, and how to play landlords off against each other to get you the best possible deal. 


2. Shorter-Term Lease with Options

The easiest way to gain flexibility is to simply take a shorter-term lease, then add on options for you to renew. This way, you are committed for less time, but you still can stay for a longer time (usually on pre-negotiated terms) if you want.  Bear in mind, though, that your landlord might be less generous with concessions if you choose a shorter-term lease.


3. Month-to-Month Tenancies

The most flexible lease is one where you simply occupy it on a month-to-month basis.  If you can take existing pre-built space, this can be a good option for you if a landlord is willing to offer it. These types of tenancies are also common in co-working and executive suite buildings, giving you the most flexible office lease options.


4. Trade TIs for Term

Frequently, landlords will offer you money to help with the cost of building out your space. Your tenant improvement allowance can be valuable if you need to truly make an office your own. However, if you're not worried about customizing a space, ask the landlord (or, if you're savvy, have your tenant rep ask the landlord) what they would offer if you didn't need a tenant improvement allowance. You could end up with a more flexible shorter term!


5. Termination Options

Another way to get a more flexible office lease is to lease the space for the amount of time that you might need, getting the discounts and concessions that come with a longer-term lease, and add on a termination option.  Many landlords will allow you to terminate by paying a buy-out fee. While this carries some cost, it will usually cost less than retaining a space that doesn't fit your needs.


6. Assignment and Subletting Rights

Assignment and subletting rights let you find someone else to take over your space if you don't need to use it anymore. While this doesn't, technically, make your lease more flexible, it lets you have someone else defray some or all of the cost of the space if you need to leave in the future.


7. Find Assigned or Subleased Space

The flip side of the above strategy, though, can give you a great deal of flexibility. If you take over someone else's space, they may be willing to work with you to craft an affordable payment (since you're getting them out of a challenging situation). Furthermore, their remaining lease term is probably relatively short, letting you get a shorter-term lease at a lower price. And, usually, the landlord will be willing to let you stay as a new tenant when the lease expires. This way, you get a short-term commitment with an opportunity to stay for the long-term


8. Be Flexible to Grow

While many tenants think about a flexible office space from the perspective of being able to shrink or leave, some tenants need the flexibility to be able to grow in the future. To be able to do this, look for buildings with a vacancy or with spaces coming open in the future. At the same time, see if you can negotiate a right of first refusal or right of first negotiation on spaces that are contiguous to yours. That way, you get the right to take them over in the future without paying for them today.


9. Finally... Just Ask

Finally, just because your lease doesn't have flexible terms doesn't mean that you can't get flexibility from your landlord. Most smart landlords don't want tenants that aren't happy in their spaces, since they know that the space will end up becoming vacant in the future. If you ask them for flexibility, they might have another tenant that wants to expand into your space or some other need for it, and they might be willing to work for you. Have your tenant representative reach out and see what happens!


Here are a few other articles you might enjoy:

6 Ways to Increase Connectivity in the Office

The Beginner’s Guide to Commercial Real Estate Terms

5 Commercial Real Estate Trends Through the End of 2020


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Don Catalano

Don Catalano