Jan 17, 2014

Best Practices for Expanding Your Office Space

By Don Catalano

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lease terms

If you need to expand your office space, there's a good chance that your landlord will welcome the idea. Many companies are minimizing space and large swaths of the country are experiencing flat to negative absorption. If you're staying, your lease terms usually serve as a starting point for negotiation. On the other hand, if your expansion plans involve leaving to a new building, those same lease terms could be used against you. As such, your strategy will depend on your needs, and whether or not you intend to stay.

 

1. Review Your Lease

Whether you're staying or leaving, your best first step in planning an expansion is to carefully review your lease. You could have options or rights of first refusal on adjacent spaces in your building, or you could have buyout options that allow you to leave early for a pre-negotiated price. If you need to leave and don't have either option, your lease should state what rights you have to sublease or assign your lease.

 

2. Plan Your Expansion

The next step is to carefully understand your space needs so that you can find one that will meet your business' goals for the long term. By the way, you might not need to expand. Given the trend towards more efficient open workspaces, many companies are able to put more employees into smaller spaces by shrinking workstations and adding back a portion of the saved space as collaborative space.

 

3. Expand in a Current Space…

If you plan your expansion to correspond to your lease's expiration, you can negotiate with your landlord independent of your existing lease terms. However, if you have a renewal option that allows you to stay in your space for a longer period of time at a discounted rent relative to the market, consider asking if you can use the renewal option to take out a larger space as well. While the option might not have lease terms granting you this ability, you may still be able to negotiate it.

 

Expanding can be challenging if you want to grow while your existing lease is in place. You might be able to simply negotiate a separate lease on a different space. For convenience, you can tie that lease's expiration date to your existing lease so that you can renegotiate both at the same time. If your landlord is sitting on vacancy, your negotiating position improves. He may be willing to negotiate a new lease on your new, larger space, letting you get out of your existing lease and into a set price for the entire space. This could get you lower rent or long-term stability.

 

4) … Or Move to a New Space

Your weakest negotiating position comes when you want to move out while your lease is in place. In that instance, your landlord is in control. However, you usually have three options in this scenario:

  • Move into a larger space in the same building.

  • Move to another building owned by the same landlord. Barring those options, you’ll want to carefully review the lease terms regarding buyouts or subleasing. If you need to sublease, start as early as possible to find a tenant.

  • A last strategy is to split your space until your initial lease expires. Moving some operations to the new building and having an option to lease more space then when you are free could be a viable option.

Here are a few other articles we think you'll enjoy:

Commercial Office Touring 101

Tips for Expanding Your Office Space

8 Tips for a Greener Commercial Office Space

 

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Topics: Lease Terms

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Don Catalano

Don Catalano

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