May 29, 2018

Importance of Having a Flexible Commercial Office Lease

By Don Catalano


Importance of Having a Flexible Commercial Office Lease
Even if you have a clear vision for your company and a smart strategic plan to help you get there, the future is always unpredictable. That's why the office space that seems ideal for your needs today could end up being a less-than-perfect fit before your lease expires. Making your office lease as flexible as possible is a way of future-proofing your commercial real estate. Here are a few of the ways that you can create a flexible lease:

Opt for a Shorter Term 

Short-term leases give companies greater flexibility to relocate in the future. If you're only locked into a lease for a short period of time, you are less likely to outgrow your space or end up with tons of unused square footage due to business changes. The downside to short-term leases is that rental rates are often much higher and you'll have less stability and security.


Introduce Termination and Contraction Options 

A long-term lease becomes more flexible when you add termination and contraction options to the agreement. A termination option gives you the ability to vacate a space before the end of your lease, provided that you give your landlord sufficient notice and pay a penalty. If you're renting multiple offices or floors of a building, contraction options allow you to surrender some of your space before your lease is up.


Add Language That Gives You Room to Grow 

If your business begins to boom and you need to take on more employees, expansion options can help you avoid having to search out space in another building. Expansion options require landlords to give you a chance to take over any offices that become available during the life of your lease and can include:


- Hold and Fixed Expansion Options. This language gives you the ability to request a space or guarantees that you can expand within a certain period of time or a specific point during your lease agreement.


- Right of First Offer. With this clause, a landlord must offer you any newly available space before advertising it to third parties.


- First Right of Refusal. This clause requires landlords to give you the chance to accept any deal that they might give a third party for a specific space in the building.


Reserve the Right to Assign and Sublease

Subleasing and assignment clauses give you the ability to lease all or part of your office space to a third party if you need to relocate, shutter an office or are no longer using all of the usable square footage in your office. These types of clauses can help you avoid paying rent for space that you are not using.


Protect Yourself at the End of Your Lease 

If you end up being satisfied with your space and feel that it will continue to meet your needs in the future, renewal and extension options will help to ensure that you are able to remain there. Renewal options guarantee that you will be given the opportunity to renew your lease, provided that you notify your landlord by a given deadline. Extension options will give you the ability to continue the lease for a specific period of time at the end of your lease before you formally renew it.


Here are a few other articles we thought you might enjoy:

Commercial Office Leasing 101

Commercial Lease Renewal Myths... Busted!

5 Steps to Due Diligence on Your Next Lease


Subscribe to our blog for more CRE tips!!
Subscribe Now


Office Space Calculator Use Now
10 Steps to Cutting  Your CRE Expenses Download
Improve EBITDA by Cutting Your RE Costs Download


Don Catalano

Don Catalano