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The art of negotiating a great office leasing deal

Chris Chapman

We all like to think we could negotiate a top deal, but when it comes to leasing office space and dealing with Landlords and their experienced leasing operatives, it can become a daunting process. Below are our top tips to negotiate the best deal when on the hunt for office space.

1. Know the Market

Knowing the vacancy rate in the market you are looking at, lays the foundation for establishing your negotiation strength. This power is far stronger in a market with high vacancy rates, or in the situation where a suite/space has been vacant or had little enquiry on it, and the owner is keen to do a deal.

For example, currently in Brisbane the vacancy rate is 16.2%, which is considered high and will, therefore, leave more room to leverage negotiations. Comparatively, the Sydney CBD’s vacancy rate is considered quite low at 4.6% which may mean you’re competing more heavily with other tenants, in a race not to miss out.

Regardless of the market conditions, it’s important not to leave your decision making to the last minute, to achieve the best result, you should contact an experienced leasing agent to discuss your options at least 12 months out from your expiry.

2. Know the Numbers

If you’re leasing a traditional office space you may already have a firm grasp of what the monthly costs involved are, such as; rent, outgoings, cleaning, car parking, bank guarantees, electricity and after hours’ air conditioning.

It’s important to account for these in your budget for your new premises so there are no surprises. As a tenant, you want complete transparency with all costs. This is where some businesses can come unstuck, by not having a firm grasp of all costs that are associated with your lease, financial issues can arise. Commonly unconsidered costs include things like cabling costs, make good* obligations ($250-$300/Sqm) for a full strip and general increases in outgoings.

To cover off any questions you may have, speak to an experienced leasing operator to give you an informed opinion of what your costs will be.

3. Ensure you are getting the right legal advice

After finding the ideal tenancy for your business it is imperative that you understand all terms and conditions specified in your contract before you sign it. We recommend asking legal experts for advice to ensure you avoid any legal or financial problems associated with the lease.

Your solicitor can explain what each clause of the lease means for your business, give you legal advice, draft new clauses and help negotiate terms and conditions to suit you and your business.

4. Know your motivations

Before the leasing process begins, it is key to understand and be able to articulate what your motivations are for leaving your current premises. Some tenants move because they want to improve staff culture, have had a period of growth and want to attract and retain the best talent in their profession, or, simply want to move as they’re wanting a change.

Whatever the reason may be, throughout this whole process it’s important to pick what parts of negotiation are important to you and stick to them. That being said, be prepared to compromise on some aspects of the offer like annual increases, after hours’ air conditioning and bank guarantees.

5. Understand the building owner’s motivations

It’s important to understand that all Landlords have a unique view of what they want to achieve for the building. Ask your leasing agent what the vacancy rate of the building is and if there’s a major tenant vacating soon. This information will give you insight into how motivated a landlord is to do a favourable deal with you.

Generally, large institutional owners and REITs (Real Estate Investment Trusts) will be driven by higher face rents (for valuation purposes) and are also better equipped for cash/fit out contributions.

That being said, in a soft market like Brisbane, even the smaller/private Landlords are having to become focused on cash/fit out contributions in order to compete. Buildings like 193 North Quay and 247 Adelaide Street, both privately owned – have done exceptionally well at constructing suites on behalf of tenants.

 

If you have any questions relating to your lease or would like to learn more about leasing office space or the office leasing market, please feel free to get in touch with your experienced Caden Office Leasing agents on 07 3014 5406.