IS RENT OVERRATED?
Offices should be an asset and not a liability. When agreeing the best deal on new offices tenants should look beyond the rent to check they are signing up to space that meets the needs of their business both now and in the future.
Rent is important but should not be the sole criteria. Equally important elements are flexibility of occupation, cost control, working environment and timing.
Break clauses in the lease are particularly important so that a company can expand and contract easily as it’s business needs change. The frequency of breaks, who can operate them, notice periods and no hidden conditions all need to be carefully considered. Similarly flexibility in the ability to assign the lease, sublet (whole and parts) and sharing occupation are also all important.
Rent is only one element of the annual costs. Equal attention needs to be given to the Service Charge (eg what does it cover, can it be capped and is there any major expenditure planned by the landlord?) and Business Rates (eg am I in an area where this is likely to go up sharply in the 2017 revaluation and should I appeal the RV?).
Other areas of potential cost control are rent reviews (eg are all the assumptions fair and can I agree a cap and collar?), dilapidations (eg possibly try to make them subject to a schedule of condition or, better still, agree an amount up front) and rent free periods (eg how much and when to receive it?).
Fresh, exciting and attractive work space will help staff satisfaction, recruitment, retention and motivation. Always difficult to accurately quantify but get this right and results will translate to the bottom line.
This is possibly one of the most important elements as the savings to be had in minimising potential double overheads, in moving from one office to another, can often be considerable.
So as you can see the headline rent may grab the headlines but it is often the other details which will ultimately determine if the new offices will be an asset or a burden to the business occupying them.