The recurring message behind tightening office vacancy rates and lack of new development is escalating rents and diminishing choice. Therefore tenants need to bring forward their pre-planning to avoid being held to ransom by existing landlords when renewing their lease. If a move is contemplated, sufficient pre-panning will ensure suitable options can be readily identified and secured well before the present lease expires.
1) Pull out the lease and check the actual expiry date. If there is an option for a further term check the latest date at which notice has to be served. A minimum of six to nine months prior to each of these dates should be taken to determine future needs, investigate market conditions and devise a premises strategy for satisfying future requirements. This timetable would apply for tenancies up to 500 square metres. Generally the larger the tenancy the longer the lead in period (particularly in instances where purpose built premises may need to be constructed). A timeline highlighting the critical events in the in the pre-planning and implementation stages should be prepared. Take into account needs analysis, obtaining Board/management approvals, periods for undertaking search and negotiations for new premises or lease renewal negotiations together with design, tendering and construction of fit out, legal negotiations make good etc.
2) Assess future and present accommodation needs ensuring sufficient floor space to meet growth targets outlined in the business plan. Engage with key decision makers within the organization to identify specific requirements and any changes to work practices that may affect the future space. This may entail designers/project managers undertaking needs analysis and test fits to establish optimum parameters for appropriate premises.
3) Having assessed present and future requirements determine how these may be accommodated and whether or not the existing premises will suit.
4) Research the market to gain an appreciation of availability and rental levels. Formulate an accommodation budget.
5) Undertake cost analysis to compare alternative solutions and best fit, in terms of renewing the existing lease or relocating to more efficient space.
6) Identify, secure and negotiate the terms for the appropriate premises.
Whatever you do, plan early. Competition for quality space is already strong and increasing rapidly. There have already been a number of instances of “gazumping” where tenants have agreed on terms and subsequently been outbid by other groups. It is therefore important to have a plan B and C. In addition do not delay unnecessarily between agreeing heads of terms and signing a legally binding agreement. As they say there is many a slip between cup and lip...
Chris Goodwin is the Principal of Goodwin Property Advisory whom specialise in the provision of independent real estate advice to tenants and occupiers of commercial and industrial premises.