How to negotiate the best deal on your new office
When negotiating a commercial property lease it is important that you are familiar with the main negotiation points so you can ensure you get the best deal on your new office:
The annual rent is the most obvious and most important negotiation point. To help determine the best rent that you can achieve on the property you will need to conduct some research into recent rental transactions of similar offices in the area. This will give you a feel for market rents and ensure you don’t go into negotiations blind. It is helpful to look for properties of a similar size and of a similar age/condition, let for a similar period of time. It is also important that the comparable transactions you refer to are within as close proximity as possible as even a small change in location can have a big influence on rental prices.
The rent-free period:
Most landlords will offer you a rent-free period at the beginning of the lease, to help cover the costs of the office refurbishment. Many tenants who negotiate office leases without the help of an agent fail to realise quite how much of a rent free period can be achieved, especially in the current market.
Again you will need to look at comparable transactions in the area to see the rent-free periods being offered.
The service charge covers the running of the common parts of the building. Whilst it is not easy to negotiate on the level of the service charge, many landlords will accept a cap. This means that if significant maintenance work is required on the building or landlord carries out any major improvements, your service charge cannot exceed the agreed cap. Serviced offices are investigated in more detail in What Is A Serviced Office
Most leases in the UK today are for 5 year or 10 year terms. If you feel that a 5 or a 10 year commitment is too much for your business you should try to negotiate a break clause. It is common to see 3 year break clauses agreed on 5 year leases and 5 year break clause on 10 year leases. You will also want to make sure you have full rights to sublet or assign the lease should you need to move on before the lease break or the end of the lease.
Negotiating a commercial property lease is a very complex process and it’s very easy to get it wrong. Remember a rental difference of just £2 per square foot on a 5,000 sq ft office will result in a difference of £50,000 over a 5 year lease. It is therefore advisable to use an experienced acquisition agent to help you with negotiations. Some agents also base their fee structures around the savings they make you.