“Begin with the end in mind” is a piece of advice from Stephen M. R. Covey. 

This wisdom is instructive when it comes to commercial lease negotiations, for long-term commitments are made, and time has a way of bringing to light decisions that did not begin with the end in mind. 

Inevitably, the pain of unplanned occupancy costs and increased business risk forces a recognition that the long-term accommodation needs were not thoroughly considered. Regrettably, many a tenant does not start with the end in mind, a mistake is easily made but that is avoidable. 

As business is becoming increasingly dynamic, it is more and more important that accommodation commitments provide for changing business requirements and risks throughout the lease term. "Business before space" is a sound principle to be applied before commencing lease negotiations, implying the need to thoroughly understand the business objectives, strategy, outlook, and risks before determining what accommodation arrangements are best aligned. 

The question is, why do many commercial tenants not pay enough attention to begin with the end in mind when it comes to their accommodation requirements? 

While there are many reasons for this, here are two common contributors. The first is that accommodation commitments often do not feature as prominently as they should in an organisation’s risk management regime. The knock-on implication is that the accommodation strategy is not preset and is not aligned with the business strategy but that the accommodation strategy evolves during lease negotiations, influenced by diverse inputs from various stakeholders. 

Accommodation commitments are material, long-term, relatively inflexible, and they warrant robust governance to ensure alignment with business requirements and risks. 

The second is when there is a limited appreciation of the impact of the accommodation arrangements on an organisation’s competitive standing throughout the lease term. An over-emphasis on the immediate requirement and the obvious occupancy cost items such as rent, incentives, and outgoings results in insufficient attention being given to how supportive the lease is to the business as requirements change, what level of risk Is being carried by the landlord, and to the detail and extent of the landlord obligations and guarantees. 

What can ensure an occupier starts with the end in mind? 

At LPC, we recommend a long-term accommodation strategy process to ensure the end is well-informed regarding the business strategy, the real estate market, and trends that impact accommodation decisions. The outworking of the process is to determine the guiderails for the right location(s), right premises, and the right commercial terms. By ‘right’ we mean the optimal fit regarding the business requirements and risks. These guiderails focus the lease negotiation process on the end in mind, contributing to leverage and to accommodation arrangements that better support the business. ‘Business before space’ is sound advice for all commercial tenants that seek to ‘begin with the end in mind’.