When considering a move, it’s important to spend time planning the next steps to ensure a stress-free process and securing a space which meets your business’ needs.
Being prepared and allowing adequate time is one of the most important factors in a successful negotiation, particularly if you have an existing lease and timeline to work towards. If you do have an existing lease, apart from the lease expiry date, you will also need to consider if you have a notice period for a renewal Option. A renewal Option allows an existing tenant to remain in the tenancy for an additional period, and will often come with a required notice period of 3, 6 or 9 months prior to the lease expiry date for a tenant to advise the landlord they wish to renew. If notice is not provided, the Option will typically expire, and there is no guarantee a tenant will be granted a new lease.
Working towards the final date to provide notice rather than the lease expiry date allows tenants with an Option to benchmark their existing premises against alternative, with the knowledge they have a fall-back.
Office, retail, and industrial markets have all been impacted by Covid-19 differently. Consequently, they each have varied availability of options, and differ between being a tenant or landlord favourable market. As a general rule of thumb, we would recommend tenants begin planning 12 months out from their lease expiry, to ensure there is adequate time to assess options, negotiate, and build a new fitout if required.
Now is a great time to begin conversations about right-sizing your space, as requirements may have changed due to increased headcounts, work from home, and preferred changes to location. In a recent letter to JP Morgan Chase shareholders, CEO Jamie Dimon stated that “For every 100 employees, we may need seats for only 60 on average.” Conversations with a workplace strategist can advise on the decisions about why and how a company uses their office.
Offices are seeing a diverse system of hybrid workplaces that emphasize both in-person and remote work. Technology, accessibility, and customisation, with an emphasis on health and wellness, are playing key roles in defining how workplaces function. Every business’ approach will be different—unique cultures require unique solutions with flexibility being key.
Besides implementing a workplace strategy, it’s also important to consider flexibility when negotiating a new lease. Important clauses for flexibility include:
• “Force Majeure” Clauses: A force majeure clause is a contractual provision that seeks to allocate the risk of certain events among the parties. At the front of many tenant’s minds is tenancy usage restrictions from Covid-19 lockdowns, and a Force Majeure clause could include provisions to waive rent during such lockdowns.
• Termination Rights: During this current market climate, landlords may be willing to provide tenants the opportunity to insert termination rights into their leases. Termination clauses will include details on when the lease can be terminated, the length of notice required to terminate the lease, and if there is any financial penalty for doing so.
• Right of First Refusal: This lease clause gives an existing tenant the first opportunity to lease additional space that is currently vacant or might become available when another tenant vacates a space within the property.
Not always! A trusted commercial real estate advisor can be extremely beneficial to ensure your real estate planning is consistent with your business strategy, and the best possible commercial terms are achieved, however, some will always prefer to undertake this process themselves. For those that prefer a more ‘DIY’ approach, Lpc Cresa has launched an online subscription service aimed at making their leasing advice and representation more accessible and affordable to businesses. The subscription service is designed to help office, retail and industrial tenants achieve tenant friendly leases by providing webinars, video tutorials, user guides, checklists, and templates that facilitate effective lease negotiations and lease management.
At Lpc Cresa, we help tenants across Australia and New Zealand with their commercial real estate needs, including transaction advisory, portfolio management and project management. In summary,
At Lpc Cresa, we help tenants across Australia and New Zealand with their commercial real estate needs, including transaction advisory, portfolio management and project management. In summary, we make sure tenant interests are protected and that our clients enter into tenant friendly lease agreements.