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Entries Tagged as 'Office Rental'

When it Comes to Renting Office Space, The Devil is in the Details

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When negotiating an office space lease or rental, you may find that the devil is hiding in some of the details and these can cost you lots of money over the life of the lease. Turn to your office lease broker for experience advice regarding how to negotiate out these demons before signing a contract for office space. An old idiom says “God is in the details” which means that anything you do should be done well. In this case, your goal is to turn those devilish little hidden clauses into the best possible agreement with the landlord of the commercial office space that everyone can live with for the life of the lease.

Initially all clauses in an office space lease tend to lean in favor of the landlord. Many of these clauses can be changed to at least give the commercial renter a fair exchange for the rent and other fees agreed upon. A few clauses to be on the look out for include:

Length of Lease and Renewal Options: The initial office lease period should give you enough time to settle in and determine how this location works for your business but not so long that you must pay a stiff penalty if you decide to move on after two or three years. If you do like the location and find the size just right for your immediate future, renewal options should offer you the right to sign another lease for a reasonable period without a huge rent increase.

Rent Increases: Speaking of increasing rent, watch out for the clause that establishes the amount or percentage at which rent can go up and the specific periods at which this change can occur. Rent should not increase more than annually and should have a reasonable cap set on it so that the cost of leasing the office space does not become outrageous in a short period of time.

Cost Transferal:  Be sure you and your office lease broker understand exactly what costs can be passed long to you or what percentage of those costs can be passed along. Examples can include property tax increases, specific repair costs not caused by your occupancy and the increasing cost of services to the building. Your rent increase should cover the costs associated with increased service costs or taxes and only those building repairs caused by you should be passed along to you.

Landlord’s Right to Early Termination: Check what verbiage is used regarding what, if any, rights the landlord has to terminate your office space lease early and what conditions must be met to justify such early termination. If this clause is too liberal in favor of the landlord, you could easily find yourself seeking different office space much sooner than your business plan set forth. This can be expensive and time consuming for your business and can be avoided with the right wording in this area of the lease.

Payment from Corporate Owners: Watch out for verbiage indicating payment can be sought from the corporate owners rather than the corporation itself.  While some office space owners like to have this protection in the event a business becomes financially insolvent, it does give a landlord too much recourse into the business owners’ private finances to allow entry into the final lease.

These are only a few of the clauses that an office space renter should be on the alert for. Turn to your office space broker for the best possible advice on all areas of the lease and lease negotiation process. 

Office Lease Location and Negotiations

By: James Osgood

Lease Negotiations , Office Leasing Tips , Office Rental , Office Space

Regus Shows Good Growth for Half Year 2012 Results

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Regus, The largest operator of executive suite and flexible workspaces, showed solid reuslts for the first half of 2012 despite a lackluster world economy. They added 76 centers during the period.

FINANCIAL HIGHLIGHTS

  • Group revenue growth of 7.6%, Mature like-for-like revenue growth of 2.6%     
  • Adjusted** Group operating profit increased 63% to £23.3m (H1 2011: £14.3m)  
  • Adjusted** Mature operating profit doubled to £68.1m (H1 2011: £33.9m) with a mature operating margin improvement from 6.1% to 12.0%
  • Notional Mature EPS increased from 2.7p (2.8p adjusted**) to 6.2p (5.6p adjusted**)
  • Interim dividend increased 11% to 1.0p (H1 2011: 0.9p)
  • Strong balance sheet with net cash of £153.3m
  • New £200m revolving credit facility offering further flexibility for future growth

STRATEGIC & OPERATIONAL HIGHLIGHTS

  • Continued strong performance from the mature business
  • Substantial investment of £65.1m in new centres - 2011 new centres progressing as expected, turning contribution positive in Q2; 76 (2011: 48) new centres in H1 
  • 1,268 centres in 96 countries, offering an extensive global and national network to approximately 1.2 million members
  • New Enterprise Programme deals with Adobe, Aviva and Telefonica amongst many others
  • Third Place partnerships announced with NS Trains (Netherlands) and Extra Motorway Services (UK). Strong pipeline in place
"The structural shift to flexible working continues to drive our strategic growth plans and organisation.  To satisfy demand we continue to invest, adding a further 76 centres in the period and signing additional Third Place agreements. New centre openings continue to perform well, a strong endorsement of our expansion strategy."


Executive Suites , Flexible Workspace , Office Rental

Mid-Year Office Space Market Report for the US

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Costar's Mid-year National Office Space Report is out with some very interesting and comprehensive information included. The report is a very interesting read. It starts out with a broad overview:

"The U.S. Office market ended the second quarter 2012 with a vacancy rate of 12.1%.  The vacancy rate was down over the previous quarter, with net absorption totaling positive 20,718,242 square feet in the second quarter.  Vacant sublease space decreased in the quarter, ending the quarter at 48,602,935 square feet.  Rental rates ended the second quarter at $21.38, an increase over the previous quarter.  A total of 160 buildings delivered to the market in the quarter totaling 6,946,279 square feet, with 59,338,973 square feet still under construction at the end of the quarter."

But it also gets into much more detailed information by office market. I thought that one of the more interesting charts included was that of the historical office space rental rates. 
Historical office psace rates
Just a little bit of a roll since 4Q 2000 and has been pretty flat over the past 6 quarters. If I were a pure technician, I would say the chart is getting ready to bump up again. We will see.

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Lease Negotiations , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate

Negotiating the Best Commercial Office Lease: Relocation Clauses

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You’ve found a great commercial office space rental to house your business operations and, with a great tenant representative (like we have at OfficeFinder) and any other needed advisors such as legal and accounting counsel; you are deep into the process of negotiating the best possible office lease for the office space location you want and need. At this point in the negotiation process take care to identify any relocation clause in the office lease and analyze how it could potentially impact your organization’s operation and earning potential.

What exactly is an office space relocation clause? This provision is contained in some, but not all, commercial office space leases, and gives the landlord the right to require the tenant to relocate their office space within the same premises in order to provide space for another tenant’s needs. Upon learning about this clause, you are very likely to say, “How very unfair to me and my firm!” and most tenants would agree. Keep in mind that most provisions in any lease tend to protect and be in favor of the property owner. For this reason, working with an experienced commercial office space tenant representative is important to protect your interests.

In an ideal situation, the landlord will simply agree to completely remove any office relocation clause in the office lease provisions. Some landlords, however, simply will not completely remove this verbiage, and then very clear, legally binding provisions must be negotiated to protect financial losses and periods of inability to effectively conduct business on the part of the tenant. It can be especially difficult when the property owner attempts to insist on keeping the verbiage “at the sole option of the property owner”, allowing the office tenant no right to refuse the request to relocate without terminating the lease at substantial penalty.

A scenario in which the landlord’s flexibility provided by the office tenant relocation clause could be invoked is a building consisting of three floors of 4,000 square feet of useable office space each. The first floor is currently empty and Tenant #1 leases 3,000 square feet of the second floor; the third floor is occupied by Tenant #2, a smaller office requiring only 700 square feet. A new tenant offers to lease 8,000 square feet of commercial space, but only if the office space can consist of the entire first and second floors. Clearly there is space on the third floor for both Tenant #1 and Tenant #2. Due to the much larger rental income from the potential new tenant who desires 8,000 feet of space on two floors, the landlord would find it most advantageous to require Tenant #1 to move to the third floor, sharing that floor with Tenant #2 who will not have to relocate. Of course, Tenant #1 may be very unhappy to uproot and relocate. If the lease were negotiated to avoid financial impacts to Tenant #1, the move might only be an inconvenience instead of a total disaster.

Points to be included in the negotiations for the relocation clause of a commercial office space lease you are considering for your enterprise should include:

  • A reasonable notice period should be defined in the relocation clause to be used as a minimum guideline.
  • The landlord should bear all costs caused by the relocation, including but not limited to finish work, painting, and moving costs.
  • Office space tenant improvements completed in the original space at the cost of the renter should be redone in a comparable and agreed upon manner in the new location at the cost of the property owner.
  • Costs associated with relocating utilities and other services such as network wiring should be borne by the landlord.
  • Expenses incurred due to changing the business address, such as letterhead, business cards and signage, including those visible on the exterior of the building, interior doors and directories, and outdoor signs, should be paid by the landlord invoking the relocation clause.
  • The relocation should not stop the company from doing business in that the space in which the company will move should be completely ready before the date of the relocation.
  • If the space is less desirable for any reason, the tenant should have the right to terminate thie office lease, attempt renegotiation of the rental charges or receive some type of incentive for relocating.
  • There should be no verbiage stating that the landlord has the right to terminate the lease should the tenant not agree to relocate. It could be in your best interest to negotiate verbiage stating that you have the right to terminate without penalty should you choose not to relocate into the space offered.

Clearly, this area of a commercial office lease can be quite tricky to negotiate. Your real estate professional will help you work with the landlord to obtain a relocation clause that both parties can agree to, should such clause be required by the landlord.  

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Office Leasing Tips , Office Relocation , Office Rental , Office Space Negotiations

The most Expensive Office Space in the World

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Hong Kong $248.83 per square foot

London - Central (West End): $220.15 per square foot

Tokyo  $186.49 per square foot

Beijing (Jianguomen — central business district): $180.76 per square foot

Moscow: $171.53 per square foot

Beijing (Finance Street): 166.89 per square foot

Hong Kong (West Kowloon district): $158.72 per square foot

São Paulo, Brazil: $144.75 per square foot

New Delhi (Connaught Place — central business district): $140.21 per square foot

London - Central (City): $131.51 per square foot

Midtown Manhattan average only $114.30  per square foot. What a deal!

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London Office Space , Office Rental , Office Space , Office Space Negotiations , Tokyo Office Space