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How long of an office lease should I sign?

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It all depends on your business and your office market.  Obviously now with it being an office tenant's market, the longer you lock in lower rents the better.  However, if rents increase upon a recovery and it becomes a landlord's market you will be faced with increases upon renewal or expiration; which emphasizes the need for regular review of you lease vs the market.  You may want to negotiate a stabilized rent in year 3 of a 5 year lease in exchange for an additional 3 years which extends the lease at the lower rent and gives the landlord a tenant in the space for a longer period.
 
If an office tenant is in an industry which is growing they may be better off with subleases or shorter term leases, say 2 to 3 years.  A business who grows steadily needs to time their expirations with their anticipated growth. 
 
If an office tenant's business is stable and not expected to grow or downsize significantly, then they may be better off negotiating a lower rent for a little more space and locking in the low rents now providing it is a tenant's market where they are.  Despite the economy, here in St. Louis we have one submarket with about a 4% vacancy and space is on the market an average of 7.3 months vs. some submarkets with double digit vacancies or availability and space on the market for over 25 months on average.
 
The tenant's amount of capital costs also will have a bearing on their length of lease.  They can amortize more improvements over a longer term.  That being said, they may also be able to get a longer term and lock in the lower rate if the landlord is able to amortize their capital costs over a longer period.
 
You should also consider the building condition. If  a building is a class B now, what is it going to be like in 5, 7 or 10 years.  If you are going into older buildings perhaps the term should be shorter so that if the building systems become antiquated or irreparable due to lack of available parts for old systems, do you want your clients and/or employees to have to work or visit an uncomfortable space?
 
Another thing that brokers can do is ask the listing agent how the buildings lease expiration stacking is.  Is it important to the landlord to stagger lease expirations so that they do not have say more than 8 to 10% of the building up for expiration at any given time?  Do they look at their expiration plan on a floor by floor basis to see how expirations are contiguous thus giving the landlord a more marketable space?  Perhaps a 4 or 6 or 8  year lease would assist the landlord in achieving their lease expiration stacking and staggering goals.  Working for a win/win situation like that may get the tenant an extra $1.00 off their rental rate and if an odd length lease term is of no consequence for them it does not matter.
 
Lastly, what are the lengths of the contracts the tenant has.  Do they have several long term contracts or several contracts expiring in a given year [mostly found with government or manufacturing, etc].  If they have 50% of their client contracts expiring in 3 years they may want to time a lease expiration to after those contracts are negotiated and negotiate strong renewal options in the lease.  They do not want to be busy with renewing client contracts while they have to search the market or negotiate a lease, yet they also do not want to have a long obligation beyond the major contracts in the event they are not renewed.
 
 
 
Lease Negotiations , Office Space , Office Space Negotiations , Tenant Representation

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