Thinking about relocating your office? Avoid these 5 common pitfalls
Starting too late
Waiting until the last minute to engage in the process of renewing your lease or relocating your office can have significant consequences from losing leverage in negotiations with your Landlord (at some point they will figure out you don’t have the time left for all the steps for a relocation to happen) to incurring additional costs in holdover (often 1 ½ to double the current rent and damages). As a rule of thumb, tenants occupying a couple thousand SF to 10,000 SF should start the process 7-12 months in advance of a lease expiration. For larger tenants, start 1 ½ + years before the expiration.
Lacking clearly defined business or real estate objectives
Understanding the factors in your space that are not ideal and holding your organization back and coming up with related success factors provides maximum financial and strategic benefit as well as accountability to the process. These factors need to incorporate medium and long-range business goals as standard leases are at minimum 3-5 years. Through this exercise, your broker will create a real estate brief which is the framework to evaluate and compare your options.
Not assembling the right team
Most tenants don’t have the market knowledge and effective process to handle their upcoming decision regarding their space. Developing a successful team starts with engaging a commercial real estate broker with the skills to drive the project. An architect, real estate attorney, and IT and tech services, to name a few, may be involved early on. Typically, your broker will have a list of recommended vendors. Internally, a project leader should be appointed that will involve experts in IT, human resources, and finance from your firm. Involvement of these parties from the outset will help clarify the objectives and achieve internal buy-in.
Failing to account for future space needs
What if the amount of space leased may be sufficient for now, but not for the long-term? An organization that has projected some variability in their size in the future will want to focus on options better suited to accommodate growth. They will also want to lean on their broker to negotiate flexibility and certain mechanisms in the lease to account for this.
Focusing too much on the rate
In any given office space transaction, there are numerous points to be negotiated. While the rate is important, a commercial real estate broker can usually provide comps to make sure you end up with fair or aggressive terms. Depending on the objectives, it is often necessary to give more weight to other negotiated terms. A broker will be able to complete a thorough analysis taking into consideration all of the economic conditions (beyond rate) of the transaction while also protecting the tenant’s interests and meeting objectives through other negotiated terms.