Part 3 — Negotiating a Lease and Moving In

Part 3 — Negotiating a Lease and Moving In

You’ve just chosen a new office space. So what’s next? You’ll make an offer on your new office space and let the negotiations begin!
But you might ask, what’s negotiable during this process? Technically, everything in the lease is negotiable, but practically, there are a few important items that you should focus on.
Rent Do a competitive analysis for your new office and make sure that the rent calculation is based on an accurate measurement of the space and a reasonable loss factor.
Rent Increases Rent Increases happen particularly in New York where rents are almost always increasing. It is reasonable to expect some increase in rent on your new office over the course of the lease, but be careful about how many increases there are, the rate of increase, and the multiple types of increases (e.g., CPI, cost of living, bumps/step-ups) that may be included.
Free Rent Most landlords will agree to some free rent to provide the incoming tenant relief during the renovation or build-out of the office space.
Landlord Contribution to Build Out If a landlord thinks that a build out of the office space will add to the value of their building or will help to secure a long-term lease, they will contribute to the cost of a build out. This is generally only a small percentage of the total costs and is usually accompanied by the tenant’s concession on the length of the lease.
Who Will Do the Build Out As a rule, you will get a better build out using an outside contractor, but you may not have the time or expertise to serve as supervisor of the work or general contractor during the office renovation.
Length of Lease You should make sure that you negotiate a term of lease that fits your projection of business growth and reflects your risk tolerance. However, understand that landlords are likely to be more malleable on other terms such as build out contributions, rent reductions, etc. if you agree to a longer lease.
Sub-tenancy Reasonable landlords will allow you to sub-lease some or all of your office space, with certain conditions. This can be very important, allowing you to take a sub-tenant while you are growing or covering part of your rent if revenues fall. If your prospective landlord allows sub-tenancy you may want to negotiate the terms of subleasing; if the landlord does not allow sub-tenancy, you may want to negotiate to sublease.
Assignment Generally, better landlords will allow you to assign a lease. In this case, the new tenant is literally stepping into your shoes so the landlord will want to make sure they can meet all the responsibilities of tenancy. The landlord general reserves the right to approve assignments.
Cancel Clause We can never predict the future. Make sure you are protected should you have to move to a large space or close your business during the term of your lease. Usually a cancellation clause will allow the landlord to market your space and only charge you for those months before they are able to rent it, minimizing your financial damage.
Hold Over If you have to stay a month or two beyond your lease, landlords will often accommodate this with a surcharge on the monthly rent due. You may want to negotiate the length of this hold over and the amount of additional rent you will be charged.
Growth A smart landlord will want to keep a successful, growing company. While no landlord can promise to meet your needs as your company grows there should be an understanding the landlord will try to find you a larger space in the building without a penalty for moving out of your smaller old space should you need a larger space.
Fit your image and functional needs . . . should you have an open office plan for improved teamwork?
If you are negotiating for yourself, you should:
    • Read a book or two on the best rental negotiation practices, such as:

Negotiate the Best Lease for Your Business
Fred Steingold, Esq. and Janet Portman, Esq.

  • Be familiar with current rental market conditions and understand that they will substantially effect negotiations.
  • Make an initial offer not simply on the price per square foot but on all terms you wish to negotiate.
  • Know before hand what you are willing to settle for when negotiating your lease.
  • Be armed with precise comparables to use as evidence to support your requests.
Fit your image and functional needs . . . should you have private offices for confidentiality?

Do you need a lawyer to negotiate your lease?

You have to weigh the substantial cost of legal fees against the benefits an attorney’s involvement might afford you when negotiating a lease. You also need to decide if you will hire them to represent you in the rental negotiations or simply to review the lease document and provide their opinion. Naturally, the former costs much more than the latter.
Most responsible landlords use a standard lease form issued by the Real Estate Board of New York. You can be assured that such a lease form contains standard commercial real estate practices, and a reasonably intelligent adult should be able to review it. If the landlord is not using such a form, it probably advisable to seek legal help.
You should read all of the terms of the lease to make certain you understand them and that there are none you would like to change. While a standard lease is just that, it does not mean that you will want to agree to all of its terms as they are written. All terms of the lease are subject to negotiation.

Be especially careful to note the filled in portions of the lease form, checking spelling, dates and rental rates carefully. Also read the riders closely. Make sure you understand everything the lease says, and ask about anything that is the least bit unclear to you.

Remember you are signing a legal document and you will be bound to the terms of the agreement whether you understand them or claim not to.
Fit your image and functional needs . . . should your office be modern, modest and calming?

Moving Into Your Office Space

As noted earlier, without a tight timeframe for a new lease, build out and a moving schedule that corresponds to the end of your current lease, much customer patience, time and money can be lost. Below is a schedule of steps that are important in most office moves.
As Soon as Possible After Lease Signing Determine the style that your new office space should project and begin to set interior design parameters to guide design, color, and furniture choices.
Agree on final layouts for the new office space and plans for heating and ventilation and air conditioning, electrical outlets and telephone outlets, offices and furniture location as well as specific details in special areas of the office.
Provide staff members with the proposed floor plan and location of offices to get feedback and their buy in.
Begin sending initial furniture and equipment orders to vendors to assure delivery in time for the move into the new office. Order window coverings and lighting fixtures, and track all orders on a single log.
Notify the phone company of the planned move and get cost estimates for the move into the office. (Will your telephone numbers remain the same?)
Have engineering drawings done, architectural drawings prepared, and construction specifications developed by architect.
Send final sets of plans to contractors for construction bids. Review bids, award contract for office renovations
Order directory listings and tenant signs from the new building.
Order any other signs you need, are allowed, and for which you are responsible.
Two Months Out Begin to arrange for removal of office items that will not be moved. Purge all files.
Send out RFP to movers, interview them and make a selection. Schedule moving and establish packing requirements, times for moving (being careful of union freight hours), crews to be assigned, methods for making furniture ready to be relocated, etc.
Arrange with leasing company for the moving of any leased office equipment.
Secure any special insurance coverage you will need for the move and your new office space.
If you are planning on sending out formal printed address change notifications begin preparing these and send them to the printer.
Order stationery items and checks with the new office address.
Make certain that all systems are addressed fully: telecommunications, IT, live and dead files, etc.
If you have systems furniture, contact manufacturer to locate approved installers to breakdown and reconstruct the system.
Generate excitement about the move by posting or e-mailing pictures of the new building, furniture, layouts, work in progress as well as pictures and news of the new neighborhood.
Fit your image and functional needs . . . do you feel more comfortable in a traditional setting?
Two Weeks Out Schedule building elevators to assure speedy service during the move.
Arrange for cleaning teams to make certain new office has no construction debris or dirt and that the old office is left “broom clean.”
Send out change of address notices with a letter to clients explaining downtime. Make certain all employees include change of address information in all their correspondence, and place a notice on you web site homepage.
If you feel you need dedicated security guards to monitor the move, solicit bids and chose a security company.
One week Out Review all plans with the moving teams, moving company and building managers.
Remove all personal items from the old office. Individuals should take them home and bring them to the new office at a later date.
Mark all items with indication of their location in new office.
Have a staff member inspect new office to make certain it is completely free of construction debris and dust.
Insure that all employees will have the keys and access cards they will need for the new office.
Day before Move Backup all data before moving to the new office.
Have IT company close down IT system and disconnect equipment.
Day of Move Assign employees or security guards along the move route out of the old building and into the new to ensure nothing is misplaced.
Makes sure you are accessible to clients by cellphone.
Assign someone to do a last examination of the old office to make sure all has been removed, all signs have been removed or covered, and the cleanup is complete.
Day after Move Make sure all employees report for work in order to set up their individual work environments and are there when the IT people reconnect their computer equipment. Ideally, this will be a Saturday, so that the office can be fully functional on Monday morning.
Change Web site information to reflect your new office.
Collect all keys to the old office from staff members.
First Work Day, after Move is Complete Distribute a welcome package with new office phone directory, a listing of important contact number in the new building, policies of the new building, a list of local amenities, an area map and maybe even a welcome gift.
Week after Move Do a walk through and complete punch lists for IT, telecommunications, construction, and furniture.
Fit your image and functional needs . . . do you want to communicate boldness and openness?