Covid-19 has impacted every aspect of our daily life, and businesses are not immune to its effects. Even companies that were financially robust at the start of the year may begin to see a slow down and changes in consumer spending impacting their bottom line. If you are looking for ways to save money while you weather these turbulent times, your office is a good place to start. Your lease is usually one of your biggest expense lines and we have listed some tips to reduce the costs of renting office space.
1. Exercise Your Right to Sublease your underutilized space.
With remote working and agile schedules for some of your office staff, many companies are finding unused office space. If your business is one of them, exercising your right to sublet could lead to substantial cost savings. By sub-letting some or all your office space, you can recoup some of the cost for your monthly rental. If your business still needs to make use of the office, your best option is to reconfigure your space to allow for a sub-division to rent the space to a new tenant. This option may require some form of changes to the layout of your workspace. Ideally you will want to provide an exclusive area to your sub-let tenant, with access to any shared spaces, kitchen, reception area etc. If you area able to work completely remotely, then the best option is to find a new tenant to take over your lease and release you from any future obligations.
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2. Are you close to your lease expiry?
If you are close to your lease expiry, you are in a fortunate position to consider your options. If you are the right location, you can engage with your landlord move to a smaller space within the building or discuss other options in their portfolio. This will simplify the process of find a new office. If the rentals are still too high, then consider looking at new areas and locations where you are able to choose from a better selection better suited to your business needs. If you still have a substantial term remaining on your lese, discuss early termination of your lease. The early termination penalties could be less than remaining in your lease for the full term.
3. Time to negotiate
Landlords know that they may soon be facing an eviction crisis, so you’re likely to find yours very eager to keep you in your space if at all possible. You can use this to your advantage by renegotiating your lease. It’s possible that your landlord may be willing to provide you with some favorable options. Should a landlord sign up a new tenant in their building, they will more than likely incur some additional expenses in the form of agent commission, fit out allowance etc. You should be able to negotiate similar terms on your renewal. If you don’t need the allowance to re-fit your space, ask for an equivalent rent free period at the start of your lease. Just remember your landlord will want a longer term commitment to be able to offer these concesions, and wont be worth their while on a 12 month or less renewal.
Before you get to the negotiating table, make sure you know what is happening in the market. What are the current vacancies in the building and neighboring buildings? What are landlords asking for similar space? What rentals are landlords achieving on new leases? The best way to get this information is to engage with your Commercial Property Professional, who will be in the best position to provide you with this information.
4. Look at your parking allocation.
Have a look at your latest rental invoice. You will note that parking takes up a substantial part of your total rental. In Cape Town for example, parking bays can cost in excess or R1,500 per bay per month. How many team members now work from home, even on a rotational basis? See if you are in a position to cancel some of your parking bays if it is an option in your lease agreement.
6. Other cost saving opportunities
If you have found that you no longer use all of your space, reconfigure your office plan so that you can “close-off” some of these areas, and have the lights and air-conditioning switched off. This may not be a huge saving, but could play an important role is reducing the overall cost of your office space.
To find out more, or get the latest trends and market activity, get in touch with one of our Property Professionals.