News Blog - Commercial
HOW TO REDUCE YOUR OFFICE RENT
Anyone who has managed a business knows the high costs involved with renting office space. After the expense of employing staff, rent is typically the next biggest business overhead. With rising costs and falling margins impacting many sectors, it is important for business owners and management teams to look at ways to reduce their operational expenses.
Minimising your occupancy costs is a great place to start, with a reduction in rents having the potential to have a huge impact on your bottom line.
To help with your finances we’ve put together a list of tips, which can help you to reduce your office rents and overall budget; whether you are considering an office move or are happy staying in your current space.
Looking for a new office location?
Start the lease process early. Give yourself plenty of time to explore all available options. Working with an agent at least 6-12 months out will ensure you have lots of potential properties to compare (both space and price) and are not forced to make rushed decisions.
Look for incentives. Depending on the size of the property, vacancy rates and the length of the lease, incentives can equate to about 10-20% discount off the cost of the rent over the term of the lease. A good agent will work with the tenant and landlord to get the best possible incentive outcomes, whether in the form of rent abatement or fitout contribution.
Negotiate with the landlord. The leasing market is competitive and landlords know that potential tenants are generally looking around. Bring this into the negotiation conversation to help get the best terms possible.
Consider the office design and fit out. It is important that you use your office space in the most efficient way, whilst ensuring the look and feel is in line with your culture. Good office design and space optimisation will not only help keep your staff happy, but can help reduce the space needed to rent.
Consider your ‘make good’ options. In most cases at the end of your lease you are required to give back the office to the landlord in the same condition as at the start of the lease. Bear this in mind when deciding on your new office. The most cost effective approach is to keep the existing fit out. For long term leases you have more bargaining power and the ‘make good’ component can be removed from the lease, saving costs down the track.
Want to stay in your current office?
Assess your rents. Mid lease or towards the end of your lease, we recommend you work with an agent to conduct a market assessment. Your agent should have the experience and a solid market understanding, in order to benchmark your rents against others, and assess if you are paying over-market.
Renew for a longer term. It is in a landlord’s best interest to hang onto their tenants for the long term (around 70% of tenants are likely to renew when the lease expires). It does not hurt to tell them that you are looking at other options and buildings – use this to your advantage and negotiate better rental rates or other incentives for your lease renewal.
Is your office too big? How about subleasing some space or co-sharing with another business. This will not only help with sharing of your rents, but you can also divvy up your amenities costs, such as meeting rooms, kitchens, utilities and other overheads, saving you lots.
Working with your Agent
With 25 years experience leasing commercial property in the Sydney CBD and metropolitan area, TGC have the market knowledge and know-how to help tenants in their office search.
As an independent broker, we do not try to push a particular building or property and have access to most vacant office space in the Sydney CBD, City Fringe, North Sydney and Parramatta. This unbiased approach means we can partner with our tenants to fully understand their commercial property needs, working with them to find that perfect office space with the best financial outcome.
If you need any advice regarding your current lease or are looking to move into a new office, you can speak with a TGC Commercial Agent. Call 1300 458 800.