When is it Time to Consider New Commercial Lease Space?

A number of factors should go into your decision to pursue a new commercial lease space and those factors will vary for different types of businesses.  In general, however, there tends to be four key areas on which to focus when making this important decision for your business.  Lease Expiration, Market Rate Changes, Staffing Needs, and Growth Trajectory are the major issues to consider and will be the focus of the following paragraphs. 

Lease Expiration

First and foremost, your business should always have someone keeping track of your lease expiration(s). Whether that is the business owner, a facilities director on staff, or a third-party Commercial Real Estate professional; awareness of pending lease expirations is vital to managing cost of occupancy issues.  It is recommended that all space with leases expiring within 18 months be reviewed regularly to determine if a renewal, expansion, or relocation might be in order. 

Market Rate Changes

Like all markets, the value of lease space changes over time.  Factors such as age, new development, governmental and economic changes, and technology can significantly affect the value of your lease space.  It is important for businesses to have a Commercial Real Estate professional on the team to keep them informed of changes to values.  A space that may have been ‘Class-A’ when a lease was signed ten years ago could be considered ‘Class-B’ or less today.  Similarly, a building that carried a high vacancy rate when a lease was signed, may now be full, providing upward pressure to the market value.  These factors should be considered in the budgeting and lease negotiation processes. 

Staffing Needs

As businesses grow (or contract) and technology advances, you may find that your staffing needs will change.  At the foundation of most real estate decisions are the questions, “how many people to I need to support?” and “How much space does each person require to successfully execute their job function?”  There are many factors to consider, such as the number of employees in private offices vs. common space (cubicles, etc.), number of conference & meeting rooms, size of kitchen / break areas, etc.  A Commercial Real Estate professional can work with you and a space planner to determine the most efficient space for your business.  This simple discussion can lead to great cost savings in the future. 

Growth Trajectory

As mentioned previously, your businesses growth or contraction will obviously have a large impact on your space needs. Understanding the long-term prospects for growth are crucial to deciding the type and term of lease to sign. A business with an aggressive growth model might consider a shorter lease term than a business anticipating a flatter curve. Typically, longer lease terms come with better rent structure and increased Tenant Improvement dollars from the Landlord. A Commercial Real Estate professional can help you determine the appropriate length for your lease as well as help you negotiate options such as Rights of First Refusal on adjacent space and Early Termination Options.

Depending on your business, there will be many other factors to consider when determining the ideal commercial lease agreement. Our team of Tenant Representation Professionals at Stafford Barrett stands ready to assist you in any way we can. Feel free to email info@staffordbarrett.com or call us at 979.260.5000 to discuss your Commercial Real Estate needs.