Frankly, it’s never too early to begin thinking about your space requirements, but to ensure that you don’t miss a crucial deadline, mark your lease expiration on your calendar at least 12 months before the lease expires.
Perhaps you need space to expand, or you have too much space for your current needs. Maybe a change of location is in order to provide the best opportunities for you, your employees and your customers. Or maybe your current space doesn’t have the requisite building operation systems and technology (HVAC, electrical, lighting, etc.) to fit your needs.
After considering these factors, if you are content in your current location, you should review your current lease to see if you have an option to renew. A standard office lease with this option generally has a deadline for exercising the option, and a set period of time after the deadline to negotiate terms.
Calculating office space needs, budget
If you opt to search for space, there are many factors to consider. Calculating how much space you’re seeking should be one of your first steps. Various formulas can help you with this step, but one of the first things to consider is how many full-time employees will be working in your office. Consider how extensive your build-out needs are. Do you require several private offices or are you seeking primarily an open floor plan? And think about what other amenities you require, such as conference space, lunch rooms, copy and file rooms, storage areas and server rooms.
Your budget is another major factor. Look at your current rent, and consider whether you can feasibly increase your monthly payment to achieve relocating to either larger space or upgrading into better quality or newer space.
Market knowledge key to a successful transaction
Understanding the local office market is a crucial part of successfully negotiating either renewing or relocating your office, and market conditions can change quickly. For example, this time last year, overall vacancy in the Vancouver office market was just over 16 percent, as compared to today’s vacancy of just 12.24 percent. A qualified commercial real estate broker can help you become familiar with the market and provide information about vacancy, rental rates and the like.
Landlords today are becoming more selective in the tenants they will lease to, and they carefully consider the strength of the tenant’s financials and ability to be sustainable over a period of time. Fewer landlords are willing to agree to reduced rents for any period of time. Office tenants have had the luxury over the past few years of completing the “triple play,” consisting of free rent, substantial tenant build-out at the landlord’s expense and aggressive starting rental rates. However, “triple plays” are becoming a thing of the past. A strong tenant may still receive aggressive lease terms, but it all depends on the financial strength of the tenant and duration of the term.
The office market in Vancouver is improving slowly but surely, and it is still an optimal time for tenants to make strategic business decisions regarding their office space. But the ninth inning is not far in the future and it wouldn’t take too many more average-sized leases for landlords to start tightening their belts and stand stronger on their approach to lease terms.
Vice President Tamara Fuller, CCIM, and Associate Vice President Doug Bartocci, CCIM, specialize in office leasing and sales at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. They can be reached at 360-852-9600.