How Long of an Office Lease Term We Need to Sign
Here’s How to Purpose Which Lease Term is Best for Your Company
How Long of an Office Lease Term We Need to Sign?
While the typical length of it can vary based on the market location and its conditions, current vacancies, and upcoming developments, there are both benefits and disadvantages to signing a short-term 2-3 years ) or long-term (3 – 5 years and more) lease.
You should note that the more competitive the market you’re in, the longer leases you ought to anticipate landlords requiring. Here, we examine the benefits of different lease lengths to help you decide what’s best for your company’s next office space.
Benefits of a Short-Term Lease
Typically, a short-term lease makes more sense for smaller companies that are still in the process of growing and want to prioritize flexibility over stability.
If your business requires flexibility to expand or downsize, it’s going to make the foremost sense to sign a short-term lease, as an extended lease may hinder your company’s ability to grow.
A short-term lease will be advantageous if the office space no longer works for your company in the near future. If you are not legally obligated to the space with a long-term lease, you’ll avoid the potential expenses of subleasing your space or terminating your lease early within the event of a move.
Benefits of a Long-Term Lease
A long-term lease can give established companies with both financial and logistical stability, plus more negotiating power during lease discussions with the owner down the road.
If you anticipate rental rates in your market to climb, it is often to your advantage to sign an extended lease and lock in today’s lower rental rates, instead of renewing at a future, potentially higher rate.
This is particularly true for stable companies that have clearly defined growth projections and like to lock-in a positive rental rate.
However, this could be true for growing companies; by negotiating expansion rights in your lease, you can sign a long-term that will allow for expansion that will match your company’s growth over the lifetime of the rent.
Long-term leases also can assist you avoid relocation costs, which may include new office build-out costs, technology and other infrastructure expenses, lost productivity thanks to downtime during the move, and additional moving and furniture expenses.
Negotiate Larger Concessions
If your company doesn’t need flexibility in it, you’ll often use an extended lease as leverage to barter more concessions from the owner.
When you sign a long-term lease, the landlord can spread the deal costs out over many years, so they can typically get more aggressive with concessions. These may include: a bigger tenant improvement allowance, discounts on rental rates, building signage rights, better rental rates, more favorable non-economic terms like expansion rights, and more.
There are a variety of the way to structure a lease to suit your business’s needs. A qualified tenant representation broker can assist you determine what sort of lease is going to be best for your company’s needs and find options on the market which will best fit these needs.
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