With Fraser Drummond, Director ACORPP

Are you looking to renew your lease or simply wanting to review your accommodation requirements? There are a number of things you should keep in mind when doing so. Have an understanding of your business’ real estate needs well before the lease expiry date. If left too late, you may be left with only one realistic option and that’s to extend the current lease, which in many cases, will not be the most desirable outcome. Once a landlord believes you are planning to stay or do not have time to move, a good part of your negotiating leverage is lost and the landlord is in control. So, even if you plan on renewing your lease, it’s ideal to find alternatives to your existing lease to show the landlord you have other options and that they could be in danger of being left with a vacant property. 

As always, timing is a critical element. Many tenants typically underestimate the time necessary to properly consider their accommodation requirements, including the time to identify a new office, negotiate the lease and complete the fit out. In some cases, depending on the size of your lease, where you are moving to and whether it needs to be built to specifications, you may need to commence your accommodation review several years before the lease expiry date. It’s a common practice for most tenants to review their accommodation requirements when their office lease is about to expire, however there are numerous factors independent of the lease expiry date, that will often force you into reviewing your needs at an earlier date.

It’s a good idea to choose a proactive approach to lease renewal and get in early as time is a powerful negotiating tool and can be essential to success. Your negotiating leverage diminishes the closer the lease expiration comes. Some of the factors affecting your decision include, but are not limited to:

• Changing market conditions, in your industry or the economy as a whole, which may force you to expand or reduce the size of our business.
• Different financial conditions for your own business or across the economy (e.g. falling interest rates, increasing inflation), which could impact on your ability to pay for your existing office space.
• Unstable employment situations, which could make it harder to employ or retain staff.
• Business amalgamations/takeovers.
• Technological innovations and workplace design that could improve the way you work.
• Infrastructure changes in your area (i.e. zoning changes, transport, housing developments) that could have either a positive or negative impact on your business.
• Changes in the law (Local, State or Federal) that could impact the business you are in.

The current office markets in both Western Australia and Queensland affords you the opportunity to take the initiative and seek professional advice to help determine if there is a need to ‘renegotiate or relocate’. A tenant representative will research other lease options, create negotiating leverage and enable you the freedom to move on, if you should choose to do so. This is advisable even if there is no change in operations or your lease is not up for renewal as the market may generate opportunities for you to:

• Renegotiate your existing lease with more favourable terms if you are prepared to commit to stay in the building longer; or
• Use the incentives that are available in the market place to relocate to a better location or a better building (flight to quality).

Based on the above, you should consider undertaking regular reviews of your accommodation requirements so that you are ‘real estate ready’ regardless of which circumstances may arise.

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