Office Space Race
Knowing some basic concepts can help you simplify the complex process of leasing office space.
By Steve Byrne

An office lease is a binding document, and considering that real estate costs are usually among the top three for a small business, it literally pays to be prepared when searching for new office space or negotiating the renewal of an existing lease.

While leasing office space is a significant and complex process, the owners of small businesses can gain a significant edge by understanding some basic concepts.

Begin the Process Early
Allow a minimum of six months when searching for new office space or negotiating a renewal. The larger your business, the more time you should allow. In the course of searching the market, reviewing proposals, negotiating lease terms, reviewing the lease document and finalizing the deal, a lot of time can pass. In addition, you need to allow time to search for alternatives should the deal you’re pursuing fall through.

Know the Market
The forces of supply and demand govern the commercial office market just like any other. Vacancy rates can vary greatly from one part of town to another. The amount of vacancy in the area of town you’re searching will go a long way in determining the amount of leverage you have to negotiate a more favorable deal.

Define Your Priorities
The rate, location, quality of the building, access to nearby restaurants and amenities and flexibility for future growth are all factors to consider when beginning your search.

Know Your Position Going In
The sole proprietor who is searching for 500 square feet for a one-year lease term will have little leverage when compared to the national corporation who is searching for 10,000 square feet for a 10-year lease term. Most businesses will fall somewhere between these two extremes.

Understand the Rate
When considering proposals from multiple buildings, make sure to create an apples-to-apples comparison. Rates for office space are usually quoted on a full-service basis, meaning the rate should include the base rent, property taxes, the landlord’s insurance, utilities, common area maintenance and janitorial costs. Retail and industrial lease rates are handled differently.

Create Flexibility
Strive to create future flexibility for your business by requesting early termination options and/or a right of first refusal on adjacent space.

Know Your Limits
An inverse relationship exists between the rate, the length of the lease term, any concessions and the requested improvements to the space. For example, the shorter the length of the term you are seeking, the less leverage you will have to negotiate the rate, concessions and improvements to the space.

Get it in Writing
Ensure that all verbal agreements with the landlord are included in clear language in the lease document.

Get Help in the Process—Part I
It is always a good idea to have your attorney review the lease document and point out areas of concern or possible liability. In addition, consider hiring an architect to review your office layout and offer ideas for more efficient utilization of your space.

Get Help in the Process—Part II
Because you are dealing with a landlord or agent who leases space every day, it is advisable to retain the services of a commercial real estate agent when negotiating a lease. Many commercial real estate professionals represent tenants in transactions and are well versed in the market and in the kinds of concessions you should seek. Best of all, it probably will not cost you anything, but should save you money.

By understanding some key concepts and by seeking the help of experienced professionals in the process, small business owners can greatly enhance their ability to negotiate favorable terms when searching for new office space or negotiating the renewal of an existing lease.

Steve Byrne is a vice president of sales and leasing for Waterford Property Company LLC, representing tenants and owners in the leasing, acquisition and disposition of office properties in the Kansas City marketplace. Steve can be reached at (913) 789-8558 or at