5 Most Common Mistakes Made when Leasing Office Space

1. Time – Taking a proactive approach and allowing for adequate time gives tenants the opportunity to explore the market, negotiate your lease, construct your tenant improvements and coordinate your move. Many tenants fail to understand the length of time it takes to negotiate a new lease or renew an existing lease and lose leverage by waiting until the last minute.  This process should begin 12-18 months before your lease expires.  This allows the tenant to familiarize themselves with the market, make sound decisions without the pressure of a lease expiration hanging over their head, and time to adjust to any unforeseen issues. Landlords understand how long this process takes, so tenants who are reactive and wait until the last minute lose significant leverage.  

2. Lack of market knowledge – Market conditions are constantly changing.  Understanding the overall market, submarket conditions and current landlord incentives will save you money.   Tenants also need to understand the financial position of each individual Landlord.  Market knowledge is key and knowing that a building is underperforming or that a large tenant may be moving out of a building can create opportunities for new tenants.  Whether you are renewing your office lease or exploring the option to move, it is always best to explore the market and request multiple proposals from landlords to create leverage for your tenancy. The goal is to get landlords to compete for your business.  

3. Focusing only on rental rate – This is one of the biggest mistakes we see tenants make.  Tenants focus too much attention to the rental rate and fail to understand what other items they may be at risk paying for down the road.  Tenants need to understand what is included in the base rate and what other expenses they are responsible for handling.  Depending on type of lease, you may be responsible for maintaining and repairing the HVAC systems, plumbing, roof, landscaping, etc. Also, a few other things need to be understood – tenant improvement allowance, market free rent, term of lease, escalations, renewal options, and termination options.  This is crucial when comparing properties to make sure you are comparing apples to apples.  

4. Not defining costs upfront – Many tenants negotiate lease terms before they truly understand their upfront costs.    Defining your upfront costs before any negotiations begin can save you tens of thousands of dollars.  It’s virtually impossible to recover these costs after a lease has been signed.  Here are few upfront costs you should investigate before you begin negotiating a letter of intent.  

    • Construction cost
    • Moving costs
    • Furniture
    • Installing low voltage wiring and cabling

5. Failure to hire an experienced Tenant rep broker to protect your interest – Hiring the wrong tenant representative or not using a tenant representative to manage this process can lead to disastrous results.  Real estate transactions are complex and require the expertise of a qualified tenant representative.  When hiring a tenant rep look for these qualities:

    • Seek out firms and brokers with no conflicts of interest and who exclusively represents tenants, not landlords.
    • Market expertise
    • They utilize a proven process
    • Honesty and trustworthiness
    • Someone to communicate the process for you

Contributed by David Ellis, Vice President


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