We live in challenging times when it comes to predicting staff numbers and space needs.

Getting it wrong and leasing space that ends up vacant or under used can cost hundreds of thousands of dollars a year. For instance, leasing 500 square metres that ends up unneeded can add upwards of $175,000 to the cost of a lease per year.

However, on the flip side, a business that underestimates its space needs can end up in trouble as well, struggling to accommodate staff and thus having to lease additional space elsewhere. It’s easy to get these predictions wrong without the right analysis, or negotiating more flexible lease terms.

Add to this the dynamic in business today where companies form project teams by pulling together staff from different areas to work together. Forming these teams requires work space to be more “elastic”. Traditional lease structures do not always allow for the required flexibility.

Flexibility is the key. Internationally more and more companies are negotiating property leases so that they can meet fast changing space needs. Traditionally, property owners wanted to lock tenants into long term leases with set terms and conditions for rigid premises areas. But we are increasingly seeing a trend for leases to have terms that provide the tenant with the flexibility they need.

For example, in one of several strategies, a corporate tenant may be prepared to lock in a 12 year lease for 3000 square metres of space, provided the landlord allows them to have a shorter, more flexible term on a further 1000 square metres. This lease arrangement allows the tenant to allow for both the growth and declining space scenarios in a rapidly changing market.

To build this flexibility into the lease so that it ends up being a win- win for both landlord and tenant requires skilled negotiation, but can reap significant rewards.

Flexible leases are becoming the way of the future as staff levels are fluctuating more and more. Staff levels can shrink and grow for many in-house or external reasons. Add to that the increasing frequency of people wanting or needing to work remotely, either from home, or on the road, and you have an ever changing scenario for work space needs.

In tough economic times, anything that can keep property costs to a minimum on the balance sheet will be critical.

This entry was posted on Monday 12th May 2008 and is filed under Property Leasing. Both comments and pings are currently closed.