Rear view series: #2 Stay or Go?
Written in 2008:
The ideal time to consider whether an organisation should stay or relocate from existing premises, is two years prior to lease expiry.
Why so far out?
In short, lease negotiations, strategic accommodation planning, design and construction take a lot longer than usually thought. The cost and quality of the final solution is directly proportional to the time and consideration dedicated to these activities. If the strategy and negotiation is left to the last minute, then the tenants lose their opportunity to leverage any advantage of comparison or market testing. In some cases, inactivity means tenants lose their right to negotiate at all and are then simply dictated terms by the building owner.
As the lease term comes to maturity, a decision must be made to either renew the lease and remain in the existing location, or go and test the market to see what suitable alternatives are available.
The critical element is, that first and foremost a tenant must begin this investigation far enough out, to allow enough time to effectively test the market to leverage the best long term deal. This window of opportunity is required, irrespective of whether the desire is to relocate or remain.
What are the criteria used to make that decision? The basic considerations are:
– Costs: Is it cheaper to stay or go?
– Accommodation needs: Do the existing premises have adequate space for now and the next 5 years?
– Appropriateness: Do the current premises support the long term business objectives?
– Brand: Is the current space aligned with desired market perception?
– Location: Does the current space provide ease of access by external and internal customers?
– Alternatives: Are realistic and more appropriate premises available?
– Time: Is there enough time for the whole strategy, negotiation, design and construction?
– Benefits: What are the benefits and risks to either staying or relocating?
– Asset or liability: Does the current workplace cost money or does it drive business profitability?
Clearly there are many aspects that need careful consideration to make a timely and well informed decision, regarding a stay or go option.
For an organisation to house their teams in an inappropriate and dysfunctional space can be extremely detrimental to its long term profitability. Therefore, it is absolutely critical to allow enough time to consider realistic options and to leverage the market to secure the best long term solution. As with all critical decisions, it is prudent to retain independent expertise to provide well informed and real world advice.
What has changed in 2018?
The real change is that businesses are changing faster than ever and the rate of change is accelerating. Also the tenure of staff is getting less. The impact is, it is becoming increasingly difficult to maintain a property portfolio that is dynamically right sized and fit for purpose. The team at Incorp can leverage 30 years of hands-on experience providing expert and independent advice in this arena.
If your lease expires within the next two years, our free expert advice is to speak to the Incorp team now.