We want to stay – lets renew our contract!

Let's look at the benefits of staying in your current space, and the strategies employed to achieve the best dealing terms. It is important to also understand the possible disadvantages for choosing to stay instead of relocating, so that the decision to stay is an informed one.

There are several potential advantages compared to moving to a new office:

1. Familiarity and stability: Staying in an existing office allows employees to maintain a sense of familiarity and stability. They are already accustomed to the office layout, facilities, and resources, which can contribute to a smoother workflow and reduce the time needed for adjustment in a new environment.
2. Established infrastructure: Existing offices often have established infrastructure in place, including IT networks, telecommunications systems, and utility connections. This infrastructure may have been customized to meet the specific needs of the organization over time. Staying in the same office avoids the potential disruptions and costs associated with relocating and setting up new infrastructure.
3. Established community and relationships: Over time, employees in an existing office develop relationships and a sense of community, which can extend beyond your own organisation, particularly in a serviced office environment that promotes inter-company engagements.
4. Cost savings: Moving to a new office involves expenses such as lease negotiation, relocation logistics, and potentially purchasing new furniture or equipment. By staying in an existing office, organizations can avoid these upfront costs and invest the saved resources into other aspects of the business.

Conversely, staying in an existing office can bring several disadvantages when compared to moving to a new office. Here are a few common considerations::

1. Limited space: Existing offices may have limitations in terms of available space. With hybrid working practices being adopted it may be that the existing fit-out is no longer conducive with the new operational practices of the company. Of course, the current fit-out can be modified or replaced, but this calls into question the cost-effectiveness of remaining instead of relocating.
2. Outdated infrastructure: Older offices may have outdated infrastructure, including electrical systems, heating, ventilation, and air conditioning (HVAC) systems, or networking capabilities. This can lead to inefficient operations, increased maintenance costs, and limitations in technology integration.
3. Cost inefficiency: Depending on the lease or ownership arrangements, the existing office may be costlier in terms of rent, utilities, or maintenance compared to alternative options. Moving to a new office can provide an opportunity to negotiate better terms, find a more cost-effective location, or improve the efficiency of space utilization.
4. Limited amenities: Existing offices may lack desirable amenities that can enhance employee satisfaction and well-being. For example, many newer buildings will incorporate enhanced facilities, such as cycle storage, showers/changing rooms, common outdoor terraces, and even through to restaurants, gyms and wellness areas. Moving to a new office can allow for the incorporation of modern amenities and better-designed spaces that cater to the needs of employees.
5. Psychological impact: Staying in the same office for an extended period can lead to complacency or a lack of motivation among employees. Moving to a new office can rejuvenate the work environment, spark creativity, and generate excitement among the workforce.

So, assuming that remaining at your current office has been determined as the best solution, what are the next steps? You could either, a) simply accept the terms that the Landlord proposes for a new lease, or b) negotiate to get the best terms that are possibly achievable. As the former option is not really in your interest, we will focus on the strategies for progressing the latter option:

1. Gather market data: Negotiations move from being merely horse-trading to strategic leveraging once you have market data. This data should, at the least, incorporate market rental figures from throughout the given sub-market, and preferably also supply volumes, time-on-market, and ideally "deals-done" information. With the benefit of this information, it may ultimately result in savings of many tens of thousands of pounds, and quite possibly hundreds of thousands of pounds, where you may not otherwise have been able to secure such discounts without the comparable evidence.
2. Investigate any necessary building improvements: You may have already experienced performance issues with air-conditioning or other such mechanical/electrical systems, and hopefully you have experienced expedient rectification of any issues. However, as you are about to extend your stay in your premises, presumably for a number of years, it would be advisable to have the M&E systems surveyed to understand their current condition (not always obvious), whether any immediate repairs may be required, and what is the useful life expectancy of the system(s), i.e. will it reasonably last the duration of your tenure?
3. Understanding the energy performance: If you are looking to extend your stay then one would assume that your building may not have been comprehensively refurbished or redeveloped within the last 5 years, and as such may not be performing at the highest levels of the energy performance rating scale. The caution here is whether the buildings energy performance rating is one that may eventually become a risk to you. More information on this can be found at this blog post.
4. Positioning yourself for negotiations: The value of time cannot be overstated with these types of projects - do not leave it too late. As an example, if you leave your engagement with the Landlord until 2-5 months before your current lease is due to expire then they will be of the opinion that you haven't left yourself enough time to relocate to alternatively premises, and thus they will take a much firmer stance with their negotiations. You need to have received their first offer between 6-12 months in advance of your lease expiry date.
5. Strategic engagement: Having armed yourself with the above due diligence information, and timed your initial contact with the Landlord sufficiently in advance of your expiry date, you do not want to be rushing through your negotiations and giving the impression that it is the only option in your consideration (even if it is!). Playing your cards close to your chest will result in the greatest outcome. Have a little engagement, but then propose to return to negotiations in due course "as you need to consider your other options".
6. Consider using an agent: Of course, we are bound to propose this, but there is considerable logic in doing so. Not only will an agent uncover a greater depth of market data to support your position, but their experience in strategic property negotiations will ensure that the greatest savings are achieved. Moreover, a Landlord who is engaging directly with an "unrepresented Tenant" will be much more bullish in their stance - simply having an agent representing you improves the outcome. Lastly, there is a clear benefit to retaining your positive Landlord/Tenant relationship, and having your agent serve as the intermediary doing all the dirty work.

Spacepoint have successfully managed lease renewal negotiations for many of our clients. Please do get in touch if this may be something you are giving thought to.