What does COVID-19 mean for my office space?

The top 3 things to consider if you’re thinking about downsizing your space.

COVID-19 has presented many challenges for all of us.  A major issue that many businesses are now facing is whether they still need large offices as many adopt home working practices or need to downsize their operations.

The impact on business has been significant; companies are struggling to pay wages and rents on office/workspaces and Landlords are facing an unprecedented situation with a loss of rental income.  Longer-term, “with the pandemic crisis evolving into an economic crisis”¹, many companies will need to economise and hunker down through a tough period of unknown duration.

This is leading many companies to question whether they need the big areas of real estate they currently lease.  For many, it will also be more a matter of pure affordability in the shrinking economy.  Unfortunately, commercial property Leases are generally not structured to give tenants the flexibility to decide they no longer need the amount of space they signed up to.  And Landlords are well within their rights to enforce the Lease contract if a tenant defaults.

Sadly, many companies will fail if they cannot find solutions to reduce their overheads.  After wages, premise costs are usually one of the highest business expenditures.

What should I do?

As usual, there are quite a few things to consider; how long do you have left under your lease term, what form of lease do you have and what are the specific conditions of your Lease etc?

The top 3 things to consider are:

1. Read and understand your lease obligations.  There can often be hidden costs and liabilities that need to be carefully considered as part of any decision making.  You should consult a legal advisor on this.
2. Engage with your landlord in good faith.  Good landlords are willing to work with their tenants to find solutions and compromise.  Options for reducing your space again depend on your lease obligations and/or the willingness of your landlord to agree to change.  For example, your Landlord may be willing to find you alternative smaller space within their building or portfolio.
3. If you are stuck with your existing space – sub-leasing part of the space may be an option under the Lease.

Bonus advice: 

Alternatively, you may consider consolidating two office locations into one if there has been a reduction in staff or you already have surplus space.  You can then optimise the retained space as an agile work environment for the benefit of the employee and the company.

Surplus space can then be dealt with by;

1. Sub-leasing to another small business as a separate and independent sub-tenancy.
2. Sub-leasing the surplus space of your tenancy but offer shared use of reception, meeting rooms and kitchen.
3. Set up your surplus space as a collaborative workspace with workstations and meeting rooms for booking and rent on an ‘as needed’ basis.

If you do decide to negotiate your Lease, adapt the space or sub-lease; Hampton Jones Chartered Building Surveyors can help you with:

• Lease negotiations – Assistance with tricky make good and reinstatement negotiations. This can reduce your liability.
• Technical documentation – Records of physical changes, e.g. amended lease/floor plans.
• Premises Condition Reports – Schedules of ownership of fixtures and fittings and responsibility for make-good and reinstatement at the end of the lease.
• Budget estimates