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.
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:
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;
If you do decide to negotiate your lease, adapt the space or sub-let; Hampton Jones Chartered Building Surveyors can help you with:
BSc (Hons), MBA DipProjMan, FRICS
Managing Director, Chartered Building Surveyor
+64 21 931 231
>>> Our next article will discuss how design and space planning can be used to your advantage.
*This should be undertaken in conjunction with your legal advisors.
1 Andrew Hay, GM Commercial and Industrial, Stride Property and Auckland Branch President, Property Council New Zealand