Are you locked into your office lease?

Landlords have historically wanted leases to be as long as possible, in order to enhance the value of their buildings with an uninterrupted stream of rental income.

Tenants however, have long pushed for more flexibility, to enable them to move to bigger or smaller accommodation as business’ office space requirements change.

To square the circle, a great deal of leases have been signed with break clauses, offering tenants options to break.

In the current market, we have assisted some savvy tenants to use their option to break in an opportunistic way (shh!). In essence they have served the required notice to break, or threatened to do so, in order to attempt to reduce the cost of their office space, or to move.

The correct method
The key is to be organised well in advance of the time when notice needs to be served to break a lease:
•    Get legal advice on operation of the break (carefully worded prior written notice is usually required - often at least 6 months in advance of the break).
•    Thoroughly investigate the market for alternative accommodation.
•    Consider moving to alternative offices if serious cost savings can be obtained.
•    Negotiating with your existing landlord to improve the existing lease may be worthwhile.

Be careful!
Tenants need to be extremely careful as there are a number of cases where tenants have bluffed to their peril. They have effectively terminated their own lease early in order to renegotiate the commercial terms and the clever old landlord has let them go! Sometimes the landlord wanted them to go anyway and would have been prepared to pay for them to leave!

Others however, have managed to improve their cost base by using their break clause carefully, or indeed moved to more suitable premises.

Do remember that every property and every lease is different. We strongly advise that tenants do not act before carefully considering their break option with their solicitor and their premises and the prevailing property market with specialist commercial property advisors.

Office Commissionaire

They say first impressions count, so when your clients reach your premises, what exactly are they presented with?

When initially finding out what a new client really wants in the way of a new office, so many say they must have a commissionaire.

Is this for looks or for security?  Frankly, some don’t look good and some don’t operate a secure building.  Apart from that, they are expensive and put the service charge for the building up substantially, so one needs to think very carefully when considering whether to opt for a building that has one.

Some commissionaires are so consumed by their building (and to some it does become their building!) that they become very protective to the extent that visitors to clients can’t get in without undue difficulty.

When I was younger, I used to do many viewings in buildings to show people office space they might be interested in.  One commissionaire of a big building was so very protective, (and sometimes down right abusive) that quite often the viewings never took place.  The stated reason was often that there was ‘a lack of advanced warning’, a ‘breach of security’ and similar.  Luckily they found him an alternative job in the end.

The real point is to be quite clear as to why you need a commissionaire before selecting a building with one, as the service charge can cost a lot more than a building without one – and who pays the service charge? The tenants!

In current times there is an undeniable growing trend towards working from home. Cutting overheads on office space by outsourcing to home based freelancers is becoming increasingly commonplace. London commercial property landlords could be forgiven for believing that this trend will persist after the recession but at FindaLondonOffice we think otherwise.

Using home based workers does yield several advantages, the foremost one being cost efficiency, however other benefits include:

• Increased scope of potential employees, such as the disabled and those located further away.
• Potential productivity gains and lower commuting time.
• Increased motivation and lower sickness levels.
• Retention of working parents and those in other circumstances that would otherwise affect their ability to work.
• Potential to locate staff near to important clients.

I believe there is no long term danger to the London commercial property market because of the drawbacks:

• Management at all levels is more difficult, especially performance monitoring where appropriate.
• Increased costs on providing equipment and meeting regulations such as health and safety at multiple locations.
• A risk of deterioration in skills, motivation and work quality.
• Information security and data protection issues, especially where cloud computing is involved.
• Communication problems and a sense of isolation amongst home workers, especially so due to the lack of social interaction that would take place at the office.
• Maintaining a team orientated focus can be more difficult due to this isolation.
• For some types of job, working at home is simply not possible.

The ideal choice of course depends on the company in question, however whether a company has a centralised structure or otherwise; the reality is that in most cases, having a central hub makes sense. It could be argued that the current trend comes more from a necessity to cut office costs than the view that home working is a superior option.

Splitting time between home working and time spent in the office can be a good compromise to reap the benefits of productive and happy workers that are well informed and able to attend meetings as well as lower office costs.

Talk to us if you need help in determining your office space requirements. We pride ourselves on our ability to understand the needs of a diverse array of businesses searching for London office space and can factor any style of work pattern into our advice.

With increased tax rates and banking on the floor, the press has been full of articles about high profile business leaders leaving London. Cities such as Geneva are competing for high net worth immigrants with a less punative tax regime and fewer regulations.

Politicians need to think carefully about potentially shooting themselves in the foot by taxing businesses out of the country. They came here to make money in a sympathetic environment and are certainly not tied to our shores.

Having said this, in the longer term we suspect London will continue to be Europe’s pre-eminent commercial center because of its unique offering of culture, history, cuisine, (ever improving) legal system, time zone, education, and language.

While super league business leaders may seek personal shelter in foreign climes, most of their employees on more modest salaries will be disinclined to relocate abroad.

London is also likely to be helped by a steep decline in office space costs. Prime office rents in the West End, for example, have almost halved in the last year and eye watering incentives (such as “rent free periods”) are being negotiated by savvy tenants in the City and Canary Wharf, who are prepared to sign up on leases.

At FindaLondonOffice we make it our mission negotiate every deal to attain the best possible terms for our clients. Contact us to find out more about how we can save you time and money.

If you have read our post on office costs worth negotiating, you will remember Michael’s mention that now is a better time than ever to get the best deals. It is currently a tenant’s market and at FindaLondonOffice we constantly strive to get better deals for our clients.

Stating that the market is currently open has prompted the following 3 questions from our readers:

• Has the market bottomed out yet?
• If I pospone a move, do I stand to lose out on potential savings?
• How long will the market stay tenant focussed?

Office commentators are good at saying what’s happening right now on the street, but worse at predicting movements in the market, which depend on changes in the hugely complex global economy. We are good at seeing the effects, but perhaps not so hot at predicting the causes.

Having said this, Central London office agents we meet on a daily basis are telling us they are starting to get busy again with lots of viewings and we are also noticing space, that has been on the market a long time, starting to go under offer.

Some analysts have forecast that the market will start to recover by the end of 2009, others have stated that what we are seeing right now is a “dead cat bounce” and that the market will not significantly recover until 2011.

A report by Knight Frank stated: “Central London rents will continue to fall for 18 months as supply peaks at the 2003 level of 12.1 per cent. We forecast a return to rental growth will return in 2011.”

Currently there is a great opportunity to secure better terms for your office space, but like anything in business, the market is subject to change. Whether a move is worthwhile depends on many more factors than the current economic conditions.

If you are wondering how current market conditions could benefit you, or if you have other questions about London office space, do contact us.

My previous post suggested companies looking for new office space can make substantial savings if they are lucky or shrewd enough to find an office that has already been designed and fitted out. I receieved quite the response on this subject and the majority were similar enquiries:

• How much can I actually save by doing this?
• Open plan may be preferable anyway if the saving is not significant.
• What is the cost of decking out each individual work station?

Well, without wishing to glibly answer how long is a piece of string? I have come across a  canny office design and fit out contractor called PPC, who have made a name for themselves advising tenants  how to adapt new office space all over Central London to meet their requirements. As they are always completing a variety of projects, they are able to give good cost comparisons.

I mentioned my previous blog post to them and they have kindly agreed to give indicative cost estimates free of charge to FindaLondonOffice Blog readers. Mention FindaLondonOffice to them to receieve your free estimate. You can find them at http://www.ppcllp.com/.

The office letting market continues to evolve all the time. Recently, there has been a growing trend towards opting for sublet office space. It’s appeal stems from the fact that in-going tenants have the opportunity of acquiring an office with a tenant fit out, meaning that they can potentially get partitions, communication rooms, a kitchen and other facilities already in situ.

It was not very long ago that office space was routinely stripped of all partitions and tenants fixtures for marketing purposes.

Why Was This?

The consensus used to be that office floors looked more attractive when empty. They were presented as “carte blanche” and new tenants were to be given the “opportunity” to start afresh. The in-going tenant would be able to design and erect their own partitions in order to meet their specific layout requirements. Another significant benefit of presenting an open plan space is that there are clear views of the windows, meaning that the all important natural light is maximised.

How Have Things Changed?

In current economic circumstances, knowledgeable tenants are searching for the opposite. They are targeting London office space that other tenants are seeking to offload, with the key consideration being that in today’s climate, they aim to secure it without the removal of partitions; before the space is returned to open plan.

Most tenants require an amount of open plan office space, but also need meeting rooms, directors offices, a board room, a small kitchen, a store and a communications room. To have these already in place can result in an immense saving.

At FindaLondonOffice, we recognise the value of this strategy and frequently help our clients to find space with the benefit of a good tenant fit out already in place, if ideal. Talk to us to find out more.

Following on from Ian’s post regarding our method, I would like to elaborate on negotiation. Now is a better time than ever to get good at it (or find someone who is) as the market is open for it.

These are some of the main areas that we negotiate:

1. Letting incentives
2. Service charges
3. Dilapidations
4. Reletting and disposal basis
5. Covenant and / or rent deposit
6. Floor areas; we check these
7. Solicitors; we can help here too

This list  is not exhaustive, as depending on your circumstances and what it is you are looking for, there may be more that we can do for you.

Talk to one of our experts to find out more.

It might seem like a good idea to search for your own office space, but as I mentioned in the post regarding frequently asked questions, the process takes time. Although some people do succeed, there are many details to consider. Many companies seek advice as trying to do it can take an inordinate amount of time.

Why is it time consuming?

1. To get details of everything that’s available around Central London you would need to contact around 500 firms. That’s a lot of phone calls to make!
2. After you identify the offices that fit our requirements, how do you value them?
3. Can you identify the lease terms you need to negotiate? Having a good  understanding of current market conditions is key to securing the best deal.

At FindaLondonOffice, we have inside market knowledge and contacts, as well as access to databases that allow us to find London office spaces that have not yet hit the main market.

Without turning this into a sales pitch, I would like to point you towards the nature of comments we receive from our clients:

Their great strength from the standpoint of another professional is their diligence in <strong>getting the detail right</strong> – not something that I always come across in their competitors. They follow through on the process and I know when they are involved that the client will have all the back up needed.

Colin Cannings, Senior Partner, Cannings Connolly – Solicitors

This industry requires a meticulous work ethic.