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Hidden Leasing Costs - NJuly 2023
It is interesting to note that after salaries, the second highest business cost are the rental costs for leasing a premises. In many cases the total cost of occupancy over the term of a proposed lease, is not fully understood, or calculated.
Various additional costs such as outgoings, parking, fitout costs and make good, together with leasing incentives, are not factored into the decision making and evaluation process. Accurate budgeting will reduce risk, and save time and money.
The most appropriate financial analysis to use when considering leasing a property is to establish and compare 'whole of lease' term costs.
If you are thinking of moving, then now is a great time to plan the move, to ensure the best outcome for your business, money and reducing risk in the process. This will give you peace of mind, and the confidence to make an informed decision.
Stress Free Office Relocation - January 2024
Did you know that relocating office is one of the most stressful things people suffer? It may be tempting to relocate from your current cramped space to more open and inviting premises that will allow you to grow your business. But beware – relocating office is a huge undertaking.
Besides sorting and packing, there are a few other things to consider: the costs, and the suitability of the new premises. Let’s look at the suitability factor first. You need to look at the key strategic, operational, property, legal and financial issues of your business.
First, calculate the staffing levels, internal layouts and information technology systems (IT) you need to increase business efficiency, productivity and improve work practices, including future business growth projections. Establish a budget and do some market research to determine the availability of suitable office spaces and applicable rental structures. What is a reasonable cost from your business cash outflow perspective? Remember to review outgoings, parking and other charges, such as IT and communication systems.
Secondly, draw up a timeline with milestone dates to stay focused. Does your business have any key operational requirements, such as access to key clients or transport linkages?
Thirdly, consider the internal layout, with office support systems grouped together for efficient functional usage. Prepare an Accommodation Brief detailing the type of premises and special accommodation requirements you require. Issue the Brief to the market to inject a ‘competitive edge’ into the process. Critically evaluate the responses and prepare a shortlist for further investigation. Fitout costs for basic suburban offices generally range from $750 to $1,100 per square metre.
Next, negotiate commercial terms and document any agreement with a Heads of Agreement. Thereby, providing a concise summary of what has been agreed between the tenant and landlord. Any potential expansion or refurbishment works need to be addressed in the Agreement to safeguard your commercial interests. This should ensure that future accommodation and expansion needs (if any) are addressed and that a suitable rental structure is agreed as part of a ‘total package’.
The landlord will instruct their solicitor to prepare a Lease Agreement based on the key Terms and Conditions contained in the Heads of Agreement. Ensure that your solicitor thoroughly reviews and comments on the lease document. This is to verify that all agreed financial and commercial terms and conditions have been included in the Lease document.
How do you take time out of running a business to do all this as well? Wouldn’t you like an expert to do it for you?
Call the Intercommercial Property Group. They will compare the costs of various property options over the life of the proposed lease, including pre-lease cost obligations such as fitout, relocation costs, make good etc. Using Net Present Value (NPV) modelling, their analysis is undertaken on an annual cash flow basis and is ideal for evaluating the impact of different deal structures under consideration.
Contact Intercommercial Property Group today. They will take the headache out of moving office premises by advising you on the ideal space for your business.
M: 0418 129 299