9 Crucial Questions Every Leadership Team Must Answer Before Signing a New Office Lease

There is nothing quite like signing a new office lease. This is one of those business milestones that feel almost like a celebration of success.

You have outgrown the kitchen table. Meeting rooms at your co-working space are regularly fully booked. Your team has reached the point where trying to hold a confidential call in a phone booth while somebody nearby is reheating some fish is less of a workplace arrangement and more of a social experiment.

So, you start thinking about finding a new office.

You have found a nice space, which looks bright and central. There is an exposed brick there. There are suspiciously nice coffee machines. The rent seems to be "not too bad, actually". Suddenly, you are discussing floor plans, lease terms and the possibility of putting a moss wall in the breakout area.

Now is the time to stop and think for a moment.

Office lease is not a simple matter. It is a financial commitment, operational responsibility and, depending on the terms, even a very costly relationship to be exited. A good office will facilitate hiring, support growth, create the needed culture and build clients’ confidence. The wrong one will drain your budget, limit your opportunities and transform your operations manager into a full-time facilities manager.

Below are nine questions every leadership team needs to answer before signing heads of terms.

1. How many people will need to work in the office?

It might seem that there is an obvious answer to this question.

You look at the total number of your employees, estimate the number of desks required, and then start to search for an office large enough to accommodate them all. This might have made more sense if the majority of your employees were coming to the office every day and "working from home" meant that you had a plumber visiting.

This is not the case anymore.

A company employs 30 people, but only 20 or 22 come to the office on the busiest day. Some of your employees are client-facing. Some are remote workers. Some only come to the office occasionally, to hold a collaboration day, team meetings or workshops. And others need to have a desk every day.

The number you need to consider is not total headcount. It is peak occupancy.

Think for a minute: on the busiest day, how many people actually need a desk, meeting rooms, lockers, a quiet zone or even the place to have lunch without balancing the salad on their knees?

But think further.

Not every office is about desks only. It also needs the space for holding client meetings, for private calls, team briefings, storage, kitchen facilities, places to chat with each other and that person, who has been staring at the spreadsheet for the past three hours and is only one unread email away from losing it.

While the floorplate might look spacious enough during the viewing, once you account for the space for meeting rooms, circulation spaces, kitchens and the simple human need to move around and not apologize for that every five minutes, it gets noticeably smaller.

The idea is not to crowd everybody in there. The idea is to avoid paying for the half-empty office that only makes sense if all your optimistic hiring forecasts come true at once.

2\. How much will the office cost apart from the rent?

Rent is always the first thing people think of.

It is written in the listing. It is discussed in broker’s emails. It is spoken about as though it is the whole story. "Only £X per square foot" sounds like a bargain until other expenses start popping up in the office like characters of a horror movie.

The full cost of the occupation of an office usually consists of many more things apart from the rent:

business rates;

service charges;

utilities;

broadband and IT infrastructure;

insurance;

cleaning;

maintenance;

legal fees;

surveyor fees;

deposits;

moving expenses;

furniture;

fit-out;

ongoing facilities management.

Some of these expenses will be fixed. Some might fluctuate. Service charges might depend on the state of the building, repairs, or communal costs. Utility costs fluctuate. Repairs happen. Broadband installation usually takes longer than any of us expected because broadband companies live in a different dimension.

Which is why leadership team should calculate the total cost of occupancy, not compare rents alone.

Space with lower headline rent might be a worse deal if it has relatively high service charges, is not energy efficient, has high business rates or requires substantial fit-out. And vice versa: space with higher monthly figure might be more profitable if it includes more expenses and you have fewer responsibilities.

What really matters is not:

"Can we afford the rent?"

but rather:

"Can we afford to occupy, operate and ultimately leave this office?"

These are two very different questions.

3\. What happens if we need to leave the office?

Every lease looks manageable when things are going well.

The company is thriving. The team is growing. You imagine a longer client list, better corporate image and even, in a best-case scenario, a reception where people will be offered the sparkling water in an aggressively tasteful glass.

But things happen.

A funding round could be delayed. Major client might be lost. The team might turn out to be more remote than you thought. You might buy another company. Merge departments. Change location strategy or, as simple as it sounds, realize that the office, which seemed like an absolute dream six months ago, has become either too small or too big or too far from the main train station.

Here comes the importance of the break clause.

Break clause is basically your contractual escape route. It allows the tenant to terminate the lease prior to the end of its full term, provided certain conditions are met.

Wording is crucial.

Some break clauses are conditional. That is to say, the tenant can only exercise the break clause in case some requirements are met, such as paying all the rent due, giving the notice correctly or complying with repair obligations. On paper, this might seem obvious and simple. In practice, commercial leases can be very strict.

A failure to give the notice at the right date, a missed payment of a relatively small sum or dispute regarding the condition of the office could become an issue at the worst possible moment.

But that doesn’t mean you can ask for a completely unconditional break clause. Landlord is not exactly interested in handing you a perfectly polished emergency exit with a big neon sign above it. But it does mean that you need to understand the conditions that apply and discuss this with your solicitor.

Never assume you can "sort it out later".

Later is when you find out that later costs a lot of money.

4\. Are we ready for the expense of fitting out the space?

There is a big difference between walking into a beautiful and completed office and walking into an empty commercial space with lights, raised floor and vague feeling of the potential.

The latter is often a Cat A space.

Cat A office includes all the basic building infrastructure: ceilings, lighting, ventilation, raised floor and mechanical systems. It is not unusable, of course. Like an empty warehouse has the potential to become a restaurant, a wedding venue or the place to make artisanal candles.

But in order to make the space usable as an office, you would usually need a Cat B fit-out.

Fit-out means everything that transforms an empty space into an office: meeting rooms, desks, kitchen facilities, furniture, cabling, branding, lighting adjustments, acoustic treatments, storage, AV equipment and other tiny details you realize once the team starts using the space.

The expenses can add up quickly.

This is not necessarily a reason to avoid the traditional lease. For an established company with a clear long-term plan, it might make perfect sense to invest in a custom space. Maybe the company needs specialized technology, improved security measures, a particular client experience or special layout.

But this is capital, tied up in the space the company does not own.

This is the money not invested in hiring, product development, marketing, goods, technology or anything that gives the company some room for growth.

For businesses that need a private office but do not want to start the fit-out process from scratch, taking leased office space london is a sensible option. Ready-made office can still give you the confidentiality, professionalism and ability to create the space around your team, without starting the relation with writing a cheque for walls, wiring and furniture.

In case you decide to take an empty space, make sure that the lease negotiations include the reality of the fit-out timeline. Rent free period may be vital while the fit-out is in progress and the office is not yet usable.

There is no point in paying for an office, which people can not enter.

5\. Does the location fit the needs of the people who will be using it?

Location of the office is not a pin on a map.

It affects recruiting, retention, client experience, team motivation and likelihood of people to be on time and not look like they have been fighting a war against the public transport on the way there.

A cheap office in an inconvenient location may help to save money. But if every employee starts spending extra 45 minutes commuting to work, you just move the cost elsewhere.

"People don’t usually say, ‘I’m leaving because of the location of the office.’"

But sometimes they say things like:

"The commute is becoming problematic."

Or:

"I’m looking for something a bit more flexible."

Or:

"I think I need a better work-life balance."

But what they actually mean is that they have been spending the past 6 months changing trains twice, walking 20 minutes under rain and coming to work angry.

For the client-facing companies, location means something else. Client notices how easy it is to contact you. He notices whether the building feels professional. And he notices that his visit to the office starts from a 20-minute walk across the business park in order to find the entry.

Before deciding, plot out the locations of the current team members. Think of the locations where the future hires will come from. Compare travel times. Visit the area in rush hour. Test the route yourself.

The office should make it easier for the people to work with you, not feel like they have to go through a small adventure every time they visit.

6\. What legal protections do we get and give up?

This is the kind of question, which makes people’s eyes glaze over in the middle of lease negotiations.

Unfortunately, it is the kind of question, which could be of a great importance later.

Commercial leases might have different rights around renewals, security of tenure and what happens when the term of the lease expires. In England and Wales, some business tenancies might fall into the provisions of the Landlord and Tenant Act 1954, while others could be contracted out of the provisions.

Difference can be substantial.

To put it in simple words, security of tenure could affect the right of the tenant to seek a new lease at the end of the term, provided that some conditions are satisfied. If the lease is contracted out, the tenant’s right to continue living in the property after the end of the term is significantly decreased.

That could be exactly what is needed in certain circumstances. Short-term space, location test or flexibility could be exactly what the business that doesn’t care about the rights to renew doesn’t need.

The key is not to treat it as fine print.

Ask your solicitor:

Is this lease inside or outside the relevant statutory protection?

What rights do we have at the end of the term?

What notice requirements apply?

Could the landlord refuse renewal?

What will this mean for the business in case we want to stay?

You don’t need to become a commercial property lawyer in a day. You just need to understand what you are signing before you become financially committed to it.

7\. Will the office suit the way we work?

Office has changed.

It is not enough to provide desk, chair and meeting room with the screen, which might connect after three attempts and ritual sacrifices to the technology gods.

Hybrid team needs the office to deserve the place in people’s schedule.

If the employees have comfortable home office, reliable Wi-Fi and kitchen where no one steals their labeled yogurt, just providing them with desk somewhere else might not be enough to justify the trip.

The office should offer some value.

This could be a collaborative workspace. This could be rooms for private conversations. This could be nice client meeting rooms, training facilities, social area, quiet zones, good IT or kitchen, which looks like a place people would actually like to sit for 10 minutes.

When you view the office, don’t ask:

"How many desks fit?"

But ask:

Where will the teams gather for the meetings?

Where will private HR conversations take place?

Where can the people take a confidential client call?

Where will the clients be hosted?

Where will people be working when they need deep focus?

Can the office offer collaborative and individual work space?

Does the office feel like a place people would want to be?

Workplace should help people to work.

If the design of the office forces the teams to gather in the kitchen, conduct private conversations in the staircase and make the video calls in the phone booth, it doesn’t support the business. Business works around the office.

And that becomes annoying pretty quickly.

8\. How much could we be charged for dilapidations?

Dilapidations are one of the least glamourous aspects of commercial property, which is probably why many businesses think about them only when somebody sends them a very alarming email near the end of the lease.

Generally speaking, dilapidations have to do with tenant’s obligations to repair, maintain or reinstate the property at the end of the lease.

Depending on the lease, the business might be obliged to return the office in a certain condition. That could involve repairing damages, removing the alterations, replacing certain items and restoring parts of the property to the condition, agreed at the beginning of the tenancy.

This could become very expensive.

Imagine spending years making an office around your business: glass meeting rooms, fitted storage, bespoke kitchen, branded features, upgraded lighting and specialized equipment. And then, when you leave, finding out that you will have to remove or restore some of these alterations.

It could feel extremely unfair. You spend money improving the space, and then have to spend more money on reversing the improvement.

One way to protect yourself is to include the Schedule of Condition.

It is a detailed description of the state of the property at the beginning of the tenancy. It may contain the photos, notes and descriptions of the existing wear, damages and defects. The idea is to establish the baseline so that the tenant is not held responsible for the issues which already existed when he or she moved in.

Schedule of Condition is not something to be casually skipped, because everybody is anxious to get the keys.

It is one of those dull aspects that can save a lot of money later.

Discuss it with the surveyor. Understand the repair obligations. Read the dilapidations wording. Ask the questions before signing the lease, not when you are already planning your move-out party.

9\. Do we have the capacity to manage the office?

Private office gives freedom.

It also gives rubbish bins.

And cleaning services. And broadband providers. And health and safety inspections. And fire system. And maintenance schedule. And access control systems. And eventually somebody asking why the meeting room screen has stopped working.

In case of the serviced office, most of these tasks will be handled by the operator. In case of the traditional lease – more of it will be the tenant’s responsibility.

That doesn’t mean every business needs a whole facility management department. But somebody should manage it.

For the larger business, it could be a workplace manager, facilities lead or operations department. For the smaller business – office manager or COO. For an especially unlucky company – founder, because he or she was the only person who knew the Wi-Fi password.

Before signing the lease, be honest about the capacity.

Who will manage the suppliers?

Who will handle the repairs?

Who will organize the cleaning?

Who will handle compliance?

Who will take care of the access issues, maintenance and building emergencies?

And possibly most importantly – what work will this person not be doing while he or she handles all of these?

Low rent office does not necessarily mean the bargain. It might cost a lot of internal effort and become a constant distraction for the people in the company.

Sometimes, paying more for the managed office is not about luxury. It is about saving time of the people who need to focus on growing the business.

The lease is only the beginning

The best office lease is not necessarily the shortest, the cheapest or the most impressive one.

It is the one, which suits the business you have now, gives you the space to grow and doesn’t punish you if the growth goes differently than expected.

Before signing anything, make sure that your leadership team can answer the following questions:

Do we need this much space?

Can we afford the full cost, not just the rent?

What will happen if we need to leave?

What will fit-out cost?

Does the location suit the needs of our people and clients?

What legal rights are we getting and giving away?

Will the office fit our hybrid working?

How much could we be charged for dilapidations?

Do we have the capacity to run the office?

Lease can be a powerful tool for a growing business. It gives your team a proper home, strengthens the culture and creates a professional environment for clients.

But only when it is chosen consciously.

Nobody wants to find out, two years into five year lease, that they have signed for an office they can not afford, can not leave and do not particularly enjoy being in.

That is not a headquarters.

That is a very expensive hostage situation.