A “Great Deal” for Too Much Space

Too often, tenants pay attention to rental rates without considering the total amount of square footage leased. Don’t make this common mistake!  

Significant savings can be achieved by correctly sizing your office space to meet your current requirements while obtaining an option to expand, or in some cases for larger tenants (20,000 or more square feet), a right to downsize as well.  These options help to avoid leasing too much space up front while providing flexibility for the future, both for a renewal or a new location.  Frequently, tenants believe they’re getting a very good proposal from the landlord for “excessive” square footage.

Obviously, landlords prefer leasing as much space as possible to new and existing tenants.  But in the case of renewals, when landlords are negotiating with existing tenants and face the prospect of losing them, they often become more open-minded about downsizing the premises to meet specific needs.  Often a tenant fails to understand the opportunity and significance of downsizing and should bring in a broker and architect to evaluate the situation.  For example, tenants who lease 1,000 square feet less than they originally thought possible, at a rental rate of $25 per square foot, save $25,000 per year.  If the rent is $40 per square foot, the savings rise to $40,000 per year or $200,000 over a five-year term.

Bottom Line:  When you want to reduce your costs, it can be accomplished by reducing your square footage as well as a rental rate reduction, or some combination thereof.