One of the most desired characteristics in today’s leasing world is flexibility. Listen to to day’s podcast to hear Bob & Jan discuss why flexibility is so important and why landlords charge extra for it.
Some companies are growing rapidly while others are shrinking. This is what makes flexibility in their leases so appealing. Companies have plans and may be waiting on that one big contract to be signed when, poof, it all vanishes overnight. In other cases, the new contract takes them by surprise and they have a hard time managing the growth. Flexibility, in some cases, is the difference between staying in business and failure. Much of the flexibility needed right now though doesn’t have anything to do with whether the underlying business is going well or not. It’s a function of working from home or other places, allowing people to live anywhere they like, hybrid working arrangements and employee reluctant to return to the office.
OK, so let’s talk about some ways tenants can achieve the ever-illusive flexibility:
- Lease more space than is needed initially and sublet it out until the company needs the space. Probably my lease favorite recommendation. You have to be absolutely sure you will need that space sometime in the future, and really, who has a crystal ball?
- Lease what you need now and have a right to expand to a future date. Probably my most favorite option. Provides extreme flexibility and you can negotiate the terms when signing the original lease. It can be in the form of an expansion, must-take or right of first refusal clause.
- Buy a membership in a coworking space. This will be your absolutely most flexible option but also your most expensive. This is great for flexibility in term, location, size, etc. Also becoming a great portion of the hub and spoke model.
- Buy your own building and sublease out what’s not needed. Non-renew tenants when you need the additional space. This can be a wonderful option but not every business is cut out to be a landlord.
- Secure a very short-term lease (again, usually a more expensive option).
- Hub and spoke model where the hub is an office but spokes are employees WFH or coworking. We discussed this in depth in a prior episode – wonderful for offices where employees live in various cities.
Bob Gibbons is a Real Estate Advisor & Tenant Advocate (also known as a tenant rep) with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.