6 Hidden Costs of Leasing Office Space
Searching for a new office space is no easy feat: You have to consider a host of requirements for your ideal location; preferred amenities and workspace layout; access to public transportation or major roadways, and more. Plus, on top of all that, you’ll also be looking into negotiating your monthly rent, as well as the total amount of square feet that you currently need or might want to secure for future expansions.
However, even after the terms are agreed to and the papers are signed, your lease won’t be your only expense — and overlooking hidden costs might prove to be a headache down the line. So, we put together a short list of the most common expenses that businesses should bear in mind when signing a new office lease.
1. Maintenance Costs
Any building — regardless of its use type or the activities of the businesses that occupy it — needs basic upkeep. This might include landscaping, repaving driveways or maintenance of the building’s parking lots.
Of course, these and other operations will need to be covered by someone, so it’s important to take time to negotiate whether it will be the landlord’s responsibility to step in and pay or if you need to agree on a certain percentage that you’ll contribute. You might also want to discuss an expense cap for maintenance fees so that you don’t end up overbudget.
Before you can move your staff in, you might need to have some work done on the new location. For example, perhaps you need to install a couple of ramps to meet the accessibility requirements of the Americans with Disabilities Act (ADA). Or, maybe your company wants to encourage employees to bike into the office, so you want to set up a few bike racks. You may even need a new sprinkler system. Or, perhaps the bathrooms need an overhaul to meet ADA requirements.
Whatever it is, any modification comes with a price tag — and costs can add up quickly. And, depending on your contract, you might need to pitch in, so pay close attention to upgrade costs when discussing lease terms.
Some landlords might want you to conduct an electrical survey of your office by hiring a contractor to gauge the amount of power your business is likely to use. Then, your landlord might factor these estimates into your monthly rent negotiations.
It’s important to note, however, that many surveys don’t produce an average of your likely power consumption. Rather, they calculate the total amount of energy you would require if you ran every single computer, light or copy machine at full capacity at all times. Naturally, this can lead to inflated numbers that are a far cry from what your operations will realistically be using.
4. Pre-Existing Conditions
Throughout your time in your new office, you might want to make several changes to accommodate your business needs to better reflect your brand’s image. In this situation, be aware of any pre-existing condition clauses in your lease.
Pre-existing condition clauses state that, when you’re ready to vacate the office, the space must be returned to its original condition. Essentially, any walls that were put up need to be taken down; any additional fixtures must be removed; and cosmetic changes — such as repainted walls, paintings, posters or signs — need to go, as well. And, accordingly, if your lease agreement has a clause like this in place, you must account for these future expenses in your business budget.
5. Operating Expense Increases
Typically, the cost of labor, equipment or materials needed for the upkeep of a building will grow from one year to the next. So, to shield themselves from shouldering all of these cost increases, landlords will often require their tenants to take on a certain percentage of the expenses. Obviously, this is another term that you’ll have to carefully negotiate to avoid incurring a sizeable increase in your monthly expenses — on top of existing your rent.
6. Property Taxes
In some cases, you might also be required to contribute to the property taxes of the building in which your office is situated. To keep your expenses in check, these payments should correlate with the amount of space your office will occupy within the property.