Commercial Lease Expiry: What you Need to Know
When considering your commercial lease expiry planning is everything. If you do not plan appropriately, it can catch you off guard and may include several penalties. However, with adequate planning, a time-conscious plan, a well-developed business plan and people strategy, a commercial lease expiration is nothing your company cannot handle. If you plan to make a real estate decision in the next 18-36 months, here is what you need to know.
The Vancouver Office Space Market Remains Strong
Despite the occurrences over the last few years the Vancouver commercial real estate market has remained strong. This strength is significant due to large tenants securing and retaining space over the long haul. The Greater Vancouver Area (GVA) saw a positive absorption of 562,000 square feet buoyed mainly by Downtown Core, Broadway Corridor and Richmond, states a recent Colliers office market report. Furthermore, with several new spaces set to open in the next two years, new supply is a primary driver of Vancouver’s low vacancy rates. Office vacancies in the GVA remained stable at 5.8%, down from 5.9% last quarter.
Developers continue to announce new buildings and have more office space available in the upcoming. People are creatures of habit who want to get back together as a team to socialize and keep a strong company culture. Given the new developments and low vacancy rates, I do not anticipate a market shift anytime soon; however, I will not be surprised if there is some form of economic downturn. An economic downturn usually results in an increase in unemployment rates. If the current market flips, it is possible more individuals will want to come into the office to have a connection with the company and a stronger sense of security, even if only through a hybrid working style.
Timing is Critical for a Commercial Lease
An office is an essential part of a company’s business strategy and is a wonderful way to optimize connections among staff. With the market constantly changing and Vancouver’s low vacancy rates, a lease expiry should be approached strategically and with enough time to make the transition as smooth as possible. Time is your friend when preparing for the end of your office lease. To figure out exactly how much time you will need, it comes down to 3 things; the size of your company, how your people work, and projected future growth. A rule of thumb is to allow yourself as much time as possible to plan.
Depending on the size of your office space and the depth of your current commercial lease agreement, organizations should begin planning a minimum of 12-18 months before the lease expires. Larger organizations that require more than 40,000 square feet should plan 18-24 months ahead of time. If your space is 75,000 square feet or larger, market availability will require up to three years of planning. Lack of adequate planning will make it extremely difficult to obtain continuous flooring, leaving the possibility of having two separate floors in a building or even two floors in two separate buildings.
Stay or Go: How to Decide your Next Step
Once you have prepared adequate time to handle a lease expiry, the next question is, will you stay or move? If you intend to move, will you require a reduction or expansion in square footage? To find which move is best for your company, you must first understand how your team functions. Once you know how your team works best, you can base your square footage requirements on that. To better understand your team, I suggest categorizing them into workstyle persona types. Each organization may have several types of personas. It is critical to look at each persona and say how much physical space is needed in the office to support each persona. Pivvot, a platform for data-driven, user-powered analytics, was developed by Aura to help with this process.
Pivvot: Data-driven analytics
Pivvot is a tool that helps companies in clarifying work-style personas and helps teams figure out how a space can support your employees at work. Through a 50-question assessment Pivvot’s software predicts future behaviors of each person and assigns them a persona. Based on the data provided by Pivvot, organizations can then extrapolate the approximate square footage needed for your office space.
When in Doubt, Hire an Expert
With so much to consider – why go at it alone? The best way to prepare for your lease’s expiry is to consult with a professional workplace planner and change management expert. I strongly recommend that businesses seek out someone who understands how to plan from the start. Knowing how to organize your employees around the space and your company’s needs is imperative. Additionally, when your office lease is about to expire, it might be beneficial to think about how your workplace strategy aligns with your business goals and objectives. At AURA, we can help you in figuring out the best way to use your workplace for increased productivity, space planning, and meaningful collaboration. We make your workplace relocation as seamless as possible using our innovative analytic platform Pivvot and our team of professionals.
Contact Us to learn more about how we can help with your workplace strategy, design and build needs.