7 Steps to Take When You Run Out of Space | Hunt KL Office

December 6, 2018 No Comments

7 Steps to Take When You Run Out of Space

Posted by Ten Fong in Site Selection


So your business is growing quickly and you are locked into a long term lease, but you have run out of space.

Unfortunately most lease terms in commercial real estate are 5 and 10 year terms. At least this is a good problem to have.

Here is what you should do:


Check the Lease


First, check to see if you have the right to terminate the lease. If not, look into your sublet rights and determine what restrictions you may have.

If you are well below market rates you may be able to sublet without taking a loss, and you can move to another property. Here is more on how to do that here: Subletting Commercial Space.

Alternatively, you may have forgotten about expansion rights within your lease. Check to see if you have a right of first offer or right of first refusal on any other space in the building.


Create a Stacking Plan for the Building


A stacking plan can be created by walking each floor of your building. Although there is some guesswork involved in determining how big each of your corporate neighbors are, it is a starting point.


Knock on Your Neighbors Doors


Ask your neighbors when their leases are due and what their current space needs are. Moving your demising wall to absorb some of their space can be win-win.

With any extensive construction and fixturing, the landlord may require a lease extension from one or both parties (depending on the existing lease terms that remain).


Consider Shared Space in the Building


Although not ideal, a shared space arrangement with another tenant in your building eliminates the need to demise space and you will more likely be able to work something out on a casual, month to month basis.

Choosing which employees are relegated to the shared space could be awkward, so be sure to communicate that it is a short-term fix.

Be sure to get landlord approval for a shared space arrangement and seek expert commercial lease advice before signing an agreement.


Swap Space with Another Tenant


A complete space swap is another option that would allow you to keep all of your employees together and you can avoid the work involved with demising. The tenant to swap spaces with likely will be paying a different rental rate so the landlord will want to be left whole.


Don’t Check the Landlord’s Website Call Them


Many landlord websites are out of date and there is always activity behind the scenes.

The landlord knows every expiry date and the intentions of most of the tenants. As the landlord will want to keep you as a long term tenant in the building (especially if you are growing), he has an incentive to help put the puzzle together.

Do not forget to ask about other buildings that the landlord owns, and if you can move, expand and transfer your lease to a new property.


Consider Short Term Solutions Nearby


Although this is a band-aid solution, a plug and play sublease at a bargain price may be the most cost effective alternative. With the explosion of co-working, you could also find short term space for some workers in an environment that they may enjoy a bit more.

For more questions, you can refer to www.huntkloffice.com


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