By: Morgan Spake
Moving to a new office means moving your internet and phone connections. There is a process called “Network Due Diligence” that answers the question, “Will my network function at the new office?” and addresses items related to cost, risk mitigation, fail over, and current contract obligations that need to be addressed prior to the move. Timing is critical and the process should commence no later than 90 days prior to the office relocation. Ideally, it is preferable to complete Network Due Diligence before the lease is signed, since it’s important to learn early on if quality, reliable and affordable internet connections are available at the new office. Your current Internet Service Provider may not have adequate service at the new address, so another provider that fits your tolerance for risk and budget must be identified and selected.
Internet Broker: Think of the ISP (internet service provider) as the landlord who wants to “rent” an internet connection to you based on 12, 24, or 36 month terms, and all enterprise grade bandwidth pricing can be adjusted based on competing offers. An Internet Broker can gather competing offers and actually drive your monthly costs lower. The Internet Broker receives a commission from the ISP and can therefore offer this free service to the client.
Cabling: A free evaluation will help determine the type and quantity of cables needed for your new office. Many existing office spaces can be described as “plug and play”, where the cabling already is installed, however it is in your best interest to have the cabling tested, regardless. The space may have been divided, and the landlord does not keep records on, or guarantee pre-existing installed cabling.
Network Move Management: This is a service that allows you to outsource the entire network move operation whereby several companies are part of the network move such as: Cabling, Phone, IT, Riser Management and one or more Internet Service Providers. An experienced network move coordinator can guide your team through the decision making process during the network move.
If you’re an office tenant in San Francisco (or any other market where vacancy is plummeting), there’s no doubt you’ll probably face a substantial rent hike upon your upcoming lease expiration. Since 2010, rents in the City have risen 39% and in 2012 alone, 24%; representing the biggest gain of any market in the world.
Relocating your office can be expensive and disruptive to your business, so if your first choice is to stay and renew, here are a few strategies that can help mitigate the rental increase. The days of passive negotiation are gone; you need to be proactive.
- Renew your lease as early as you can. The sooner you renew, the lower your rate will be. Unfortunately, your landlord is also aware of this and typically will not renew your lease if too much term is remaining. They’d much rather have you come back to negotiate at a later date, when rents are higher. Every ownership is motivated by different things, however, so it doesn’t hurt to begin the dialogue early.
- Explore options outside of your building. Even if you fully intend to stay, you need to get out in the market and see what else is available. You cannot expect to have any negotiating leverage with your landlord if their property is your ONLY option.
- Explore options within your current landlord’s portfolio. If you’re getting priced out of your current office space, perhaps there’s a less expensive option elsewhere in the building on a lower floor, or even within another building your landlord owns.
- Reduce your square footage. One of the most effective ways to reduce your monthly operating expenses is to simply lease less space. Identify inefficiencies within your current space and consider consolidation or reconfiguration. Are there employees in private offices that could be just as effective in a workstation? Could employees who are out of the office regularly share a common workspace? There also might be an opportunity to “give back” some space upon your renewal whereby the landlord carves out a section of your office and builds a demising wall, thus reducing your rentable square footage.
- Hire a commercial real estate advisor. Your broker is the best source of market information, and when you’re well-represented, your landlord knows you have access to valuable market information and may potentially relocate if they don’t offer you a fair deal. But your broker also knows something your landlord does: renewing existing tenants is cheaper for the landlord than signing leases with new ones. Should you leave the building, the landlord will temporarily lose rent while the space is unoccupied. Also, brokerage commissions and tenant improvement allowances are typically higher on new leases. Your broker will quantify these costs, translate them into real numbers your landlord can understand and then make a business case as to why your renewal rate should be lower than their current asking rate.
Rental increases are a natural part of the cycle and being prepared and proactive is the best way to mitigate an inevitable rental hike. Ultimately, you’ll need to weigh out the two options of either staying in your space and softening the blow, or relocating to a less expensive building or submarket.
See also: When is the Best Time to Renew an Office Lease?