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Why Business Owners Should Find New Office Space During the Recession

30 Nov

Conventional wisdom would have it that the midst of a recession is a time for business owners to run and hide. Batten down the hatches, reduce all risky moves and wait out the economic storm in the hope that they can raise the sails once the worst has passed. A recession is no time to expose a business to risk.

In most cases this holds true. The current global recession has put everyone on the defensive, and most business owners have responded with caution. Nobody dares take risks; one wrong move could sink a business.

However, that isn’t the whole story. In fact, the depths of the recession can present businesses willing to take measured risks with great opportunities for short term benefits and long term growth.

 Moving in a Renter’s Market

The leasing of office space makes up the lion’s share of the overhead for most companies, and this is especially true in cities such as London and the business centers of mainland Europe. Even after several years of recession and glacial growth the property markets in Europe’s business centers are still expensive, but there are opportunities there for those who can find them.

Right now it’s a renter’s market. Most businesses are loathe to move to new office space; they don’t want to lay down even a penny of capital, and they certainly don’t want to make any long term commitments with the uncertainty of the coming months and years. As a result the rental market has become relatively stagnant. Few new leases are being signed, and landlords are surviving on the revenue from their existing tenants.

Taking Advantage Of the Downturn

As a result of this stagnation it’s possible to secure excellent terms on prime office space. Those businesses willing to risk a move can find leases with relative ease that offer rent free months, flexible lease conditions and even the occasional incentive such as free parking, bundled utilities or cut priced janatorial services. Some lessors may even offer a rental rebate up front to cover the cost of modifications to your specifications. Landlords are desperate to lease their space, and the power is very much with renters.

The greatest perk here is the free rent that may be offered to lure in new tenants. Depending on the length of the lease, several months free rent as a ‘moving in’ bonus could reduce your effective rent considerably – perhaps even allowing you to occupy larger premises at a lower cost (over the life of the lease) than you currently pay. For example, when UBS Financial Services recently leased new premises in Manhattan’s Park Avenue their ten year, eight month lease came with nine months of free rent and an allowance for work on the property, reducing their effective rent from $75 to $56.99 per square foot.

Cutting Costs to Survive the Recession

While moving into larger premises may be appealing, perhaps a more sensible option would be to trim overhead by transplanting to a smaller space. If your current lease allows you to move it may be worthwhile to work out exactly what space you need to function right now, and how much you’ll need to account for modest growth over the next few years.

If you’re currently leasing London office space in the heart of The City you may be surprised at just how much you could save with an incentivized move to smaller premises nearby.

Why You Should Act Now

While the market can be cruel and unforgiving it’s a fact that it often rewards risk takers. Right now the opportunities for those looking for new office space are attractive, but as the economy grows – no matter how sluggishly – the demand for office space will once again increase and the incentives will begin to vanish.

Those business owners willing to take a chance will find leasing terms more attractive than any they are likely to see in the future, but those who decide to ride out the recession in their current premises may find a resurgent market tipping back towards landlords when the time comes to move.
If your business is secure enough to survive the turmoil of a change in premises this may be the right time to consider a move. The risks may be considerable, but the advantages for a business making the right move at the right time may outweigh them.