Are you thinking of entering into a commercial lease for the first time? Read below for an introduction of what to expect and look out for when you’re moving your business into a new headquarters.
Obviously for any lease you are considering, it’s important to know what the terms and conditions are. In addition to reading through all the clauses yourself, most people will get advice from their business management team such as accountant or solicitor. If you sign a net lease, on top of your rent you will also need to pay your landlord outgoings. Outgoings are your share of the building’s operating costs including energy, maintenance, cleaning and repairs. Your lease should specify how these costs will be structured and what actual services will be included.
The first bit of good news is that tax wise, you can deduct the cost of your rent if you register your new office for lease as your business premises. If applicable to your circumstances, you can also claim GST credits subject to the lessor’s GST registration.
Not all leases are long term, some people simply rent out conference or meeting spaces as needed on an ad hoc basis. This can be a cost effective strategy if you’re not regularly meeting clients and already have a place to perform the bulk of your work, such as a home office.
Another cost saving tip can be to seek out a lease that is within a suitably energy efficient space. Simple things to look out for include the presence of natural light, but west facing windows can often contribute to excess heat gain. Ideally lighting is zoned so you don’t have to have an all or nothing approach to the use of electric lighting, bonus points for movement sensors that turn lights off when no activity is occurring in an area. Look for a building with a high NABERS rating (National Australian Built Environment Rating System), aim for a minimum of 4.5 stars.
If you want to care for the environment and reduce costs, you may consider signing a gross lease which includes your outgoings as part of your ‘rent’ payment. When the landlord is responsible for building costs, they too have an incentive to make a space more energy efficient to improve their margins. However, be sure to compare the market and know if you are being charged an excessive premium to sign on a gross lease, it may not always work out in your favour financially.
Choosing a suitable location to base your business can be tricky if you are unsure what to prioritise – customer convenience, price or facilities available in a building. Sometimes you can be lucky on all three fronts, but you’ll often get what you pay for. A well located commercial hub will often come with an appropriate price tag in terms of rent. However, if it meets the needs of your business and offers easy access for you, your clients and suppliers, it can be worth the investment.
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.