Flexible lease terms have become popular in the commercial real estate market. That’s because they offer businesses greater freedom and flexibility in their office space arrangements.
What are flexible lease terms?
A flexible lease is one in which tenants are usually able to adjust leasing conditions to meet their specific needs. For example, they may need to rent office space for less than a year. Sometimes referred to as a short-term lease, the terms of this agreement must still be mutually agreed upon by both tenant and landlord. However, the duration of the lease may be flexible, scaled up or down by the tenant’s needs or the landlord’s preference.
There’s no question that a flexible lease can be appealing for some businesses. Before signing such an agreement, however, it’s essential to understand some of the risks associated with this decision.
5 Disadvantages of Flexible Lease Terms
1. The long-term cost of leasing office space may be uncertain.
Since flexible lease terms often dictate shorter lease agreements, landlords have more opportunities to adjust leasing rates. This can make it difficult for businesses to budget long term commercial office space rental costs. Changing lease rates could also make it necessary for businesses to relocate altogether. Unpredictable expenses or moving costs can potentially interfere with cash flow and overall business operations.
Leasing tip: Always make sure you understand the lease terms before signing an agreement. When possible, ask for terms that offer some sort of certainty like a cap on rent increases. Also consider whether or not your company can commit to a longer term to help mitigate rent increases in the near future.
2. Flexible lease terms may limit tenant improvements.
With a shorter lease term, landlords may not be as agreeable to significant modifications. This may make it difficult for businesses to create a customized office space that fits their brand and unique operating needs.
Leasing tip: Before signing a lease, determine what improvements are essential. Negotiate with the landlord to ensure that these customizations are included.
3. Shorter lease terms means less stability.
Multiple moves within a relatively short period of time can interfere with employee morale, productivity, and overall business profitability. Additionally, the need to constantly be on the lookout for available commercial office space to lease can distract business owners from their overall objectives.
Leasing tip: If you value stability, choose flexible lease terms that have a longer duration.
4. Flexible lease terms often come with less negotiating power.
When it comes to lease renewal or rent adjustments, tenants may not have the same success with negotiations as they might with longer term leases. The landlord may have the advantage, especially if the business is desperate to keep operations in a particular location.
Leasing tip: Keep an open line of communication between your company and the landlord. Be proactive about what your business needs to succeed and learn how to be a model tenant. Landlords will be more likely to negotiate favorably with tenants who have proven to be trustworthy and reliable.
5. Frequent moves may affect business identity and brand recognition.
Have customers or clients become accustomed to your company’s location? Flexible lease terms that cause you to relocate frequently within a short time period could cause uncertainty and confusion about your business.
Leasing tip: Choose longer term leases in order to maintain a consistent brand image and market presence.
Lease Commercial Office Space in the Dallas-Fort Worth Area
TXRE Properties is based in Irving, TX but we have a large portfolio of office buildings with commercial office space for lease in the DFW metroplex. This includes Arlington, Dallas, Fort Worth, Hurst, Euless, Plano, Bedford, and surrounding areas.
Our leasing associates and marketing directors are committed to helping you find the ideal office space for your business, along with the lease terms that meet your specific needs. Contact us today to learn more about our property locations and current office space availability.
