Short Term Office Leases vs. Long Term Office Leases
A business owner who has to lease an office space is confronted by two options: leasing long term or leasing short term. Both options have advantages and disadvantages based on the set-up of the business and the preferences of the owner. A short term lease is an agreement to rent property for a short duration of time, usually shorter than a period of ten years. The short term lease specifically states the exact date when the property is to be surrendered back to the owner. There is no chance of converting a short term lease into a long term lease.
What are the advantages of a short-term office lease?
The business is not tied up to the property in the long term giving flexibility to the owner in case business in the new location does not thrive as expected or does not meet the projected degree of success. Relocating to another area could easily be done.
There is less responsibility of the tenant over the property such as maintenance concerns as compared to the added responsibility over the property in the case of a long term commitment.
It will be easier for the business owner to move to a bigger or better space when the business operations require expansion. Short term lease is the recommended option for businesses that are starting in a new territory or location.
What are the disadvantages of a short-term office lease?
The rent for a short-term lease is generally more expensive than in a long term lease. The landlord can increase the amount of rent every time the short term lease is up for renewal.
Business loses a great deal of money searching for a new office space in a different location when the short term lease is about to expire and there is no desire on the part of management to renew the lease. A long term lease is an agreement to rent a property for a period of ten years or more. This is the most common form of lease that involves commercial real estate such as office spaces.
What are the advantages of a long-term office lease?
The business owner does not need to worry about frequent rent increase as he is protected by the contract he signed with the landlord on a long term basis. The business owner will be paying the same rate of rent for the duration of the lease agreement. A long term lease can build long term loyalty and a solid clientele base because the company will be in the same location for a considerable length of time. The business owner can save a lot of money which would otherwise be wasted in looking for a new place and moving every few years. Rents are generally lower or cheaper in cases of long term leases.
What are the disadvantages of a long-term office lease?
The business is stuck with the lease for a considerable number of years even if the business is not performing well in the location. While the amount of rent is generally lower for long term leases, there is still the possibility that the leasing market could crash leading to much lower rate of rent. Since the business is covered by a long term lease, they are bound to pay the agreed rent even if the going rate is much lower than what they are supposed to be paying. There is less flexibility in the long term lease. The business could experience the need to either expand or downsize operations. In the event of expanding operations, there will be a need to rent another office space, either in the same building when available or in another building which could be far. This translates into bigger expenses for the company. In the event of downsizing business operations, the company is stuck with the current office space they are leasing, which could be too big for what they need. Again, this translates into bigger expense for the company.
The best kind of leasing arrangement for a business owner is one that fits well the goals and objectives of the business operations. The business owner and the management must take into consideration all the factors that will determine which is the best type of lease they should take. The rule of thumb, however, is for a small start up business to try first a short term lease.
The Kennedy Office Center offers the kind of lease that any business owner could be looking for. The Kennedy Office Center offers flexible leasing terms – both short term and long term leases to fit each tenant’s specific needs.