5 Questions Businesses Should Ask Before Signing Office Leases During COVID

Entering into an office lease during COVID comes with a unique set of issues and concerns. Before you sign a lease for business office space, ask these five questions.

When the COVID-19 pandemic hit in March 2020, many businesses declared their employees would be working from home until “at least the end of the year.” Twitter famously declared its employees could work from home “forever,” other big tech companies followed suit, and the gross leasing volume of offices dropped by 53.4% in the second quarter of 2020 alone. This amounts to a loss of 14 million square feet in office space.

But somehow we made it to 2021, and with no end to our current reality in sight, questions are beginning to arise over how long office workers can sustain a fully remote working environment in the long term.

Psychologists have identified particular problems with the remote model, including loneliness and the limitations of digital technology, which indicate that the longer it continues, the more it could become problematic. 

Instead, perhaps you’ve decided on a hybrid working model and you’re thinking about returning — in some capacity — to a permanent office space. Or maybe you’ve been looking to downsize your office for some time now but cannot work your way out of a multi-year office lease you’re already tied down to.

Either way, in the context of a global pandemic, office lease decisions should be approached carefully. And while making informed choices for the future is difficult at the moment, taking the time to stop and ask yourself the following five questions could be a lot more valuable than you might think.

What Does Your Workforce Want?

As managers, you’ll know by now that a top-down management style doesn’t work well during a pandemic. With homeschooling responsibilities for parents, a brewing mental health crisis, and the constant anxiety that comes with trying to avoid catching a deadly virus, our new working realities have become much more complex, flexible, and spontaneous than before. 

Now is a time for leaders to show compassion, to interact with their employees, listen to them, and make collaborative decisions. So seek feedback! Whether it’s through polls, anonymous surveys, or team meetings, ask your workers how they would like to work in the near future and take their answers into consideration.

For example, research by Slack’s Future Forum shows that 72% of workers would prefer a hybrid work model in the future, and never want to go back to how working was before. Only 12% would be in favor of returning to full-time office work once COVID-19 vaccinations have been administered. 

How Do You Calculate Office Space Requirements?

With some form of social distancing likely to be a requirement until at least 2022, calculating how much office space your company might need is now a very different decision-making process from how it used to be.

In order to meet guidelines and maintain a distance of at least six feet between people who do not share households, businesses would need to allow an average of 147 square feet per person, a sharp increase from pre-COVID office space guidelines of around 100 per person.

In order to calculate how much space you need for your next office, it’s then simply a matter of multiplying the number of square feet required per employee by the average headcount you can expect to see in the office on a daily basis. 

And this depends on the model your company is looking to adopt going forward. If your company is opting for a hybrid work model, the number of employees using the office on a daily basis will naturally be lower, meaning you might be able to downsize your office, even while observing social distancing guidelines. However, if you plan to accommodate for your entire workforce, this could mean increasing office space by more than 20%.

How Should You Negotiate Lease Terms During COVID?

Commercial real estate has fallen off a cliff this year, meaning landlords are faced with a renters-market due to rent deferrals, tenant bankruptcies, rent holidays, and other concessions such as eviction moratoriums. 

With the market so weak, this leaves businesses with an advantage when it comes to negotiating lease terms. If you happen to find yourself in this position, you can try negotiating an adjustment to your commercial lease which will offer long-term value for a landlord — who is likely to be willing to negotiate — and short-term gains for you. 

Suggested modifications include: 

  • Lower rent terms: with the market as it is, prospective tenants are likely to be able to negotiate with landlords for lower rent terms. 
  • Rent deferral: some landlords will be willing to allow future tenants to delay rent payments for a period of time on the assumption they will pay them back later.
  • Pay rents upfront for bulk discount: if you have the financial capability to do so, most landlords will accept an upfront payment of future rent in return for a discounted rate. 
  • Increase security deposit: agreeing to pay a higher security deposit to your landlord could encourage them to provide rent relief if you ever find yourself in a financially unstable situation. This is helpful for tenants who anticipate uncertain times ahead for their business.
  • Elimination of tenant rights: by eliminating certain rights that come as part of a commercial lease — such as the right to extend the term or expand the premises — tenants can also negotiate a cheaper monthly rental rate.
  • Landlord lien: by giving your landlord the right to sell abandoned personal property on the premises to cover unpaid rent, you could further incentivize them to accept a cheaper monthly rental.
  • Subletting: if this works for you, you could also agree for your landlord to sublet a portion of the premises to another tenant in order to increase their income.

Whatever deal you come to with your landlord, make sure to approach the conversation objectively and openly, providing all the financial information necessary.

Are Coworking Spaces a Good Alternative?

Before you decide to sign an office lease, it’s also worth weighing up the pros and cons of renting a coworking space instead. 

Flexibility, cost, and creativity are three of the biggest advantages of coworking spaces over traditional offices. You can lease private office space or hot desks within communal areas on a monthly basis, enabling you to easily scale up and down in line with your business’s office space demand. And Compared to a traditional office lease, coworking spaces are usually a cheaper option. 

In terms of creativity and collaboration, coworking spaces can be great for this, as there are plenty of other businesses and professionals to network with inside the space, as well as regular events. 

However, coworking spaces can have plenty of drawbacks for businesses used to having their own office premises. These include lack of personal branding, which can be an issue if you receive plenty of clients who expect a certain image as well as a lack of available meeting rooms and other spaces, which have to be booked well in advance in a coworking space.

More generally, you don’t “own the space” which may be a hard adjustment for some businesses, as this can cause issues with privacy and with creating the right type of work environment that’s best for your business and employees.

And finally, the potential for COVID-19 transmission is less-easily controlled in a coworking space, given there’s a high possibility of chance encounters with workers from other companies, whose COVID screening protocols may be out of your control. 

What’s the Best Way to Support Hybrid Working?

After consulting your employees, if you find they are in favor of a hybrid work model that will allow them to mix remote work with reduced office time, you’ll need to implement measures to ensure that the smaller office space you’re about to sign a lease for will continue to serve the needs of your business in the long term. 

In order to ensure the space doesn’t become overcrowded at a later stage, it’s a good idea to create rules around how often employees can work from home and how often they can work from the office. These can be facilitated through sign-up sheets or rotas. 

And likewise, it’s also your responsibility to give employees all the tools they can to continue successfully working from home. Although this might mean shifting funds from other parts of your business, if you haven’t already, you’ll need to invest in making your employees’ home office as comfortable as possible. 

This could include anything from providing equipment or internet upgrades to childcare resources or benefits, supporting your employees’ mental health, providing online training sessions, offering flexibility, and investing in as many tech tools to enable teams to collaborate and continue to work productively from a remote setting.

In sum, asking yourself and your team these questions before signing an office lease is not intended to be a means of discouraging you from doing so. What it will do, however, is help to structure your thought process before making an informed decision that could potentially carry deal-breaking consequences for your business during the pandemic and after.

About the Author

Adam Day is the President & CEO at Time Rack, a time and attendance and HR services company, providing time tracking software, hardware, and mobile apps to businesses.

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