Restrictive Leases Spell Doom for Today’s Businesses?

12Jan09

With the credit crunch affecting all aspects of business, it’s important for companies to realize the areas where increased supply and falling demand can benefit them in terms of commitments in the short term.  Using serviced office providers as an example, an office building occupier that utilizes serviced over traditional office buildings has just unencumbered themselves of a restrictive lease (which for the most part are priced at pre-credit crunch levels) that never takes into account the currently falling prices of property throughout the multi-year term.

With traditional office leases, the owner/landlord may begin to offer more free rent periods in the hopes of ensnaring businesses that see this as a counterbalance for the higher-priced, restrictive leasing terms.  Unfortunately for them, in a year when the office market could very well reach record lows, they will be stuck in the same economically undesirable leasing agreement while their competition that have opted for trying out a short-term office solution like serviced/managed offices will be able to enjoy forging new rental agreements that exploit the adjusted market prices.  Imagine that the company with the traditional office is in the same market, and same area of business as the serviced office—it’s not hard to extrapolate the result of one company having a huge financial and flexibility benefit over their rival.

While not every business will benefit from short-term office solutions, it certainly remains the least expensive, lowest-risk alternative option for testing out new business locations, avoiding restrictive leases, and freeing-up revenue for the rough economic ride that many companies are in for as the full-effects of the possible recession come to fruition in the years to come.

Filed under: credit crunch, Office Space, short term   |  Leave a Comment