10 things to watch out for when...Negotiating an office lease

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Published: 12:00am, 17 Nov 2002

Negotiate: Lease terms almost always protect the landlord's interest but you can improve them greatly with a little knowledge and negotiating savvy, according to Lynne Poelmann, managing director at Poelmann Chan Group (www.pcg.com.hk). Commercial property indicators for 2002-2003 forecast further declines in rental and occupancy rates, so make the most of your rental dollars.

Net floor area: Many leases state a lettable rent per square foot but this rate can be misleading as it usually includes your share of communal areas such as corridors and lift lobbies. Ask for a plan to scale so that you can check the actual area and consider the efficiency of the space.

What is included? The term 'bare shell' can have different interpretations. As a minimum, expect heating, ventilation and air-conditioning equipment and a fire-safety sprinkler system. Ask for extras - some landlords will throw in carpet tiles and furniture.

Allowable uses: Ensure your business and future plans suit the building's usage policies and that neighbouring businesses are compatible. Use common sense to determine whether your neighbours are high-traffic generators that may cause interruption to your clients or operations.

Safety: Check that the landlord follows current fire safety standards, that other tenants do not block fire escapes and fire doors are kept shut. If it is an older building without a wet sprinkler system, find out if such a system will be installed in the future.

Overall value: Analyse the entire package, not just the rent per square foot cost. Who pays for utilities, insurance and maintenance? What are the operating hours for utilities? If you require 24-hour air conditioning for your data room and the cost is extra, you may be shocked at the rates.

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