Most traditional office spaces require an annual or multi-year lease agreement. However, some startups and early-stage businesses might be uncertain about their business’s future and want to minimize the risks. If you’re not ready for a long-term agreement, consider a short-term office lease instead. Here’s what you need to know about a short-term office lease, as well as its pros and cons.
Short-Term Office Lease: The Basics
A short-term office lease has a span of 6 months or fewer. A month-to-month or weekly agreement for temporary office space is also common. The lease may or may not be renewed after the end of the term. Similar to most leases, the duration is based on the agreement by the 2 main parties — the tenant and landlord.
Short-Term vs. Long-Term Office Lease
A long-term lease has a fixed rent amount per year. If a tenant ends the agreement at an earlier time, they might have to pay a penalty.
A short-term lease has a fixed rent amount per week or per month based on the agreement. This enables landlords to quickly change the terms — as long as they inform tenants ahead of time. Some cities, such as the City of Vancouver, Washington, demand a 45-day written notice if landlords intend to raise the rent price by more than 10%.
Advantages of a Short-Term Office Lease
Many businesses want to set up shop in New York City because it puts them near potential investors, industry titans and networking events. However, some office leases in NYC require a 3- to 5-year commitment; this can be intimidating for startup companies that are uncertain about the long-term future. In this instance, it’s better for a business to enter a negotiable, short-term commercial lease agreement.
Here are a few reasons why users opt for short-term office leases:
- Startups and entrepreneurs can rent an executive suite per hour or day because they need it for meetings with investors.
- An early-stage startup may need a temporary office where they can meet clients as they start their business.
- An account manager could book a temporary office space to have regular meetings with nearby clients and close deals.
Spaces from WeWork and Regus usually have the necessary office furniture and equipment, so renters can efficiently come and go. However, confirm the available equipment with your landlord to determine if you need to purchase or lease items for your company.
Co-working spaces and sublets are also viable options for businesses that have only a handful of employees. It’s cheaper to rent an area with the necessary amenities than to commit to long-term rent. While these short-term leases might be subject to a price increase, some businesses prefer the option to quickly move out when plans change.
Advantages for Landlords
Short-term office leases are available in places where the demand for office space exceeds the available options for renters. This enables landlords to choose from a huge pool of renters every time the lease ends. If the demand is high, they could also increase prices for new leases and still fill the rented space.
Disadvantages of a Short-Term Office Lease
Short-term leases might not be the best option for some tenants and landlords. Below are some common disadvantages that you should consider.
Because short-term office leases are frequently renewed, a landlord could raise the rental fees on short notice. Some tenants might find it difficult to keep up with a price hike, and if they decide not to renew the lease, they’re faced with a quick turnaround time to find another short-term lease and move to another commercial property.
Change Agreement Terms
Landlords can change lease terms once it’s time to renew the agreement. Simply put, tenants who agree to renew the lease several times in a year could face difficulties if they want to stay in the office space but they don’t like the changes to the subsequent short-term commercial lease agreement.
Both landlords and tenants have the ability to end the lease agreement with short notice. This process might be stressful for landlords who have to vet potential tenants and regularly market their property. Meanwhile, tenants might have to hunt for new office spaces with little notice.
Tips for Selecting Temporary Office Space
How do you decide which commercial property is the best option for your money? Here are some tips to consider before signing a short-term commercial lease agreement.
Understand Local Laws
There are different laws for short-term lease agreements based in your area. Some municipalities have a laissez-faire approach; other towns have strict laws in place to protect tenants. For example, Seattle requires a 60-day notice before implementing a 10% or more increase in rental prices. When you review your landlord-tenant short-term office lease, keep in mind what rights and protections you’ll have (or not have) from the local government.
Be Familiar with the Space
Information is the key to choosing your office space. Make plans to visit the property, ask for pictures and check out the neighborhood. Determine the contact information of the landlord and reach out through a phone call or an e-mail. As a rule, be upfront about your needs when discussing details and negotiating the lease agreement.
A property should be safe and secure for all company employees. Determine if the rental property has any security measures—such as a door entry access control system, camera surveillance, alarms or a guard—available during and after working hours.
Determine Responsibility for Repairs
Repairs can be a big expense, so determine who will shoulder the responsibility. Although a landlord might be willing to pay, ensure that they will promptly respond to any reports from you.
Consult an Expert
The process of finding an office space and negotiating a lease agreement could be overwhelming for newbie entrepreneurs. You can consult a broker or real estate agent in the community to help you with the process.
Consider Parking and Bike Storage
Employees, clients, and investors will need space for their vehicles, so determine if there are nearby parking spaces. Having a secure parking lot is a big advantage. If employees use bikes to reach the office, ensure there’s a rack where they can securely leave their bikes.
Negotiate the Period of the Lease
The period of the lease is another important factor. While you don’t want to make a long-term agreement, you also don’t want a big price hike if you choose to renew the lease agreement in the near future.
Make a Back-Up Plan
If there’s a likelihood that you may not be able to renew your lease, it’s best to prepare ahead of time. Find options for office spaces before you are given a month or several weeks’ notice.