Guide | Planning Ahead for Your Next Commercial Lease

Commercial Real Estate Lease Agreement

If you've ever negotiated a commercial real estate lease, you know that they tend to be pretty rigid. One thing the COVID-19 pandemic taught us is that we need to be more flexible, particularly when it comes to where and how we go to work. Let's take a look at how all of that is changing and how sensor tech can help you plan for your next commercial lease.

Past, Present and Future of Commercial Real Estate Leases

"Flexible" is not a word many people would use to describe commercial leases — at least not in the past. They were typically available in 10-year terms and followed an industry-standard format. Prior to the pandemic, commercial leases were beginning to shift due to advances in technology. Newer practices, like teleworking and ecommerce, were slowly but surely forcing these changes. The Great Recession also had an impact.

The COVID-19 pandemic sped things up. The way organizations use their office space will never be the same, and both tenants and landlords will do better to figure this out sooner rather than later. That starts with ditching the standard 10-year lease and offering less lengthy terms. Another big change is that organizations won't be as excited about certain amenities, like fitness centers and conference rooms. Shared workspaces will also become more prevalent than ever.

This also means providing flexible space. With more and more employees working remotely, most organizations just don't need the amount of square footage they once did. That doesn't mean they're giving up their office space completely, but modifications must be made. Many organizations are offering their employees options like hoteling, hot desking or a hybrid schedule. In other words, multiple employees may use the same desk or office at various times throughout the workweek, which means employers may no longer need a designated space for each staff member.

What Does the Disruption in the Commercial Real Estate Industry Mean for Businesses of Different Sizes?

These changes won't just affect large corporations. They'll disrupt the entire commercial real estate industry.

Small businesses

Smaller businesses may find that the new demand for shared workspace benefits them and lowers the amount of rent they pay. They can also benefit from the shorter lease terms that are likely to be offered going forward. However, they may not be able to afford to modify a space if needed, and their landlord may not be willing.

Midsize businesses

A midsize business may have less certainty about the size of space it'll need as it grows in the future, and flexible rent terms can benefit it as well. But a midsize business must also be careful to avoid getting stuck with more space than it needs.

Corporate businesses

For larger corporations — and businesses of all sizes — these changes can provide them with more options. In a post-COVID-19 world, many organizations are choosing to move away from the city, and more flexibility in a commercial lease means more options. However, for larger spaces, there may be some debate over who is in charge of paying for modifications — the lessor or the lessee?

How Does Sensor Technology Help Businesses With Planning for Their Commercial Leases?

Navigating commercial leases in the near future and beyond will be quite different than it was even two years ago. One way to remove some of the guesswork and get exactly what you want is to rely on sensor technology. By adding sensors to desks, tables, conference rooms and other places where your employees work, you can get an idea of how your space is working for you and what changes you'll need to make when it's time to renew your lease.

Small businesses

In order to get an idea of what your workspace should look like in the future, you'll need to conduct some kind of occupancy study. An observational study may seem like a good idea, but it takes lots of time and manpower to get it completed and make sure it's 100% accurate. For a small business, it's nearly impossible. However, when sensor technology, you can get accurate data — without human error — from day one. And it only requires one person to read it and make decisions.

Midsize businesses

That midsize business that isn't sure whether it needs to expand or shrink its office space in the future can remove all doubt by adding sensor technology. While conducting your occupancy study via the technology, you can use daily reports to remain flexible. Over time, you can look at trends to determine what to do when it's time to sign your lease.

Corporate businesses

Larger corporations can benefit as well. With so many changes happening so quickly, you probably have dozens of questions about what your workspace can do for you. Sensor technology can provide the answers.

Regions Bank recently partnered with 4SITE by CORT to add sensor technology to its offices in Charlotte, North Carolina. The company used the real-time data it gathered to:

  • Reduce square footage per employee and overall space
  • Negotiate new lease requirements
  • Build a consensus within management for change
  • Overcome pushback to change, thanks to hard data
  • Rearrange floor plans to accommodate employee preferences
  • Achieve a goal to drive greater adoption of agile space
  • Protect employee anonymity
  • Reinforce company culture
  • Achieve five times annualized ROI in real estate savings

Let’s Get to Work

You can't afford to go blindly into your next commercial lease in today's rapidly changing climate. Let 4SITE by CORT help you measure twice and cut once and assist with predicting office lease renewals. Adding sensors to your workspace today, even if you haven't quite re-opened, can help you start planning your future the day your employees return to work. Like we did for Regions Bank, we want to help you create a more efficient space for your organization and save money on your next commercial lease. Call us today to get a quote or sign up for a sensor technology demo.