Strategies to Lower Office Lease Costs

In challenging economic times business owners must be creative in seeking ways to lower the costs of running their organizations. At the same time they must maintain modern workspaces in order to keep valued employees and to provide an attractive hiring environment when business conditions improve.

“It is possible to take advantage of a slow economy by securing more attractive lease terms for office space – an action that can pay big dividends when economic conditions improve,” says Mark Bassil, co-founder and vice president of MAiSPACE, a Mt. Olive, NJ, based manufacturer of modular office furniture systems. “If current leases are expiring or there is otherwise an incentive to rewrite terms, business owners have two things going for them. First,” he suggests, “building owners with a surplus of empty office space on hand might be receptive to writing more favorable lease terms. Second, business owners can bargain for even more favorable terms simply by negotiating for unfinished floor space rather than paying their landlord to furnish the facility and tacking the cost onto the monthly rent.”

The second point particularly applies when the floor space being negotiated is 50,000 square feet or less. “Generally, building owners have little interest in taking on a furnishing job of that size,” Bassil says. “Instead, business owners will manage the project internally by contracting with a full-service systems furniture vendor such as MAiSPACE.”

Bassil recognizes that timing is important with respect to current lease terms and that landlords may be in the driver`s seat with respect to their own inventory of floor space. “Nevertheless,” he says, “business owners and their facility managers should keep current with commercial real estate trends and familiarize themselves with the cost-saving advantages of systems furniture. By being informed they can be in a position to move more quickly when opportunities arise.”

Saving Now and Down the Line

High-quality stackable panel systems furniture configured as office cubicles, collaboration and reception areas together with modular movable wall systems for conference rooms and private offices are attractive to all parties for many reasons. “As suggested, systems furniture can simplify the entire negotiating process,” Bassil says, “because landlords don`t have to devote their time and resources to the project. Business owners can shop for the most favorable terms in fitting out the space.”

According to Bassil, that`s the systems furniture solution. “We have helped companies put together stunning offices running from two to several hundred units, and at prices starting from $12 to $15 per square foot installed,” he points out. “Local MAiSPACE dealers and distributors team with specialists at interior design and planning firms to take on turnkey projects that are move-in ready within 4 to 6 weeks of receiving the order. This removes a lot of headaches from management, allowing them to concentrate on running the business instead of designing workspaces.”

Fitting out costs are also reduced thanks to the MAiSPACE patented plug-and-play voice, data and power cabling system. Cables are laid in behind lift-off panel segments, not fished through structural elements. Strategically placed consolidation points simplify adding or removing cubicles by plugging or unplugging them at the nearest consolidation point. “This feature alone saves substantially on installation costs because cabling can be performed by furniture installers at a lower cost than charged by telecommunications professionals,” Bassil says. “Subsequent moves, adds and changes (MACs) can be performed by office IT professionals after a minimum of training.”

Longer Term Savings Strategies

Bassil suggests that business owners request credit for the improvements in furnishings and fittings such as carpeting and lighting that will remain if and when they relocate at the end of their lease. “While MAISPACE quality construction supports trouble free initial installations, it also remains distortion free during MACs – including relocation to another site,” he says. “Adding to the MAiSPACE value proposition is our lifetime warranty and guarantee against obsolescence. While these features do not directly apply to lease costs, they substantially reduce lifetime costs of the systems furniture installation.”

Tax saving can also enter into the picture. Because systems furniture elements including cubicles, furnishings and movable walls are not considered as part of the building`s physical structure they may qualify for accelerated depreciation and therefore provide attractive tax benefits. Bassil points out.

“Another way companies can lower up front costs associated with upgrading their office space is to consider leasing rather than outright purchase. This can also provide tax advantages,” Bassil says. “Take as an example fitting out 12,000 square feet for a 60 month lease. Upon qualification a business can lease everything required – including furniture, accessories, installation, delivery and other soft costs – for $3,747.60 per month or $0.31 per square foot. The example,” he explains, “is based on our $15 per square foot installed price, which as an outright purchase would be $180,000.”

Companies should review the tax advantages of lease vs. purchase with their tax accountants.

Stackable panel systems and movable full walls can be an important part of a company`s strategy to lower office lease costs for the present and the future, Bassil concludes. “These solutions meet the technology and versatility requirements today and down the road. Owners of small to mid-sized businesses should look to fully integrated turnkey solutions offered by systems furniture manufacturers such as MAiSPACE and its lineup of dealers, distributors and interior design firms.”