Why a Long-Term Lease Is A Shortsighted Decision For Your Business

by Knotel: Dec 13, 2017

With sharper competition coming to market each year, it’s impossible to accurately predict what your business will look like years from now.

Your landlord, however, will still require you to sign a 10-year office lease.

The advantages of a long-term lease revolve around stability: a set location for an extended period of time and the security in knowing that rent costs won’t skyrocket year after year. But when companies find themselves locked into a lease that no longer fits their business model, they experience a frustrating discrepancy between the product and their needs.

THE COST OF LOSING FLEXIBILITY

Leases force companies into two bad choices: buy too much in the hopes you’ll grow into it or buy just enough and risk outgrowing it. Either way, you’ve sacrificed flexibility.

If you buy too much, you’ll be wasting money on unused space and have two options: either sublease the entire office or sublease a portion of the office to offset your costs. If you outgrow your office before the lease terminates, you’ll be forced find a subtenant while also restarting the multi-month real estate search process for yet another restrictive lease.

In either scenario, you’ll spend six months on average finding a subtenant while incurring significant costs, including but not limited to broker commissions, “free rent” concessions, free furniture, and the potential to pay “double rent” on multiple offices. That’s money that could have been better put to use on securing top talent.

FUTURE-PROOFING YOUR BUSINESS

When was the last time you spent $1M on moving, renovation, and recurrent office expenses? That is what long-term leases are asking for.

If you’re a 50-person team looking for a 20,000 square foot space in the heart of Union Square that will allow your team to grow to 100 by the end of the year, you’ll wind up spending upwards of $1M on your security deposit, furniture and upfront expenses on a 10-year commercial lease. A restrictive lease prevents you from future-proofing your business during the highs and lows that your team will inevitably experience over the years.

flexible terms

Why a long-term lease is a short-sighted decision for your business

What happens if you have space you never outgrow? That’s Knotel.

If the same 50-person team with the same expectations signed with Knotel for more than a year, expenses are cut in half, and the terms are tailored to make sense for your business goals. Your company can focus on what matters most: the future of the business. Not office space headaches.

“The flexibility that Knotel has given BentoBox while we’ve been growing has been unbelievable,” says Krystle Mobayeni, CEO of BentoBox, a SaaS hospitality management platform that grew from 20 to 50 at Knotel Houston.

“Figuring out office space as we scaled our team could have been a huge distraction, but we were able to focus on the important things. We feel like we have a true partner and community that supports our growth.”

The choice ultimately comes down to one question: are your resources better spent on finding office space or on growing your business?