Office Relocation – How Much Time Should We Allow?
The office lease is coming towards the end of contract and you need to make that agonizing decision – ‘do we stay or should we move?’
Either way, it’s a huge distraction from your day to day task of running your business and is, unfortunately, often parked to one side and taken seriously only when it’s too late – too late that is to negotiate the best deal, or to find the ideal location, or, worse still, ending up in limbo without an office at all.
Moving office is always costly (and I will go into that later), but missing the deadline can be far more so, and potentially detrimental to your business. So, my advice is to start looking, or at least planning what you want to do and where you want to go as early as you possibly can – a year in advance if necessary – because in my role as an office fitout coordinator I’ve seen it time and time again; property searches, landlord negotiations and the usual legal due diligence & contracts that take many months rather than a few weeks as many had hoped and ending up either falling through or running beyond the deadline (and sometimes going ahead but with serious compromises). You become stressed because the sodding office issue has taken over your life and you can’t focus on running your business, we get stressed because you’re asking us to make a commitment to scheduling an office fitout that you don’t yet have (and incidentally we will invariably not be able to make that commitment which will anger you even more!) and you develop an overwhelming hatred of landlords and their lawyers.
The landlords and their lawyers seem very adept at drawing everything out to the last possible moment. Whether this is by design or simply that it genuinely takes that long I don’t know, but it will more often than not put you, the lessee, in a compromised position whereby you have no option but to sign up to less than ideal terms.
I’d like to explore the main issues you might encounter, and explain why it’s necessary to put certain processes in place.
Firstly, 3 months is simply not enough time (usually) to find a new office, check that it is the right size and shape to allow the layout you need (that’s where people like me can help with measured surveys and space planning), getting quotes for fitting it out and being sure you can afford it, agreeing the Heads of Terms and finalising the contract and then fitting out the office before you can move in!
Here are the staged processes:
- Weighing up whether you stay put and negotiate a new or extended lease with the existing landlord, or move office.
- Assuming you decide to move, you need to determine how large an office you need, where it should be (location), and how much you can afford. At this point, it is important to factor in not only the cost of ownership of the new office (fitout plus ongoing rent, rates, service charge etc and dilapidations) but the cost of dilapidations on your existing office and the cost of moving. Dilapidations are often overlooked but the cost can come as a massive shock to SME’s. More about this later
- Appoint an acquisition agent (a property agent who specialises in finding, rather than selling or disposing of, commercial property) to search for the office and negotiate the best Heads of Terms for you. You can do it on your own by trawling the internet and speaking to dozens commercial property agencies, but you probably won’t find everything that’s out there and you probably won’t have the experience to know where to pitch your offer in order to get the best price. A good acquisition agent will have instant access to database of every property available matching your brief, and will have the knowledge of the market in order to know exactly how hard the negotiations can be. Of course, you’ll pay them a fee and it could be argued that it is in their interest to find the highest priced property possible so that their percentage fee is of more value to them, but you will find most to have integrity and work in your interest.
- Once you’ve identified an office you think might tick the boxes, discuss with the landlord (via your agent if you have one or directly if not) to get a feel for what terms they might offer. At this point its best not to get the lawyers involved until you’ve got an indication of what the agreement might be, and that you’ve addressed items 5 and 6 below.
- Get someone in immediately to do some space planning – by all means give me a call and see if I’m free as I’d be delighted to help you if I am – before you get into any form of lengthy and costly negotiations with the landlord. At this stage, it’s important to make sure that the office is going to accommodate all of your staff with the space, functionality and layout you need. If you think you need, for example, 3000 sq ft, don’t assume every 3000 sq ft office is the same – because it isn’t. Some will have dead space that you’d be paying for but which you can use whereas others will have far more usable space. Furthermore, the floor area stated in the letting agent’s blurb might be the NIA (net internal area) calculated using the UK specific and older Royal Institute of Chartered Surveyors (RICS) code of measuring practice, or the later international standard IPMS3. Both measurements are likely to return different results – possibly considerably so – and more often than not it is the NIA that would be more representative of the actual usable space you will have available to you.
- If the space planning works ok, get a reasonably accurate estimate of how much it’s going to cost to fitout the space the way you want to make sure you can afford it. Bear in mind again the cost of dilapidations at the end.
- The agent should now be in a position to progress further with the landlord or their agents in tightening up the heads of terms and, if satisfactory, getting the lawyers involved to progress to a conclusion.
Of course, timing depends on a host of different factors, size and type of office one of them, and its reasonable to assume that the larger and more expensive the office the longer it will all take (not least that the fit out of a large office would usually take longer than that of a smaller one). That said, for the purpose of this article, my experience is in the SME business sector with offices of 1000 to roughly 10000 square feet in size and this is what I’ll focus on.
So, how long does the whole process take?
Property Search and Legal Contracts:- Well, as they say, how long is a piece of string? It might take ages to find the right property and you might then be involved in equally lengthy negotiations with the lawyers to get the lawyers to get the heads of terms and contract agreed. It never ceases to amaze me how long the landlords’ solicitors take over this matter, and how relaxed some landlords are whilst they have office space sitting empty, costing them rates and generating no rental income, but that’s how it seems to be and prospective tenants should anticipate this process may drag out into months rather than weeks. And besides that, the prospect of gazumping shouldn’t be ignored either. Our advice is that, as mentioned earlier, is not to try to do everything yourselves and save money but to get yourselves a good acquisition agent to find you a property to match your brief and to negotiate the heads of terms. Yes, you will pay a fee, but its more than likely that you’ll get the office you want – at a price that you probably wouldn’t have been able to negotiate yourselves.
Scheduling:- A slight deviation from the main topic here, but you must appoint a single main/principal contractor to take control of the entire project. This is a legal requirement and you can not commission different companies to engage in different aspects of the fitout works – at least you can if you wish, but you will then automatically take on all the responsibilities of ‘principal contractor’ which is, please believe me, not something you will a) want to do and b) likely to be capable of doing unless you have specific and extensive experience in the construction industry. The moment in time that you have signed the contract with your main contractor is the time when you can expect them to start making preparations. This will involve CDM as mentioned above (don’t expect them to begin this sooner without a contract) and scheduling (again, don’t expect them to schedule labour resources and order equipment and materials until they have a firm contract in place). Dependent on the scale of the works and the specification of materials and furnishings, scheduling labour and leadtimes for materials can range from a few days to many weeks. But as a starting point, on a relatively straight forward smallish project using standard off-the-shelf materials, you should perhaps allow at least a couple of weeks.
Building Control & CDM:- Before work can even begin, the building control department of your local authority needs to be notified as to what work you intend carrying out. Your contractor absolutely must not start work on site until such time as they have acknowledged your application and formally notified you that it is ok to begin work. This typically takes around 1 week from the time of submitting the application. Your project manager (usually appointed by the main contactor) will need to produce CDM (Construction Design Management) documentation which would include risk assessments and method statements and, if there is likely to be more than a certain number of workers working on-site at the same time, or if the project is likely to take more than a certain amount of time, a form & documentation needs to be made to the HSE. On a large scale project this could involve a number of weeks work and planning, but for the purpose of a small project it is possible that this could be done within a few days – possibly whilst awaiting the go-ahead from building control.
Office Fitout:- By enlarge, the larger the project and the more facets it has to it – i.e. strip out, partition building, floor laying, electrical and data cabling installation, teapoint, lighting etc – then the longer its going to take. Yes, we can put more people onto the job to make it happen more quickly, but this only works to a point. Legislation, health and safety and straight forward practicality means that there is a finite limit to how much can be done at the same time. Processes need to be carried out in sequence and most often one element can not be done until the previous one has been completed otherwise we end up getting into a complete mess, producing a substandard finish and more likely, simply slowing everything down because one trade is getting in the way of another and everything grinds to a halt. So, it doesn’t matter how many people we throw at it because there is a point at which the work can not possibly progress any faster. Other factors that come into play are the availability of materials. If off-the-shelf immediately available products are used, then everything can progress a lot faster than if they have a leadtime of days, weeks or months. That said, the absolute minimum you should allow for an office fitout should be 4 weeks, and that’s a small and very straight forward job with immediately available materials – and taken from the time the work starts on site rather than when you give the go-ahead to the contractors to engage in the project. Realistically, you should allow 6 or more weeks for even a relatively small project.
Moving Office:- Allow plenty of time for the actual office move, particularly if you’re also taking with you all or most of the existing office furniture. You can not have your staff, your IT people or removals personnel trying to move things in or setting things up whilst the fitout is still in progress. It is likely to be a safety issue and it is likely to delay the completion of the works.
Carrying out Dilapidations Works:- If you’re moving out of an existing office you will have to honour the dilapidations clause written into the original lease agreement and normally the landlord will expect you to return the space to its original state – i.e. the exact same layout & finishes and in the same condition as it was when you took out the lease. Hereby lies a few problems for most office occupiers, because firstly it can be VERY EXPENSIVE, secondly this is work that can not generally be done until after you’ve moved to your new office – i.e. you need the existing office to be completely empty before this work can start and thirdly, the landlord is probably not going to let you back in to carry out the work once the lease has expired. That means you’ll need to time the move such that you’re fully installed and operational in your new office a few weeks before the lease terminates on the old one, in order to give yourselves time to do the dilapidations work. That means paying rent, rates and service charges on 2 offices for a period of time, which might not be insignificant, and thus adding to your costs and considerations.
Very often, given the complications stated above, the tenant agrees a settlement price with the landlord so that they can walk away without having to worry about the dilapidations, but invariably it will be weighted very much in favour of the landlord.
Anyway, if there are works to do and you choose to do these yourselves, then it can take as long as, and cost as much as, the original fitout you commissioned – particularly now it will invariably involve stripping out and disposal as well as repair and re-instatement work.
There is no definitive answer here. There are too many variables that will determine how long the whole process will take, including size of project and how quickly you are able to identify and secure a suitable office space. It’s probably fair to say that the property search and contract negotiation is the biggest unknown because much depends on luck in finding and agreeing terms quickly and first time around rather than having to repeat the process multiple times (having found that after space planning perhaps it doesn’t work quite how you envisiged, or that you get gazumped, or that you reach a stalemate in lease negotiations).
That aside then, let’s look at typical minimum timescales based on a 3ooo sq ft office that has already had a basic landlord’s Cat A fitout (all the essentials such as raised access flooring, air conditioning and lighting and all plant and all finishes are new or in very good condition. In this example, you need minimal design work (interior design work for a large office space can otherwise take weeks or months) some partition walls, carpeting or LVT or both, under floor power distribution system (Electrak or similar) plus floor boxes, power outlets and data cabling, kitchen/teapoint(s) and finally new office furniture.
Minimum typical timescales based on the above
Office search: 6 weeks
Contract/legal process: 8 weeks
Fit-out from point of contract: 10 weeks
Total: 24 weeks / 6 months
Plus, if you choose to commission the dilapidations on your existing office yourselves, then allow at least a further 4 weeks after you have moved out.
To many readers, this may sound pessimistic – surely everything can be done far more quickly? Well the reality is that sometimes it can, but so often it can take far longer than this (bear in mind we are talking about typical minimum timescales for a specific size and specification of office and fit-out so different briefs will change the predictions).
The earlier you begin looking and planning, the better!