When our (often foreign) clients ask us what the standard term of an office rental contract is in Belgium, we refer in the first instance to the classic 3-6-9 terms that apply as 'generally accepted principles'. These principles are often confused with 'legal' periods that can be taken or allowed to be taken. Not so! Office tenant and landlord are free to agree on what they want. But what does the tenant best agree on in terms of time limits?
A lease is a long-term commitment one enters into as a company. Moreover, it is one of the largest (fixed) cost items in addition to personnel costs. It is therefore worthwhile to rethink this carefully in advance. We believe a lease should be optimally aligned with your (long-term) business strategy. Numerous conversations with corporate CFOs showed that most of them have a 5-year financial business plan. Looking ahead for about 5 years is still quite successful, after this period predictability becomes harder for business leaders and many management committees due to the rapid economic evolution.
If we take a look at the 'classic 3-6-9 periods', this means that the first cancellation option will come 6 months before the expiry of the first 3-year period. Only 2,5 years after the move in or signing of the current lease contract. This means you would study your needs again two years after moving by confronting your current accommodation. If other conclusion than 2 years before would arise, this would mean (with the exception of eg mergers) that your initial homework was not done properly. The first so-called 'break option' is therefore unnecessary. A flexibility in the lease that you almost never need but for which you will pay a lot. After all, the owner / lessor will give little discount because he only has certainty about 3 years' rental cash flow. Subsequently, you're next break option is after 6 years, terminating the contract after 9 years.
By adjusting the deadlines to a 5-7-9 (instead of 3-6-9) you build in flexibility when you need them, namely every 2 years from year 5. Moreover, better conditions (in terms of rent, incentives, etc.) can be obtained because the owner is certain of a continuous cash flow during those first 5 years. Since the future for the company becomes hard to predict after 5 years, a 5-7-9 contract offers sufficient space and flexibility for a quicker adjustment of the lease to the evolved business strategy!
In the event that your future already now looks hard to predict, an even more flexible rental contract can help. Suppose as a company you are housed in a building with 4 floors or wings. For example, if you know in a reduction scenario that 75% of your headcount will certainly be retained, but you are uncertain about the remaining 25%, make 1/4 of your rented space more flexible by making one floor (or wing) cancelable annually. You can secure the remaining 75% in a 5-7-9 contract. This will net be cheaper in terms of rental costs than recording everything in a 3-6-9 contract. The extra discount of the 5 year fixed on 75% of the surface weighs more heavily than the increase on the annually cancelable part of only 25%.
Looking for a sparring partner to discuss your housing situation? We would be happy to visit you in exchange for a cup of coffee.
Oh yes.. good to know: we work exclusively for tenants and through a no cure no pay success fee principle. All alternatives are examined from a spatial, technical, financial and contractual perspective to arrive at the best solution at the best possible conditions.
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