$30 million saved in a month - how to get the best commercial lease deal

Start early, consult experts and negotiate skillfully. These are the three pillars that recently helped Canberra-based advisers secure $30 million of savings from commercial lease deals in a single month.

According to Australian Strategic Property Advisers (ASPA), the secret to that success begins long before the first contract is drafted.

“You start by asking, ‘What are we actually trying to achieve through this lease?’,” ASPA managing director Stephen Oxford says.

First up is a critical assessment of needs, backed by a data-driven profile of your future operations.

The key to achieving lease cost savings is in getting your requirements right, including incorporating space utilisation data.

“Understanding how many square metres you actually need once you account for hybrid work, growth projections and specialised spaces is key to achieving office space efficiency,” Stephen says.

“It is also essential to understand what you can afford and what financial terms will best support your organisation.

“And crucially, when do you need to move in? Work backward from your current expiry date, adding buffers for potential development delays, planning approvals, construction and fit-out timelines and associated risks and that’s when you should start the process.

“Often it means if you’re two years out from lease expiry, and you haven’t started planning, you’ve left it too late.”

Time is one of the biggest factors in securing the best deal – leaving things too late limits options.

Stephen says the market is often given only four weeks to translate requirements into a viable building solution and prepare a compliant response.

Leaving too little time shrinks the pool of potential respondents to existing buildings or those already in development.

“That’s not setting you up for competitive tension, which is a crucial element to achieving property cost reduction,” he says.

Once the timeline is set, the strategy moves to procurement design, a phase where market intelligence becomes your greatest leverage.

At a minimum, you must understand current supply, vacancy rates and active rental benchmarks. However, layering in data on incentive levels, historical outcomes and the projected supply pipeline is what truly sets your procurement up for success.

While much of the information is publicly available on market reports from property agencies, it’s often more efficient to consult professionals who have this evidence base readily available and can interpret it to your specific needs.

ASPA’s Stephen Oxford and Tony Brine have decades of experience negotiating commercial property leases. Photo: Michelle Kroll.

With a clear view of the market landscape, you can then determine the most effective way to engage it. This preparation ensures you select the right procurement model, whether that’s an open tender to maximise competitive tension, or a limited tender to target specific outcomes.

Stephen says it is often a clear preferred outcome before the procurement method is determined, in which case it can be disingenuous to undertake an open approach to market.

“Decisions on procurement method should be backed by robust considerations on what method will achieve the best result – not just by a default open market approach,” he says. “It’s also important to do what you say you’ll do.”

Responding to procurements can cost hundreds of thousands of dollars and cancellations, significant changes to scope or major delays can damage good faith.

Transparency, discipline and predictability in procurement drive better market engagement and maximise competitive tension.

“For instance, if your timeline slips significantly, market conditions may have changed. Interest rates, construction costs and timelines all shift,” Stephen says.

“This can fundamentally alter the deal and exclude potential respondents who could have met revised timelines and puts pressure on respondents to hold pricing longer than is reasonable.

“We have seen procurements in the ACT slip by several years and delays in approvals resulting in cancellation of tenders.”

But preparation only gets you to the table. Securing the final terms on a high-stakes lease requires a refined skillset built on years of repeated exposure to complex negotiations.

Too often, government negotiation stops after receipt of tender responses. Stephen argues that adopting the more aggressive rigour of the private sector is essential to securing the best possible terms.

“Private sector negotiations are far more structured and disciplined,” Stephen says. “You go in understanding the other party’s drivers, costs and constraints and work through each element strategically.”

Because every variable can significantly shift the deal, the cheapest rent isn’t always the most cost-effective lease.

“Every negotiation should be achieving an improved outcome through aligning financial with your financial strategy and non-financial terms with the outcome that your organisation needs through the lease,” Stephen says.

For more information, visit ASPA.

Source: Region.com.au