When setting up an office, one of the first decisions you’ll need to make is whether to opt for a short or long-term lease. Several factors should be considered to ensure you choose the right lease term for your business. Your decision will affect various aspects of your business, from operations and finances to your overall flexibility and plans.
What are long-term and short-term leases?
Let’s break down the difference between the two. Generally, a short-term lease is less than 3 years, and can even include month-to-month contracts with co-working spaces, and has more flexibility, while a long-term lease is stricter, with a locked-in contract period of 5-10 years. The key difference between the two lies in the level of flexibility and stability each provides, which can significantly impact your business decisions. Let’s dive into the pros and cons of each option to help you decide which is best suited to your needs.
Pros and cons of long-term vs short-term leases
Pros of long-term leases
Secure: Since landlords offer long-term leases for up to 10 years, these are more secure and stable for businesses looking for a consistent place to establish themselves for a longer time. Plus, with consistent monthly rent, you gain the reliability needed for planning and growth. Businesses won’t have to worry about being kicked out because they have a guaranteed ongoing tenancy.
Customise to your preference: A long-term lease allows you to transform a space exactly how you want it. You can choose the furniture, hire the staff you prefer, and create an atmosphere that aligns with your business needs. You have complete freedom to incorporate any elements that make the space yours.
Cons of long-term leases
Rigid: If your business fails and you’re locked into a long-term lease, you may face considerable financial and legal penalties if you need to break the lease early. Landlords will only terminate a lease under pre-determined, specific circumstances, so you’ll be stuck with paying the rent if there aren’t any. Long-term leases may also not give your business the flexibility it needs if your enterprise is quickly growing, so if you’re running out of space, you’ll have to stay until the lease expires.
Complex: Getting a commercial lease for an office is lengthy and detailed. Since it’s a long-term commitment, navigating the terms and ensuring everything fits your business needs can be challenging. Everything requires careful consideration, from negotiating rental rates and renewal options to potential liabilities.
Pros of short-term leases
Flexible: Short-term leases can be arranged on a month-to-month basis or for up to 3 years. They provide more flexibility than long-term leases that lock you in for longer. This flexibility gives business owners various options to make space changes, like expanding or downsizing, depending on whether they’re losing employees or hiring new people.
Adaptable: Flexible leases allow businesses to adjust to market conditions. Short-term agreements let tenants benefit from better rental rates and test a location before committing long-term, making relocation easier. This is especially valuable for new businesses that may need flexibility on their ideal location or growth potential, as an adaptable environment provides the flexibility they need to thrive.
Lower financial risk: Long-term office leases can be challenging to break, especially if your business faces difficulties or fails. Leaving you responsible for an unused space is a significant stressor. Instead, short-term leases reduce risks, offer a lighter financial burden, and allow you to exit without complications if circumstances change.
Cons of short-term leases
Potential for Higher Rent: Short-term leases often come with higher rental rates than long-term agreements, as landlords may offer fewer incentives for shorter commitments. Additionally, rental costs may increase with each renewal, increasing overall expenses.
Less Stability: Short-term leases provide less security than long-term agreements. There’s always a risk that the landlord will choose not to renew the lease and opt for a different tenant.
How leases benefit specific businesses
After weighing the pros and cons of short-term and long-term leases, you can determine which option best suits your business needs. A short-term lease agreement might be more suitable for smaller, newly established businesses. On the other hand, a long-term lease could benefit well-established businesses or those looking for stability without the need to relocate frequently.
Short-term leases at co-working spaces
If you’re an innovator, entrepreneur or business guru searching for flexibility and space to grow your business to new heights, a short-term office may be the way to go. Here at Haven Workspaces, we offer a variety of memberships, from private offices to flex desks and virtual addresses. They can be locked in anywhere from 1 to 12 months and charged monthly.
Do you need a spot for 3 months? 6 months? A year? A short-term commercial lease at Haven offers you the perfect place to dedicate space to your business and connect with a network of like-minded professionals.
Interested in learning more? Click here to discover more about our options and enquire about availability.
