The 7 golden rules when moving office – Translation of an article that appeared in Finance, Slovenia’s daily financial newspaper, on Tuesday 4th July 2017

Directors of global companies in Slovenia have access to a wealth of resources when they have to relocate. An estates department at their global headquarters full of real estate experts, and a global agency with offices all over the world with expertise in office, to assist on the ground locally.

At S-Invest we provide assistance to most of the global agencies that do not have representation in Slovenia, we are regularly engaged to find new premises for international companies, or to negotiate lease renewals.

If you are responsible for a local or regional company, you probably don’t benefit from such expertise, and have to take control of any office moves yourself. At S-Invest we know from experience how difficult it is for CEO’s or other senior people to find the time for relocations, especially if real estate is an area unfamiliar to them. Many find it so difficult to think about that they put it off until the last minute, which makes relocating much more difficult.

So how to ensure that you find the right premises, on time, at the right price, and get them fitted out for your needs?

Here are the 7 golden rules:

• Don’t pay commission to an agency unless they are acting exclusively for you
• Properly research the available spaces
• Offices trade at 10 to 20% below asking price
• Make sure you understand all extra costs
• Think about different office layouts
• Ask for incentives
• Don’t even think about buying

1) Don’t pay commission to an agent unless they are acting exclusively for you.

It is advisable to hire professionals with experience in office rentals to help you. A professional commercial real estate agent will take a brief to understand your requirements and draw up a long list of potential properties for consideration. That can then be narrowed down and site visits arranged. Your agent should arrange the inspections and accompany you. You should then narrow the choice down to two or three properties and your agent should provide a side by side comparison of all costs over the length of the lease. You can then decide which one suits you best and embark on negotiations. A professional agency will charge around two months rent, some will agree to a percentage of savings made comparing the final deal to the asking price.

What you should never do is agree to pay a fee to an agency in return for showing you a property they are engaged by the landlord to lease. The agency is being paid by the landlord and therefore has a conflict of interests, and is unable to provide unbiased impartial advice to you. Your agency should have only one objective, getting the best possible deal for you.

2) Properly research available buildings

It is time consuming viewing different premises but your workspace is very important and when you move it is likely to be for some time. Your office is home for most of your employees during their working hours and they are going to be more productive and happier in a good environment. Your office will also play an important part in how your Clients perceive you – it says a lot about what kind of Company you are.

3) Offices trade at 10 to 20% below asking price

This is a good time to negotiate hard. Most landlords have vacant space, although it is running out, especially in better quality buildings. Achievable rents are 10 to 15% below asking price, sometimes more. There is more than one way of reducing the rent. A rent-free period reduces the effective rent paid. Remember the longer you are prepared to sign for, the more leverage you have. If you sign a lease for only one year the landlord will have increased letting expenses and the possibility of a rental void. If you sign for five years you will have a better chance of negotiating the rent down – you can always ask for a three year break option. Some landlords still ask for unreasonably high rents, some long term tenants are still paying 2008 rent levels and the landlord is unable to advertise vacant space at market price for fear of alienating higher paying occupants.

4) Make sure you understand all extra costs

There are no rules about service charges in Ljubljana, every building is different. Some landlords charge rent only on the net space occupied. Others charge additional rent on a percentage of the common space such as corridors, staircases and reception. Some do not charge rent on the common space, but they do charge service charges on this ‘add on space’. Many buildings in Ljubljana, particularly older ones from the socialist days, are inefficiently designed and have a great deal of common space, and poor insulation. A modern office building will have 15 to 20% common space, some older buildings up to 30%. In some office blocks individual office suites are metered, and you pay for what electricity and water you use. In others, the costs are split between all the tenants proportionally. Sometimes individual floors are metered and the consumption of each floor is charged to the occupants proportionally. Service charges vary hugely, from 2.3€ to 5.5€/m2. These typically cover cleaning, heating and lighting of common parts, property management, and sometimes a concierge. In some cases individual consumption of electricity and water is included, in others not. Ask to see a copy of the service charge statement for the previous year. We have seen many cases where agents give erroneous information to potential tenants about service charges. Land and property tax is another area to watch, most landlords pass these taxes on to tenants. These taxes will rise in Slovenia and this is something that should be factored in to your budget.

5) Think about different office layouts

Most multinational companies are downsizing by adapting their workspace. Many are adopting an open plan unallocated desk system whereby workers take whatever desk is available. Small meeting rooms and chill out zones provide privacy or peace when required. This system supports learning, collaborating and socializing. Accenture, a global consultancy adopted a new stragegy in their Houston office, they went from three floors on over 6,000m2 to 2,300m2 on one floor, whilst still housing more than 800 people. Accenture found that many workstations were empty for long periods of time because workers were collaborating in team spaces, project rooms, or offsite. Accenture changed to benching for workers who need different spaces during their time at work. They move seamlessly from bench, to enclosed space, to café, to lounge area. Their work weaves between meetings, informal collaborations, and focused personal work sessions. The Accenture workforce voted the new offices an outstanding success, in a study that measured Interaction with Clients and Customers, Networking and mentoring, Impromptu collaboration, and Collaboration with team members. The overall improvement was 26%. It is worth spending a little time and money on an architect with experience in designing workspaces to think about how your working space can best meet your needs.

6) Ask for incentives

Most landlords are prepared to provide incentives to new tenants. The most common incentives are a rent-free period, and a free fit out. Some also provide a number of free parking spaces or a relocation incentive. If you are prepared to sign for 5 years, you could ask for 3 months free rent. If you sign for 3 years you could ask for 2 months free rent, and for 2 years then 1 month. The landlord might not agree but it never hurts to ask. If you sign for anything more than 2 years, the landlord should be prepared to pay for a basic fit out. This includes demolishing or building plaster walls to your requirements, and installing all cabling. If you need some special fit out such as glass partitions, you should expect to pay a contribution. The landlord should hand over the office suite with either a timber/laminate floor or a professionally cleaned carpet.

7) Don’t even think about buying

Some occupiers want to buy office space but this is inadvisable for a number of reasons. The value of office space has dropped significantly since the peak in 2008, and older buildings are unlikely to appreciate. Acquiring office space also uses valuable capital that could be better utilized by most companies to create growth. If you rent office space, it is the landlord’s responsibility to maintain the property and deal with any problems – not yours, freeing your time for what really matters – your business.

Jacqueline Stuart is a Director of S-Invest d.o.o.