Occupying an office space or building that you have leased involves costs beyond basic rent. In order to budget properly and evaluate your real estate portfolio, you need to consider your total occupancy costs. Read on to learn more about occupancy costs and what you can do to reduce them.
What's Included in Occupancy Costs?
Rent
The amount that you pay to occupy a specific commercial space will typically account for the largest portion of your occupancy costs.
Common Area Maintenance
The amount that you pay your landlord to cover the costs of shared areas like elevators, lobbies and parking facilities also factors into occupancy costs.
Insurance and Taxes
As a tenant, you're responsible for paying for a percentage of the property insurance and taxes on the building that you occupy or lease space in. In addition, general liability insurance that your company pays for also factors into occupancy costs.
Utilities
If your water, electricity and sewage are not included in your rent, they must be added to your total occupancy costs.
Other Services
Any other services, maintenance or repairs that are not covered by your lease also are included in occupancy costs. These may include cleaning services, security services, pest control, plant services, equipment rental, water service and repairs.
Ways to Reduce Occupancy Costs
Negotiate a Fair Lease
When it comes time to sign your first lease or renew your lease, make sure to do your homework and research the current market. Consider extending the term of your lease for leverage to negotiate for reductions in rent and common area maintenance fees. Having a tenant representative broker on your side during the negotiations can give you an edge and help you walk away from the table with a more favorable lease agreement signed.
Consider New Work Schedules and Arrangement
Allowing employees to telecommute on a full or part-time basis can reduce the amount of square footage that your company needs and also have an impact on utility costs and some services like furniture rental and water service. Employees who are in the office only part time due to telecommuting or travel can share offices or use communal work areas when they are on-site.
Green Your Space
Taking steps to make your office space more eco-friendly can lower your utility costs and your occupancy costs. Use more natural lighting and invest in LED lights that use less energy. Restrict access to the thermostat or consider a SMART thermostat that automatically turns down the heating and air conditioning after business hours. Energy Star-certified computers and office equipment can also decrease the amount of electricity that your office consumes.
Involve Your Real Estate Team in Decisions
Often, decisions that management makes can have unforeseen impacts on occupancy costs. Having a member of your real estate team at strategic planning and management meetings can help you identify any potential increases in occupancy costs that may arise from new policies, procedures or initiatives.
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