Office space is often treated as a fixed cost. But in reality, it hides significant savings opportunities – if you know where to look.
Payroll and office space are often the two biggest expenses in a company’s budget. But if you consider these two expenses, only one of them is truly negotiable.
If you want to save money on payroll, you’re faced with difficult choices: hiring freezes, redundancies, or slowing growth.
Cutting salaries, bonuses or roles can damage morale, reduce productivity, and leave long-term scars on your business. It’s a high-risk way to save money – and one that can quickly lead to negative consequences.
By contrast, reducing your office lease costs is a low-risk, high-impact alternative. It doesn’t negatively affect your people, your product, or your performance. And yet, it can deliver significant savings.
The reality is that many companies are overpaying for office space. Not because the rent is too high, but because they haven’t negotiated the best possible deal on the lease.
Where the extra costs are hiding
An office lease is not just about rent per square metre. It’s a complex, multi-layered agreement that includes obligations and variables that can dramatically affect your total cost of occupancy.
Here are five areas where companies commonly leave money on the table:
Incentives not fully negotiated: Landlords regularly offer fit-out contributions and rent-free periods to attract tenants – but without benchmarking or representation, these offers are often lower than what’s achievable.
Too much space: Many businesses lease more space than they truly need, often based on outdated assumptions about how their teams work or overly optimistic growth projections.
Outgoings passed through unchecked: Shared building expenses like cleaning, insurance, repairs, and electricity are often accepted without review – even when they’re bloated or misallocated.
Make-good liabilities: The clause that says you have to return the office to its original condition can lead to a costly surprise at lease end if not capped or negotiated upfront.
Not negotiating renewals: Staying put often results in “lazy renewals” where tenants accept a modest rent increase without testing the market – despite having strong negotiation leverage.
Individually, these may seem manageable. But collectively, over the life of a 5-year lease, they can easily add up to hundreds of thousands – even millions! – of dollars in avoidable expense.
The true cost of a passive approach
The commercial leasing process favours those who prepare. Landlords are professionals – they have representation, market data, and experience structuring deals to protect their returns.
Many tenants don’t bring that same level of expertise to the table. Leases are reviewed internally, sometimes by legal or procurement teams, but not always with a clear commercial leasing strategy in place.
And so the deal goes through. It might look fine on paper. But small gaps in rent benchmarking, fit-out support, operational flexibility, or make-good clauses add up to major avoidable costs over the life of the lease.
In this context, overpaying is less a mistake than a missed opportunity – one that plays out slowly but significantly over time.
What smart negotiation looks like
A better lease outcome doesn’t come from pushing harder – it comes from negotiating smarter. That means:
- starting the process early
- understanding what the landlord values
- benchmarking incentives and effective rent
- comparing offers for multiple properties
- identifying expenses and risks hidden in legal clauses
- aligning lease terms to your operational needs, not just your current headcount.
None of this is revolutionary. But in practice, many businesses skip these steps due to lack of experience, time constraints or internal bandwidth.
And that’s where the money gets left behind.
