4 Steps for Creating an Option to Expand in Your Office Park in Overland Park, KS
If you are negotiating your lease for commercial property in Overland Park, KS, be sure to consider whether or not you want to negotiate for an expansion clause. An expansion clause gives you the option to expand into more space in your office park in Kansas after a certain point in your lease. If you think your business is going to grow and you are interested in having the option to expand, here are a few steps to take when negotiating your initial lease with a landlord, as suggested in the article “Things to Consider When Negotiating Expansion Rights”:
#1 Identify the Space
The first thing you want to include in your option to expand clause is a clear identification of the space you would want to expand into. Be clear whether it is in the same building or another property that is owned by the same landlord.
#2 Determine the Cost of Expansion
Obviously the ideal situation is to find a space adjacent to yours to identify as your option space to minimize costs, but with any space you choose, it is important to budget for the cost of expansion. Do you need to knock down walls or make any other structural changes? Discuss with the landlord who will shoulder these costs. Often landlords will agree to take on construction costs that will be beneficial to future tenants or raise the value of the space after you leave.
#3 Negotiate the Rental Rate
It is important to talk upfront about what the rent will be in the optioned space. Even if you don’t have a specific number, it is possible to come up with a formula for calculating the new rent. A common agreement is to either apply the current rental rate or a fair market rate based on square footage—whichever amount is lower at the time of your expansion. However, make sure that you also specify how fair market value will be determined, so that this calculation is not left up to the landlord alone. Waiting to monitor the landlord’s decision at the time of the expansion could result in a messy legal process that drags on and ends up costing you more than you planned on spending for an expansion.
$4 Set the Expansion Window
Finally, you will need to negotiate with the landlord to determine when you have the right to exercise the expansion option. Obviously for you as a tenant, the longer the timeframe, the better, but the landlord will most likely want a narrower window to avoid the possibility of space being tied up for too long, so be prepared for some give and take in these discussions.
If you want your business to have the opportunity to grow into more space in your office park in Overland Park, KS, create that option at the beginning of your lease by negotiating for an expansion clause!