Why Do Tenants Make Expensive Mistakes?
Leasing an office is something most companies do only once every five or seven years.
Landlords, developers and their leasing teams, on the other hand, negotiate lease agreements every day.
This creates a natural imbalance of experience.
The problem is not that landlords negotiate aggressively. That is their job.
The problem arises when the tenant enters the process without sufficient time, market knowledge, financial analysis or a clearly defined negotiation strategy.
Here are some of the most common mistakes.
Mistake 1 — Starting Too Late
Time is one of the tenant’s strongest negotiating tools.
If you start negotiations only a few months before your existing lease expires, your landlord knows that your alternatives are limited.
A relocation requires time to:
- define your requirements,
- analyse the market,
- inspect alternative buildings,
- negotiate commercial terms,
- negotiate the lease,
- design and fit out the new office,
- organise the relocation.
Without enough time to complete these steps, the threat of relocation is no longer credible.
And without a credible alternative, your negotiating leverage is significantly reduced.
As a general rule, start analysing your options 18–24 months before lease expiry — and even earlier for larger offices.
Mistake 2 — Negotiating Only with Your Existing Landlord
This is closely related to the first mistake.
You may already know that you want to stay.
Your employees may like the location. The building may work well. Moving may appear unnecessary.
But telling your landlord that you intend to stay before negotiations are complete removes one of your strongest bargaining tools.
The better approach is to test the market.
Identify realistic alternative buildings, request proposals and compare them with the terms offered by your current landlord.
You do not need to relocate.
You need a credible option to relocate.
That difference can have a substantial impact on the final commercial terms.
Mistake 3 — Comparing Headline Rent Instead of Total Occupancy Cost
A rent of EUR 16 per m² is not necessarily cheaper than EUR 17 per m².
The final cost depends on much more than headline rent.
A proper comparison should include:
- base rent,
- service charges,
- rent-free periods,
- fit-out contributions,
- parking,
- utilities,
- indexation,
- fit-out expenditure,
- reinstatement costs,
- relocation costs.
This is why competing proposals should be compared using effective rent and Total Cost of Occupancy (TCO) rather than headline rent alone.
A seemingly more expensive offer can ultimately be the better financial option.
Mistake 4 — Focusing on Price and Ignoring Flexibility
The lowest rent does not always produce the best lease.
A company signing a five- or seven-year lease is making assumptions about its future requirements.
But businesses change.
Headcount can increase or decrease. Hybrid working can reduce space requirements. Companies merge, restructure or change strategy.
This is why provisions such as:
- break options,
- expansion rights,
- contraction rights,
- subletting rights,
- assignment rights,
- rights to additional space
can have substantial financial value.
Saving a few percentage points on rent may prove insignificant compared with the cost of being trapped in thousands of square metres that the company no longer needs.
Mistake 5 — Defining Space Requirements Based on Headcount Alone
“We have 200 employees, so we need 2,000 m².”
This approach is increasingly unreliable.
The amount of space a company needs depends on much more than the number of employees.
It should take into account:
- actual office attendance,
- hybrid working patterns,
- peak occupancy,
- number and type of meeting rooms,
- collaborative space,
- individual workstations,
- future headcount scenarios,
- organisational culture.
Before entering the market, it is worth understanding how the office is actually used.
Reducing the requirement from 2,000 m² to 1,700 m² can have a much greater financial impact than negotiating another EUR 0.50 per m² off the rent.
Mistake 6 — Underestimating Fit-Out Costs
The rent is negotiated early.
The real fit-out budget often becomes clear much later.
That can be expensive.
Modern office fit-outs may require substantial expenditure on:
- HVAC modifications,
- electrical installations,
- IT infrastructure,
- AV systems,
- acoustics,
- furniture,
- access control,
- specialist rooms and equipment.
A landlord may offer a fit-out contribution, but that does not necessarily mean it will cover the entire project.
The correct question is not:
“How much fit-out contribution are we getting?”
It is:
“What is the total project budget and how much of it will ultimately be funded by us?”
Mistake 7 — Looking Only at the First Year of the Lease
Office leases are long-term financial commitments.
A proposal that looks attractive in year one may become significantly more expensive over five or seven years.
This is particularly important when considering:
- annual rent indexation,
- changes in service charges,
- expiry of temporary incentives,
- stepped rents,
- future CAPEX,
- reinstatement obligations.
The financial comparison should therefore cover the entire lease term, not just the initial monthly cost.
Mistake 8 — Leaving the Lease Agreement Until the End
Commercial terms and legal terms are not two separate transactions.
A very attractive financial proposal can lose much of its value if the lease contains unfavourable provisions concerning:
- guarantees and security,
- reinstatement obligations,
- service charges,
- landlord access rights,
- subletting,
- assignment,
- termination,
- liability,
- handover conditions.
The legal review should therefore run alongside the commercial negotiations — not begin once everything else has already been agreed.
Mistake 9 — Negotiating Without Clear Priorities
Not every lease provision has equal value to every tenant.
Before negotiations begin, determine:
What is essential?
What is valuable but negotiable?
What can we give up in exchange for something more important?
For one organisation, flexibility may be critical.
For another, the priority may be CAPEX.
For another, it may be parking, expansion rights or a specific handover date.
A clear hierarchy of objectives makes it possible to negotiate strategically rather than simply responding to each landlord proposal.
Mistake 10 — Making the Decision Based on Emotion or Habit
“We have been here for ten years.”
“Our employees know the building.”
“Moving would be difficult.”
“We like our landlord.”
All of these considerations may be valid.
But none of them should replace a business case.
The decision to stay or relocate should be based on a comparison of:
- financial impact,
- operational requirements,
- employee experience,
- flexibility,
- risks,
- future business needs.
Sometimes the analysis confirms that staying is clearly the best solution.
Sometimes it shows the opposite.
The important thing is that the decision is made deliberately rather than by default.
What Does a Well-Prepared Leasing Process Look Like?
A structured process usually includes five stages.
1 — Analyse
Review the existing lease, current costs, office utilisation and future requirements.
2 — Test the Market
Identify credible alternatives and obtain comparable proposals.
3 — Build the Business Case
Compare the Stay and Go scenarios using Total Cost of Occupancy, CAPEX and operational factors.
4 — Negotiate
Negotiate with your existing landlord and alternative buildings from a position of genuine choice.
5 — Decide and Implement
Select the solution that delivers the strongest overall business outcome and manage it through to completion.
One Principle Worth Remembering
A landlord has every right to maximise the value of their property.
A tenant has exactly the same right to maximise the value of its lease.
The difference is usually determined by preparation, information and negotiating leverage.
The earlier you start and the better you understand your alternatives, the stronger your position becomes.
Summary
Most expensive leasing mistakes happen before the lease is signed.
Starting too late, failing to test the market, comparing headline rents, underestimating fit-out costs or ignoring flexibility can create financial consequences that remain with the company for years.
A well-managed process should therefore answer three fundamental questions:
How much space do we really need?
What alternatives do we genuinely have?
What is the total financial and operational impact of each option?
Once you can answer these questions, the lease becomes much easier to negotiate.