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Lease Terms Deserve Thoughtful Consideration

Denver Companies looking to expand or renew in today's tenant-favorable office market should not jump too quickly at all the great opportunities and concessions. It is critical to step back and analyze how the length of a lease term will impact your operation.

Conditions in Denver, Colorado have softened enough in most major markets for tenants to give serious credibility to subleases, especially where a short, highly-flexible occupancy scenario is needed. However, subleases carry with them a number of challenges, especially in terms of making improvements to the space, communicating ongoing needs and the risk of default of the primary tenant.

While many of the drawbacks to a sublease could be addressed in negotiations, you should weigh the work involved with your intent for the space. If you need space for a year before a planned growth spurt, a simple "plug and play" sublease could work.

Important to consider in a shorter term lease is the impact of a quick turnaround. Offices on the move can face productivity issues and added risks such as damage to capital equipment or technology investments. Further, employees can grow frustrated, and a company can have a hard time establishing an identity.

If your company is positioned for prolonged growth, locking in the right space in today's market could go a long way toward sustaining success. Along with rate concessions, strong tenants can secure a number of lease provisions that could provide the same type of flexibility available in a short term lease. One such scenario could call for a two-year term with a series of two-year renewal options. A couple of years ago, leases less than five years were rare.That's not as true anymore.

Denver tenants seeking five-year lease terms and longer are often rewarded with more aggressive concessions. They do, however, demand a great deal of foresight and strategic planning. With the wide array of building options available today, there is a very good chance you can come across a space worth securing for a number of years. You can also
negotiate a reasonable out clause to provide a level of comfort should things change dramatically for the company.

Keep in mind that many of the companies that sign ten-year leases end up leaving before the term expires, so there is more than enough precedent set should you need to alter your course down the road.

Unless your company can justify setting up shop in temporary space, your best option may be to pursue a mid-length lease term with dependable renewal options, to capture today's aggressive concessions while establishing corporate stability.

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