When Ilona Ionescu, from Hamburg, took the plunge into self-employment and opened an agency specialising in the supply of sports equipment to fitness centres a year and a half ago, she was a one-woman business. “I had a sound business plan and I brought specialist knowledge of my sector to the table – but even so, you’re grateful for every penny you can save at the start,” recalls the 34-year-old, thinking back to those early days. “It was clear to me right from the start: I would rent a small office in a business centre.”
The reasons were obvious: “I didn’t have to – and still don’t – enter into any long-term tenancy agreements. This meant I didn’t need to set aside capital in my business plan to service a liability that I couldn’t assess, let alone foresee.” Many start-up founders find themselves in the same situation as Ilona Ionescu – Markus Gelderblom is a specialist solicitor in tenancy and condominium law, as well as managing director at Haus und Grund in Bonn/Rhein-Sieg. He knows the pitfalls of long-term commercial tenancy agreements only too well: “Many start-up founders are unfamiliar with legal matters; for example, they have never even heard of the legal term ‘risk of non-use’. Under commercial tenancy law, this risk lies entirely with the tenant. Even in the face of impending insolvency, the tenant almost never has a right to terminate a commercial tenancy agreement on extraordinary grounds – meaning that the contractual obligation to pay remains in force even if, to put it bluntly, the money has run out. In such cases, sound advice is often very costly and the situation can reach proportions that threaten the very survival of the business. Every tenant should be aware that long periods such as three or five years are very difficult to predict, and that, in case of doubt, the rent must be paid for the entire duration – even if the premises are no longer needed or used.”
Dr André Helf, CEO of the COLLECTION Business Center Group, is naturally well aware of this issue and makes it clear: “We protect our clients from such risks. We know that many of them have to start small and get their business off the ground. Tying up capital for the long term is no help in this regard – it benefits our tenants, and ultimately all our partners, far more if they can invest the money in developing their businesses, such as through new products, advertising or presentation ideas – and thus build a sustainable and successful business.”
Ilona Ionescu cites yet another disadvantage of long-term lease commitments: “The settlement of service charges poses a major problem and represents a risk factor. The financial burdens are sometimes unpredictable – take energy prices, for example. Electricity and heating costs are becoming increasingly expensive in the long term. These are uncertainties that we as entrepreneurs would rather avoid. That’s not an issue at the Business Centre. Everything is clearly regulated here. If necessary, I can also rent more space, for example to accommodate two employees I now need. But who knows how business will be going in two or three years’ time? Perhaps I won’t need those people by then. Naturally, I wouldn’t want to be paying for the space I currently need.”
There’s also the potential interest rate trap: “Depending on how I structure my financing, I can agree either flexible or fixed interest rates and loan repayment instalments,” explains Ilona Ionescu, “at the moment, interest rates are still fairly low. In a few years’ time, that won’t necessarily be the case. And then what? If I have a loan plan with variable interest rates, that could well be my undoing, especially if I’m also having to meet high payment obligations under a long-term commercial lease. I don’t need that risk, and in an era when you can rent offices in business centres without a long-term commitment, it’s also unnecessary.”
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