A new office lease looks like a facilities decision. It isn’t. Once you sign, that lease sits on your balance sheet, shapes your debt ratios, and locks in costs for years. That’s why the CFO’s job isn’t just approving a number, it’s stress-testing the deal.
In this post, we walk through five questions every CFO should ask before signing off on an office lease: what it actually costs beyond rent, how it hits your financial statements, whether the escalation terms are predictable, what happens if your headcount changes, and whether the building itself is ready for your business.
The rent figure on the term sheet is only the opening number. Most CFOs get surprised months later when the actual monthly outflow lands 20 to 30 percent higher than what they budgeted.
Base rent covers the space. It doesn’t cover what it takes to run that space. Common Area Maintenance (CAM) charges pay for lobbies, lifts, security, and housekeeping and landlords usually bill this separately, often with a yearly increase built in. Property tax gets passed through to tenants in many leases too, so ask who pays it and how it’s calculated. Add utilities, parking, fit-out costs, and the technology infrastructure needed to get the office running on day one. On top of all this, factor in the security deposit typically 6 to 12 months’ rent in India. It’s not part of your monthly occupancy cost, but it ties up a large chunk of cash upfront, and CFOs need to plan for that separately.
Say a landlord quotes ₹100 per sq ft as rent for a 10,000 sq ft office. That’s ₹10 lakh a month on paper. Add CAM at ₹15 per sq ft, parking for 20 cars at ₹4,000 each, and a fit-out cost of ₹3,000 per sq ft amortized over a 5-year lease. Run that math and the real monthly number lands closer to ₹13 lakh nearly 30 percent above the quoted rent. Build this full model, deposit included, before the approval meeting, not during it.
Rent used to be a simple line item on the income statement. That changed a few years back, and most CFOs are still catching up on what it means for a new lease.
Under these accounting standards, most leases now show up on the balance sheet, not just the income statement. Signing a lease means recognizing a Right-of-Use asset and a matching Lease Liability. In plain terms, the lease starts to look a lot like debt. There’s an exception worth knowing: short-term leases of 12 months or less and low-value assets can skip this treatment under Ind AS 116/IFRS 16, which is why some companies structure satellite offices or pilot GCC floors as short-term arrangements to keep them off the balance sheet.
Once a lease liability sits on your books, it moves your debt ratios. If your company has loan covenants tied to leverage or interest coverage, a large new lease can push you closer to a breach without a single rupee of new borrowing. Lease term, lock-in period, and renewal options all affect how big that liability looks, so the terms you negotiate directly shape your financial statements. Before you approve a long lease term, run the balance sheet impact past your accounting team first.
A lease that looks affordable today can get expensive fast if the escalation clause isn’t clear. The real question isn’t just what type of escalation this is, it’s whether you can forecast your rent three years from now under this clause.
A fixed percentage increase, say 5 percent a year, is the easiest to plan around because you can put an exact number in next year’s budget and the year after. A clause tied to CPI moves with inflation, so your forecast needs a range instead of one figure. A market-rate review clause is the hardest to plan around, since it resets your rent to whatever the market is charging at renewal, a number you don’t control today. Ask finance to run your monthly cost five years out under each scenario. If the gap between the low and high case is wide, that’s a negotiation point, not something to accept as-is.
Lock-in period and lease term are not the same thing, and mixing them up is a common mistake. The lock-in is the minimum time you’re committed to paying rent, even if you want out early. Renewal terms decide what happens after that whether rent resets, whether you get first right to renew, and how much notice you need to give. Get both terms in writing before you sign.
Business plans change. Hiring slows down, or it speeds up faster than anyone expected. Instead of checking lease clauses in isolation, walk through the actual scenarios your business might face and see whether the lease has an answer for each one.
Check whether you have first right of refusal on adjoining space, and how much notice the landlord needs to make it available. Without this, a growth spurt means restarting your entire office search mid-year.
Subleasing rights let you hand off unused space to another tenant and recover part of the cost instead of paying for empty desks. Assignment clauses cover a different scenario transferring the whole lease to another entity which matters if your company merges or spins off a unit.
A break clause is your way out before the lease term ends. Ask exactly what notice period and penalty apply, and get this in writing before you sign, not after you need it.
GCCs and startups don’t grow in a straight line. A team that’s 200 people today might be 350 next year, or it might restructure and need half the space. Hybrid work adds another layer, since attendance patterns shift how much space you actually need day to day. Running your lease through these scenarios before you sign it tells you far more than reading clause names in isolation.
A great location and a fair rent don’t mean much if the building itself isn’t ready to operate. This check splits into two timelines: what to verify before you sign, and what to verify before your team moves in.
Ask for the Occupancy Certificate. Without it, the building isn’t legally cleared for use, and that can create real problems down the line. Ask for the Fire NOC too, which confirms the building has passed fire safety inspection. If your company tracks ESG goals, check for green certifications like LEED or IGBC at this stage, since retrofitting for these later isn’t realistic.
Check the power backup capacity and whether it covers the full floor or just common areas. This matters more than most people think until the day the power goes out. Internet connectivity needs the same scrutiny, especially if your team can’t afford downtime. Walk through disaster preparedness too: evacuation plans, fire drills, and how the building handles emergencies. Confirm all of this before move-in, not after your team is already working there.
Before you approve the office lease, make sure you have clear answers to these:
Rent starts the conversation. Everything on the checklist above is what actually decides whether an office lease works for your business. Ask these five questions before you approve any office lease, and you’ll walk in with real numbers instead of assumptions.
If you’re evaluating office space in India and want a workspace built for this kind of flexibility, talk to our team at GoodWorks to see what fits your growth plans.
