Ian Ketchin, financial director of the Parity Group, which provides IT and business services, is a man with a property to let. Ten thousand square feet of offices in Fleet, Hampshire, nine-year lease, close to the M3, nicely presented, he says.

Ketchin wishes he didn't have a property to let. He's part of the new management team at Parity, which is still trying to dispose of unwanted offices acquired when the previous management backed unrealistic growth plans in the early 2000s.

"We had more than 20 properties on lease and we're now down to around 12," says Ketchin.

Parity's experience is a timely reminder that directors should think twice before they take on new premises at a time when economic prospects are uncertain.

"One of the things the business got wrong in the past was taking out long leases," Ketchin says. It has not been easy disposing of the surplus property and he has sublet some offices at a loss.

"You have to recognise that property isn't just a profits drain—it's also a cash drain. And cash is king," he says.

"We just had to bite the bullet and sublet for less than we're paying. But if it gets some cash coming through the door, I would rather have that today than hope for something more tomorrow."

In another case, Parity reassigned a lease to a landlord who expected another tenant in the same office block to take extra accommodation. But handling the problem of excess property has been a distraction for a business that Ketchin says is "in recovery". Even so, it's made a significant difference to the bottom line. By 2008, Ketchin says that Parity will have sliced 40 per cent off 2005 property costs, saving £2m.

Nick Cook, managing director of Haywards, which advises on commercial property, says directors need to do some careful thinking before taking any decision about new offices.

"The first thing is to be very clear on what the business needs in terms of the amount of space and where it can operate from," he says.

"Make sure the lease term is truly commensurate with the business plan. The lease is probably the single biggest contract you will take out and it is the most inflexible."

He advises directors to negotiate a lease that has break points and allows the property to be re-let on terms that are not too restrictive.

A rough rule of thumb for small and medium-sized enterprises used to be 135 sq ft per employee. But that is falling, in the face of cost pressures and more flexible working practices.

Cook advises directors looking for new premises to have a shortlist of possibilities and make sure landlords know they've got alternatives when negotiating terms and conditions.

And he adds: "Do not take on a property lease without getting a building surveyor to have a look at the premises and lease conditions."

Cook has been helping a small company that took a three-year lease on a 1,200 sq ft suite. At the end, it was hit with a large bill for "dilapidations" which it unsuccessfully tried to fight in the courts. The cost was £50,000.
As Ketchin also knows, there's a price to pay for getting property decisions wrong.