Whether you are a new business starting up or a seasoned business owner, renting the perfect office space has never had as many variables as it does today. While moving into a new office is a very exciting time, you must make sure that it is the right move (both literally and figuratively) for you and your business.
Planning Ahead
The first step in choosing the right office space is planning ahead and setting goals. One of the most common mistakes made by businesses is not allowing themselves the proper amount of time to find an office space. The recommended amount of time for a small business is 4-6 months while larger companies should begin their search up to 3 years prior to the end of their current lease. Other plans should include setting a price-point as well as a budget for relocating and new occupancy costs (such as utilities, internet services, and janitorial and maintenance costs), selecting a move-in date, and creating a list of amenities that your new office space must have. To begin writing your list of amenities, you must first consider the amount of space you will need now and for future growth. In order to get a baseline estimate of the amount of space your company will need, use the recommended square footage numbers found on our article "How much office space do I need?".
Building Type and Design
Not only do you need to consider square footage, but you must also consider what class building you would like to rent. Typically, there are three types of buildings, Class A, Class B, and Class C, that vary in appearance, amenities, luxuriousness, and price. Class A is the most high-end building type with a sleek appearance, top-quality amenities, and a high price-tag to go with it. Class B provides a polished exterior, slightly outdated amenities, but lower costs than Class A and Class C building are often a decade or older perfect for general businesses that do not need top tier technologies but the lowest prices. If your business will be receiving clients often, you will want to pick a building that has a well-maintained appearance in a safe, and easily accessible location.
Additionally, what kind of layout will best suit the needs of your employees? The answer to this question is different for everybody with some opting for a cubicle-based structure, some for an open layout, and others choosing a mix of both. You will want to add a shared-space such as a conference room, a break room, or possibly both in order to create productivity and cohesiveness.
Something to keep in mind is that Generation Z is beginning to make their mark on offices and corporate culture and it will only become more prevalent in the next decade. This generation is largely classified as intrapersonal learners, meaning that they have a love for learning, but they want to do so on their own in their own office space. This is a shift from the collaborative millennial's that valued shared spaces. The office buildings that will see the most success are ones that are less visually cluttered with a versatile work space consisting of both individual spaces and common areas.
Evaluating the Property
Choosing the right office space is no easy task, so getting help from a commercial real estate expert such as Greg Pond, will make the process much easier. Nonetheless, there are certain questions that must be asked when you are evaluating a prospective office space. We recommend talking to the current tenants about the property managers, the engineering, the security and the janitorial staff. Ask them what their most common complaints about the building are and how often do they occur? Does the elevator function 24/7 or does it often malfunction? Is the janitorial staff punctual and meticulous? These are important factors to know about in order for you to run your business efficiently.
Other things you must consider include the location and the parking. You want to choose a location that is convenient for both your employees and your customers. Office spaces that are located close to major highways and public transportation make commuting easier and more desirable. A parking structure is another important feature for an office space to have as well as a secure bike rack or storage area for employees that ride their bikes to work. It is important to evaluate multiple office space options so that you do not miss out on any possibilities.
Negotiating the Lease
If you have a commercial real estate expert and a real estate lawyer, this next step will be easier. Regardless, negotiating your lease is an important part of renting a new office space, so expert advice is critical. For many companies, their needs may change, thus making a shorter lease term more attractive. This may not always be easy depending on the market you are in but we recommend negotiating for a three-year lease with a three-year renewal option.
Another factor that you might need to negotiate in the lease is any improvements or alterations that need to be made at the office space. If you are in a hot market with limited office space vacancy, you will have a harder time getting the landlord to pay for these improvements. However, these improvements are still negotiable.
Many leases include a rent escalation clause that states your rent will go up every year based on the percentage increases to the Consumer Price Index. If you are signing a long-term lease, we recommend negotiating a fixed-rent for the first two years followed by a predetermined fixed increase rate. For example, try negotiating for a 3% increase per year in rent so that if you pay $10,000 a month in year one, you would pay $10,300 in year two. If you are signing a short-term lease, we still recommend negotiating a fixed price increase.
Lastly, we always recommend negotiating for an exit clause in the case that you need to break your lease. An exit clause usually allows for the lessee or lessor of the property to legally and without penalty get out of a lease, due to agreed upon circumstances. There are many factors that go into writing up an exit clause, so we recommend seeking the help of an experienced commercial real estate broker and attorney.