Your office location and space are the physical manifestation of your vision for your business! It is also one of your larger operating expenses. Adequate time needs to be taken to make sure it is the right space at fair terms for you. Securing your first office space is exciting. But choosing just any office would be a mistake. You need to make sure that your office is one that will support your team and allow you to grow and thrive.
Below is a 5 step guide to help you get started.
1. What should I consider while getting excited peeking at office space listings?
Square footage needs
Accessibility to the building and space (and ease of giving directions)
Surrounding businesses (complimentary businesses, competitors, etc.)
Tenant Improvements (Tis)
Commute distance and paths for you, employees and core clients
2. Important terms to be familiar with as you browse:
TIs (tenant improvements): these are the improvements the tenant requires be made to a space. The improvements may be paid by the landlord or the new tenant or shared depending on the lease negotiations.
CAM (common area maintenance): these expenses are fees paid by tenants to landlords to help cover costs associated with overhead and operating expenses for common areas (i.e.lawn care, janitorial, HVAC).
NNN (triple net): a lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three "nets") on the property in addition to any normal fees that are expected under the agreement (rent, utilities, etc.).
Gross Rent: the rent calculated inclusive of all building costs.
LOI (letter of intent): a document outlining the understanding between two or more parties which understanding they intend to formalize in a legally binding agreement.
RFP (request for proposal): in this context it is the offer made by a potential tenant to a landlord to rent space in one of their properties.
3. Should I Work With a Broker?
Having a broker help you find the locations, filter out the ones that don’t make sense to your needs and perhaps show you spaces that are yet to come publicly on the market can be a huge plus. The process of looking for office space can be overwhelming for a newbie, and a broker can do much of the research and leg work beforehand, giving you a feel for costs and terms. It is important for your broker to represent you versus the landlord; although, they can do both under the right circumstances. A good broker can help you with your Letter of Intent (LOI) and even help with the negotiation. However, just like all businesses, not all brokers are of the same level of knowledge and professionalism. Finding the right broker is key. Be thorough and honest regarding your needs with the broker to help them identify a viable location and space for you.
4. Negotiating the Lease
The negotiations begin with an LOI or RFP to give general terms and conditions that you would lease the space. Just in case, you should know what might happen if you have to break your lease. Make sure that you’re comfortable with any fees or other penalties just in case something changes throughout the course of your lease.
The landlord will have an asking price and will have made their broker aware of what terms and conditions they would consider. We find it best to work with your broker to construct a reasonable offer but with all the things you need. The back and forth will go from there and, hopefully, the two parties will come to terms. Sometimes lessor and lessee will get their respective attorneys involved to negotiate terms of the lease. This can be very expensive if not well managed and generally is not needed unless the lessee feels the need for legal representation or the building ownership is a large property company where their legal team handles all the negotiations.
5 Lease Review & Signing
You should always have an attorney review your lease to make sure everything stated is as you expect and there are no surprises. Your attorney will likely have changes to the original document. Depending on the flexibility of the landlord with their documents, the back and forth of the document may happen a few times to get everything incorporated into a final lease agreement acceptable to both parties. Upon signing the lease, you will be required to provide a check to the landlord for a pre-negotiated amount. Typically, this will be for the first month of rent and a number of months’ rent for a security deposit.
Identifying your office space is the genesis of establishing your new business and many things such as technology, communications, furniture, signage, etc. All of which will begin as soon as you sign a lease. And, though it is a process, it's one that will be immensely rewarding in the end.