Has your small business reached the point where it’s time to move into an office? Congratulations! But where do you find an office space to rent, and how do you rent one? Finding an office space that meets your needs and negotiating a lease that works for both you and the property owner can be a long process.
It helps if you use a real estate broker to look at properties, although you can also research properties on your own. A broker can help you negotiate a lease, too.
Before you go on the hunt for office space, determine how much space you need and how much it should cost for your area. You’ll have to tour spaces, gather together documentation of your business finances to show to prospective landlords, and finally, negotiate a lease for the office you choose.
Consider Your Needs and Your Budget
The first thing you should do when you’re considering leasing an office space is to figure out just how much office space you can afford. Figure out what office space typically rents for in your area. In some cities, like Atlanta, you can get office space for $1.74 a square foot per month. In other, higher cost of living cities, like San Francisco, you’re going to pay $5.43 a square foot per month.
Figure out how much space you’ll need and then multiply that number by the average cost per square foot for renting office space in your area to arrive at your monthly rental budget. Don’t forget that in addition to space for cubicles and desks, you’re going to need break rooms, restrooms, and conference rooms. If you have customers or clients coming in, you’re going to need room to receive them and complete your transactions.
Your budget for renting an office space should also include the cost of utilities. Electricity costs, for example, average $1.34 a square foot each month. Once you figure out how much space you need, you can calculate your monthly utility costs based on the average cost of utilities and the expected square footage of the space you hope to lease.
Get a Tenant Broker
Technically, you don’t need a tenant broker to rent a commercial space, but having one really helps. Let’s say, for example, you want to look at office space for lease in Tempe, Arizona, but you have no knowledge of the local commercial real estate market or what’s available. A tenant broker can bring that inside knowledge to the transaction. He or she may even have previous experience working with specific landlords and can tell you what they’re like.
A broker or listing agent may also have access to properties that haven’t been listed on the open market yet – these are known as pocket listings. He or she can help you shave time off the search by directing you right to the kinds of properties that meet your needs. And a leasing agent or tenant broker can even help you negotiate your lease – he or she will be familiar with your legal rights as a commercial tenant and what kinds of clauses normally appear in these kinds of leases.
You wouldn’t buy a house or rent an apartment without looking at it first, and you shouldn’t rent an office space without touring it in person, either. It might not look as good up close as it does in the listing pictures. Make sure to take note of the building’s security features, especially if it’s in a shady area.
Examine the building’s mechanical systems, like elevators, plumbing, heating and cooling, escalators, and so on. Even though you won’t be responsible for repairing them, you don’t want to rent the building if they have a history of breaking down a lot.
Make sure your new office space is easily accessible to handicapped employees and customers, as required under the Americans with Disabilities Act (ADA). You should also pay attention to the neighborhood the property is located in.
Is it close to where potential employees might live? Are there amenities in or near the building? Plenty of access to parking? What about other tenants in the building? If an anchor tenant in your building goes under, the desirability of the location could take a big hit.
Gather Your Paperwork
You’re going to need to gather all your financial paperwork to prove to potential landlords that you’re capable of paying the rent on office space. Compile your business tax returns, balance sheets, bank records, and profit and loss statements.
If you can, present records going back two or three years. If you can’t provide records going back that long, be prepared to show what you have.
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Hammer Out the Lease Details
Here’s where hiring a tenant broker or leasing agent can come in handy. He or she will negotiate lease details for you. The best type of lease for a commercial tenant is a full-service lease, wherein the landlord pays for property taxes, insurance, upkeep, repairs, janitorial cleaning, and utilities.
However, you may be able to negotiate for a lower rent if you pay those costs yourself. A modified gross lease can ensure that your rent remains the same amount each month, even if you pay expenses like utilities and janitorial yourself.
Finding and renting an office space can be time-consuming and tiring, but it’s a necessary next step to growing your business. Take your time to find a space that will meet your company’s needs, because you may be working there for years to come.