| If you have never leased an office space before, the process seems a little mysterious. Most people who have never done it before start by calling the phone number on a leasing sign outside of a building that might look interesting. This is the time consuming and probably dollar consuming way to start. Having now leased multiple properties, I find the process quite simple (usually), but the first time, it was painful. First things first, discover what you need. Make the following list: - Number of employees
- Break this number into ones that need to be in cubicles vs. offices
- Number of customers that may stop by in a given day
- Equipment needed to run your business
- Any special needs, such as a wet lab or secure server room
- Expected growth over the next five years
- Will you need conference rooms? If so, how many?
- Will you need a breakroom where people can sit or is a small kitchen acceptable?
- Do you have an inventory? If so, how much do you carry at one time?
- What are your hours of operation?
- Is a large sign important to attracting business?
- Is drive by traffic important to increasing your business?
Now that you have a clearly defined description of what you need, find a broker. There are numerous national brokers; CB Richard Ellis, Coldwell Banker Commercial Real Estate, and MacKenzie Commercial are ones I have used. However, don't just call up the brokerage office. If you are looking for a smaller space and you just call the office, you are likely to get a junior broker. Ask other business owners for specific recommendations. Ask what they liked or did like about their brokers. Interview the broker to see how many deals they have done that are similar to yours - this is especially important if you are going to be leasing some complicated space, such as for biotech. A good commercial real estate broker is like a good residential broker - they work hard to find you the best space, negotiate the best deal for you (not them), and help you resolve any problems with your future landlord. Once you have selected a broker, give them your description. If you are not sure what kind of building you would like, communicate that to the broker. Ask them to give you a tour of available properties. They can use your 'likes' and 'dislikes' to narrow down two to three suitable properties. Once you have decided on a few properties, your broker can approach the landlord's broker to find out what sort of terms would be acceptable.Different terms that should be negotiated: - Price per square foot (which, by the way, is listed in $/sq ft per year)
- Term of the lease (long lease usually means more landlord concessions)
- Build-out allowance (how much the landlord will contribute towards customizing your space for your needs)
- Sublet provisions (good idea to have this as an option in case the space doesn't suit your needs in a few years)
- Guarantees (don't make any personal guarantees)
- Rate of annual rent increases
- Whether the lease is a "gross lease" or "net lease" (gross means rent includes the utilities, net means you pay for them)
Try to be fair and reasonable in your negotiations. The landlord should do the same. If they are hard and unreasonable, they will be worse once you have signed the lease. This is also a benefit of a good broker - he or she will know which landlords to avoid. Once you have selected the final space, hire a real estate lawyer to review your lease. Your favorite uncle may be the district prosecutor and willing to review your lease for free, but I would advise you to spend the money to hire some one who specializes in this space. Even the best broker works for a commission that he or she only gets if the deal gets done. A lawyer works for you and will alert you to any issues that may come back to bite you long after the broker has collected a commission and left the building. It would seem that once the lease is signed, you would be done and could move in. Well, this is true if no changes are being made to the space, but if the landlord has agreed to make electrical upgrades, move walls, paint and/or install new carpet, you still have a lot to do. Once you have the space layout, spend the time to decide exactly what you want the space to look like and how it will be used. I am putting this in bold and capital letters because it is one of the most important items if you are having improvements made to your space: ONCE WORK HAS STARTED, ANY CHANGES COST MONEY. And the landlord will want you to pay for it. If you need to increase the number of electrical outlets (often true in older buildings) or have the IT infrastructure upgrades, involve your electrician or IT service provider involved in the planning stage. If you need to have cubicles installed, understand how they will be powered and where that power will come form. Don't let the contractor rush you into choosing paint and carpet colors that you will hate later. Additionally, as part of the planning process, have the contractor provide you will a schedule as to when each item is expected to get done. Often these things cascade, so if one item falls behind, the entire project drops off. This will allow you to come into your space and assess whether things are on track to get finished by the negotiated date. By the way, they won't be, but having a good time line and overseeing the progress will get you a lot closer to your move in date than if you leave it to the contractor. So, the paint is drying, that new carpet smell permeates the rooms, the building inspector has approved the space for occupancy. Time to move in. Now all you need is the furniture, but we'll leave that for another day. |
| Author: C. Worrall |
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Author Bio:
In my career, I have worked for four startups, three large corporations, and one government-funded company. I have also started two companies of my own, as well as being with one of the startups from pre-business plan days. In the course of my career, I done everything from buying office supplies to meeting Dick Chaney (back when he ran Halliburton, not as Vice President). I have raised venture capital, negotiated leases, bought furniture at auction, ... [More] |
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