The average commercial lease lasts between three and five years. What if the lease isn’t over yet, but you need to get out of it? The COVID-19 pandemic recently reached... Read More
Whether you’re experiencing the office space market for the first time or you’ve moved your business before, you need to ask the right questions about your long and short-term goals for the leasing process. Here are nine questions every tenant needs to keep in mind throughout the office leasing journey—and certainly before you renew an agreement or sign your name on the dotted line and move in.
Question One: How much office space do I need?
The answer to this question is far from obvious, even if you’ve picked up and moved offices multiple times. If you’re a small company and expect to grow, you need to do some projections on headcount so that you look for the right amount of office space. You may even decide you don’t need an entire office for your company, and opt for shared space solutions like PivotDesk.
You should also brush up on how to allocate square footage per employee. This can vary greatly by industry. Even within the norms of the open office, some industries require different floor plans, desk allocations, and degrees of privacy. For example, lawyers who frequently have confidential discussions with clients need a different arrangement than a collaborative marketing team that primarily works on computers. Regardless of industry, you’ll have to think about how many business partners or customers may visit the space.
The general rule of thumb is to allocate 150 square feet per employee, but for a more granular analysis, consider using our office space calculator to see how much space your business needs. You don’t want to pay a higher monthly cost than necessary for room you don’t need, so keep square footage specifications high on your list of priorities.
Question Two: How will the move affect employees’ commutes?
Before looking at potential commercial space, check in with your team and ask which locations would benefit them. Most employees prefer to work in an office that they can easily access from home and that is near plenty of restaurants, amenities, parking, etc. While you don’t need to consider everyone’s opinion, it does pay to include your employees in the selection process. They should appreciate that you cared enough about their quality of life to take into consideration the commute they face every day to get to work.
Those searching for office space in New York might want to look into the Midtown East area, which boasts impressive accessibility. But newer buildings, better cultural alignment, and solid values in other neighborhoods have companies curious about other locations.
Try the Commute Calculator to help you narrow down your list of potential locations.
Question Three: What are my priorities for finding a new office?
What is most important to you when it comes to leasing office space? Is it price? Amenities and services? Lease terms? Take time to think about exactly what you want for the future of your business—then consider what it costs and how to get it.
We mentioned the importance of the commute earlier. That might be your number one priority going into the search until you start to tour office spaces in the “optimal” location and find that none feel like your next home. Or, maybe you thought neighborhood character was most important, but a building on the other side of town offered a deal too good to resist.
It’s also crucial to think about the length of the lease term you want. Are you willing to sign a 3-5 year lease, or do you want more flexibility for your business? If the latter is true, you may choose to focus on coworking solutions at first. If you decide coworking isn’t for you, however, solutions like FLEX by SquareFoot enable you to benefit from flexibility while still being able to lease a traditional space.
Whatever you thought your priorities were, don’t be surprised when they change. Whether you need a new office in the next month or you haven’t begun looking yet, identifying your top priorities now will ensure you will recognize it when the right property becomes available.
Question Four: How do I find the right commercial tenant broker?
First, recognize that “tenant” is the keyword here. If you were to call the phone number on a “space for lease” sign, for example, you would find that almost always, the broker or agent on the other end of the phone represents the landlord, not you. Everything—the spaces listed, the lease terms, the information provided—will benefit the landlord, his broker, and their budget.
How do you get a commercial tenant broker who represents you and looks out for your financial and business interests? If you’re part of a big enough company, tenant brokers will often come to you—usually after they read about you in the news. For the average business owner, though, that isn’t the case.
Finding a commercial tenant broker, just as it is in residential real estate, will likely start with finding listings that interest you. Finding quality office space listings you’d like to rent should lead to finding quality tenant brokers who can show you the space and find others like it.
Until fairly recently, finding quality office and retail space listings was touch and go. As commercial real estate matures though, tenants can expect to find more comparable experiences to residential real estate online.
Question Five: How do tenant brokers get paid?
While hiring a talented tenant broker to help you negotiate exactly the right contract provides a certain measure of security, the mere thought of hefty brokers’ fees is enough to make the average person cringe. As the tenant, you may already be responsible for paying for insurance, maintenance, taxes, HVAC, Internet, and various other fees. Fortunately, in commercial real estate, the landlord will usually pay the tenant broker’s fee.
Typically, the landlord’s broker or listing agent and the tenant’s broker each take a percentage of the commission on a closed deal. There can be nuances to the structure of the deal, but by and large the tenant is not responsible for paying the broker.
Question Six: How do I get free rent?
“Free rent” usually comes in the form of a Tenant Improvement Allowance (TIA), a monetary contribution the landlord may give businesses to help fund renovations and improvements to a building. If you are leasing office space in 2020, make sure you ask if a TIA clause is included before signing a commercial lease.
Especially in New York, tenants should ask about this type of agreement. There’s more space on the market than tenants to fill it at the moment. In particular, newly minted spaces at Hudson Yards and World Trade Center, combined with Midtown emigration and a competitive sublet market, have contributed to an increase in vacancies for landlords.
Coupled with the pressure to upgrade building stock in neighborhoods like Midtown East to compete with newer Class A spaces further south, tenants find themselves in position to demand more aggressive build-outs, cutting down on service and repair-related expenses. Some landlords are obliging.
Question Seven: How long is the whole leasing process going to take?
Time is money, so how much time is leasing office space going to cost you? This is arguably one of the best things to ask. If you don’t mind taking a lot of time, you may be able to either wait for just the right opportunity to appear or to renovate an almost-perfect property to meet your needs.
As a general rule, sixth months is a realistic timeframe between the day you start looking for office space and when you can move into a finished space. That’s even with the help of a knowledgeable, dedicated broker.
Deals that seem like a sure thing can fall through at the last minute, renovations can take longer than anticipated…even getting signatures on a lease can be a protracted step in the process.
Question Eight: Do I need to hire an architect, designer, both, or neither?
When you rent a new office space, you’ll want to put together the right team. Before you pick up the phone and call an architect or a design firm, take a little time to learn what they do.
In short, architects are concerned with a building’s structure and the spatial relationships, both within and outside the building. Their skills cover design, engineering, and managing construction projects (to name a few).
Interior designers are strictly concerned with the space inside of buildings, but they, too, can help establish spatial relationships and manage remodeling projects, such as the construction or removal of walls and partitions.
For average TAMI tenants, for example, an interior designer may very well satisfy their build-out needs. For large scale or specialized companies with unique space requirements, an architect might be best suited to re-imagine the space and come up with the structural changes to support their vision.
It is fairly common to employ both an architect and an interior designer. Their skills complement each other and they are used to working with each other.
Question Nine: Can I negotiate expansion rights for other rooms in the building?
It might seem premature to start thinking about the next move, especially if you’re inking a multiyear deal on a lease. Still, it’s never too early to think ahead.
In the event your company expands even more rapidly than you predicted, you could quickly end up with too many people—whether employees or clients—for your space.
During the leasing process, you and your broker can always make a specific request for an expansion option in the lease. While these expansion-friendly leases are great for tenants, landlords usually don’t prefer them. That’s because the landlord would need to ensure the space was vacated when your business wanted to expand into it. And that could mean leaving the space vacant or allowing many tenants to share it on shorter terms.
That doesn’t mean, however, that your broker can’t negotiate some expansion rights on your behalf, like taking over another space contiguous to yours if it happens to become available. Also, in some cases, landlords will consider options for other floors in the building.
Now that you know the questions to ask, it’s time to find the answers! Contact one of our experienced brokers, who will help you find available rental properties that fit your business needs.