Industry jargon. Commercial real estate is chock-full of it. Whether you have negotiated a commercial lease before or it’s your first time, chances are you will run into some potentially... Read More
Finding office space can be frustrating and tedious, even more so than finding an apartment (if you can imagine). It’s difficult to navigate the many ins and outs of commercial real estate, and missteps can result in being taken advantage of by a broker or landlord. To help you throughout the process, we’ve put together this comprehensive guide on how to find office space to rent.
Here’s where to start.
1. List your office space requirements
For starters, list your initial criteria — knowing that they can of course change throughout the process. But the faster you generate a list, the faster you can eliminate some spaces from your search.
A list is easy to share with fellow stakeholders for feedback, including brokers. It also helps you recall your requirements faster so you can pounce on available office space faster.
Start with the basics, like size (or square footage), location, and lease term (or the duration of your lease) and then move on to any “must-haves,” like “must have a minimum of three bathrooms,” and so forth. After that, you can also list any nice-to-haves.
Here are some key questions to consider when listing your requirements:
Do you want to remain in or around your current location or explore a new one?
Several practical considerations should determine the ideal location of your next office:
- Your employees’ commute. Consider prioritizing easy commutes as you search for new space. The ease with which employees can get to and from your office has a sizable impact on their happiness, and by turns, their performance. While you can’t please everyone, it’s worth the effort to gauge employees’ receptiveness to the new locations under consideration before making your decision. And if your current space is in a great spot for most people already, consider an office nearby that doesn’t disrupt their routine too much.
- Proximity to clients and events, especially if you need to be nearby for meetings. This matters less in some industries than others, but companies facing pressure to provide on-demand client services, like a PR agency, might prioritize proximity to customers over other considerations.
- Whether a particular neighborhood will enhance your company culture. Your office neighborhood can also play a role in shaping and informing the company culture you’re trying to promote. It all starts with a neighborhood’s “character” which is outwardly defined by architectural identity and the other businesses taking up residence. But the neighborhood’s cultural identity has implications beyond the purely aesthetic. Where your team’s professional development and individual growth opportunities are concerned, the ease with which they can attend relevant events or take classes after work is also significant. These are the neighborhood characteristics, alongside fun bars and great lunch options, that employees appreciate.
- The average cost per square foot per year, as this fluctuates by neighborhood. Commercial space for rent is priced by dollar/sqft/year. For example, a 4,000 sq. ft. space with an asking price of $45/sqft would be $90,000 a year, or $7,500 in rent every month. So, if you know how much space you need, which you can work out using a simple tool like a space calculator, you can start budgeting for what your business can afford.
What sort of workspace is ideal for your organization?
Workspaces aren’t one size fits all, so determine what kind of space will best suit your business needs. For starters, consider:
- Does your organization require privacy? If many of your day-to-day operations require a meaningful degree of confidentiality, you may want to opt for a private office space over a coworking space or a shared space.
- How big is your organization, and are you planning on growing in the near term? If you only need a few desks for the foreseeable future, coworking or shared space might be right for you.
- Do you want an open-plan office or an office with cubicles or separate offices? Open-plan offices are a top trend and help to save on build-out expenses. If you want a space where people can focus with minimal distractions—or if some or all employees need a lot of privacy—you may want to avoid the open office.
How much space do you need?
For private workplaces, office space is generally calculated by multiplying the number of employees you have or are expecting to grow to, by the amount of space needed per employee—150 sq. ft. is average, but you can be more economical or spacious. Consider also the number of private offices and conference rooms necessary, and if a kitchen is a must—expect to add about 250 sq. ft. per office, 500 sq. ft. per conference room and 200 sq. ft. for a kitchen.
Savvy searchers also know to include extra for “Loss Factor”—the percentage difference between what landlords call Rentable Square Footage and Usable Square Footage. It includes unusable space like walls and shared areas (stairways, bathrooms). To avoid shelling out cash for unworkable areas, you want to find a space with a low Loss Factor but since advertised measurements will include at least some unusable space, you’ll likely need to hunt for more square footage than you think.
If you’re on a tight budget, you can get creative and optimize your usage of your square footage. Take meeting space, for example. Think of more adaptive solutions, like small partitions to form semi-enclosed spaces and privacy pods that take up relatively little in the way of floor space.
What’s your budget?
Office space is one of a business’ largest operating costs, so it is important to determine what you can afford to spend annually. By working with a broker, they will be able to help you ascertain whether or not your expectations are realistic. The cost of office space can vary greatly depending upon neighborhood, building class and amenities (doorman, lobby, etc.). In addition to base rent, you need to think about a security deposit as well as whether you will be required to pay for some or all of a building’s taxes, insurance and maintenance.
What’s your move-in timeline?
Do you need to move immediately or do you have months to look for the right space? This is another good reason to work with a tenant broker who can walk you through what to expect during the office space search, and how the process usually plays out. As a rule, it takes about 3-9 months to secure a space, plus more for build out. This will vary based on the type of space you choose to occupy.
2. Decide on your preferred lease term
The average lease term on office space in New York, for example, is three to five years. That can be a daunting time frame for some small or early-stage companies unsure of where business will be in a year, let alone three. Here are some of the types of spaces available to you and what they entail.
|Traditional space||Your typical office space. Your company’s name is on the lease.||Typically the most extensive option, although a good broker can help you find a great deal. Additionally, this option can become cheaper than coworking the bigger your team gets.||3-5+ years||Privacy|
|Office sublets||You rent an office from a tenant who holds the lease to the space||Typically 15-40% below office market rates||Varies widely||Privacy, cheaper rent than traditional space, flexibility|
|Shared space||You rent a few dedicated desks from another company, who also occupies the space||Affordable. You’ll often pay per desk, per month. If you rent a private office in a shared space, you’ll usually pay a flat monthly fee for that space.||Typically month-to-month agreements. Shorter-term agreements like 6 months or a year are often available||Good if you only need a few desks for the foreseeable future. PivotDesk is a curated marketplace that connects people who need offices with those that have extra space|
|Coworking||You rent space from a coworking provider||Affordable. You’ll often pay per desk, per month. If you rent a private office in a shared space, you’ll usually pay a flat monthly fee for that space.||Typically month-to-month agreements. Shorter-term agreements like 6 months or a year often available||Turnkey, networking opportunities, potentially lower costs, flexibility, amenities|
Sublets or shared space like coworking might be the most sensible option if you just need a few desks for the foreseeable future. Both offer flexibility and seats at a cheaper rate than standard rent. They have their drawbacks, but their impermanence can make them ideal. You can find both online, but a broker can locate available sublets faster for you. More on that below.
3. Start sooner rather than later
Finding new office space can take longer than you think—two to eight months on average for those with particular specifications. Where your search fits into that range depends mainly on three factors:
- the demand for office space in your desired neighborhood
- your space requirements
- vacancy rates of the buildings that you are considering
We recommend starting a search 6-12 months before the end of your current lease. An essential part of this stage is drafting a fit plan—with the help of an architect or specially-designed software—to confirm that the new space will accommodate your company’s needs.
The search for office space isn’t the only time investment to plan for. It can take many weeks (and sometimes months) for both parties to reach a lease agreement and you might also need to renovate your new space, which can add days, weeks or months to the timeline depending on your buildout needs and ambitions.
4. Appoint a lead to maintain continuity
Appoint someone you trust to spearhead your office search. If you are the only person matching that description, just be mindful of the time commitment you’re taking on, in addition to your already extensive list of commitments. Consider delegating it to an established right-hand resource.
This person should attend all the office tours, handle communications with the broker, and facilitate all the feedback from internal stakeholders. If on occasion the point person can’t meet these commitments, they should in turn appoint someone else to substitute and provide a crystal-clear update on the status of the search and priorities.What you don’t want is several different people looking at several different spaces and reporting back with their own take on the front-runners for rental space. That’s a recipe for a confused, prolonged search.
5. Work with a tenant broker
Walking down the street, you see a flag flying from the side of a building. It says “office space for lease” and lists a phone number. The building looks great from the outside and is in a neighborhood you love. Can’t hurt to call the number to learn more about the available office space, right?
Unfortunately, calling the number on the sign usually results in a waste of time, and at worst, the beginning of an awkward journey to signing a lease on an office you still have doubts about.
First, the odds that the advertised space actually matches your requirements is slim. Standing outside the building tells you nothing about the available office space inside, and the only way to tour the space is to call that number and get more information.
And the number listed on those “Office Space for Rent” signs usually belong to the landlord’s broker or listing agent. They work for the landlord. Not you. Their incentive is to satisfy the landlord so they can earn a healthy commission. Not help you find an office you love. They also know much more about commercial real estate than you do. If they wanted to, they could exploit that knowledge gap.
That’s where tenant brokers come in. They represent you. These brokers have knowledge of what spaces are available and their only job is to work on behalf of tenants (as opposed to landlords).
Working with a commercial tenant broker is a no-risk, high-reward endeavor.
- They know the market and what to expect in terms of pricing
- They know where to start looking
- They do all the legwork for you
- They negotiate savings and amenities on your behalf
- Some are salaried and consequently less likely to rush you into a lease for the sake of commissions
- Most don’t cost you a dime out-of-pocket – their fees are paid by landlords
The more your broker knows about your requirements, the current stage of your search, and what kinds of spaces you’ve already seen, the faster they can pinpoint the most helpful next step in the process.
6. Bring a list on tours
Not just to keep you and your broker honest. Once you start touring spaces, you might find your priorities shifting. For example, the speed of the lobby elevator might never have crossed your mind as a matter of importance. Five minutes into waiting for it to come, though, you might realize that a slow elevator is actually an untenable feature. You’ll not only want to add this requirement to your list but keep track of which spaces featured the best elevator speeds. As a starting point, keep the following questions in mind as you tour and update your list.
How are visitors admitted to the office building?
It’s not always as simple as walking through the entrance and taking the elevator up to the right floor.
Will it be obvious to guests like clients and delivery people how to get in? Are you at all concerned that entry to your office could be confusing? Here, as a building visitor, you can use yourself as a guinea pig.
What is the condition of the building lobby?
Is the lobby attended or unattended? Does it have other security parameters like key cards during work hours? Is it so small that it might be cramped for team members, clients and partners as foot traffic comes in and out?
Other considerations: if you’re intent on impressing clients and partners from the second they enter your building, the lobby’s overall condition is worth noting as well.
What is the after-hours protocol for the office building ?
Is there security personnel present? Are there cameras? Doors that lock? If a team member needs to come in on a weekend, what should they know about entering and exiting the building?
How many floors and how many tenants are in the building?
In commercial leases where you have to split building costs with the other tenants, this can be an important consideration. It also affects elevator performance, which shouldn’t be taken for granted.
Speaking of which…
What are your impressions of elevator performance?
No one relishes long waits for the elevator—or riding up ancient ones. So be a catastrophist and do the necessary due diligence on the building: who does maintenance and how well? How’s lobby security? Is the elevator reliable? What are late nights in the neighborhood like? These technicalities can mean the difference between general satisfaction and serious resentment.
How many elevators are there? If there’s just one, you can expect a bit of a wait to get to your floor.
You also need to decide whether it’s important that the elevator doors open directly onto your office floor or, as is often the case with suites, they drop you off in front of other businesses.
What are the access parameters for the freight elevator?
How to access the freight elevator is helpful to know, especially if you work in an industry that requires moving large quantities of goods or equipment in and out of the office building (like the food industry). It’s also helpful information for the move-in process.
How is HVAC priced?
Does your rent include the heating, ventilation and air conditioning (HVAC) for the entire building as well as your space? Does the system operate after hours? Does it cost more to operate after hours?
Does the office building have onsite maintenance?
Is there a cleaning service or will you need to hire one? Who do you contact if the elevator stops working? Or if there’s a problem with the HVAC or electricity?
What is the landlord’s usual build-out policy?
The build-out is the construction and renovation process required to transform empty commercial space into functioning office space. In some cases, the landlord may have a system that works well, whereby he manages the build-out for a tenant from end-to-end.
In other cases, the landlord might prefer that the tenant do the work on the space, in which case he will usually offer a tenant improvement allowance to help fund the renovations.
Each approach has its merits and limitations. Ask which method the landlord prefers and then discuss the best way to move forward with your broker.
What is the process for installing telecommunications?
Installing telecoms can be a surprisingly tricky affair. The cabling alone might require a physical “alteration” to the space that the landlord has to approve (and will likely charge for).
Find out on the tour how the landlord typically manages a telecoms installation and ask your broker for some advice on how to complete the most seamless transition.
How’s the lighting?
Floor-to-ceiling windows with natural light pouring in and high-end pendant lights might have been out of reach early in your company’s life.
But for your next office, you should consider making light a priority, as numerous studies point to the negative effects bad lighting has on productivity. Look for good natural lighting and high-grade lighting fixtures.
Traditionally, you’d have to write these kinds of details onto a piece of scrap paper or a PDF that your broker printed out. Thankfully, technology has helped automate the process. SquareFoot, for example, has developed a free collaborative tool that organizes tours, lets tenants take notes on each space in a digital TourBook, and allows tenants to easily share those notes with other stakeholders. SquareFoot brokers also use this tool so you can screen listings together and get updates on available spaces.
7. Get feedback internally
You may have a firm understanding of what your company needs in its next office space, but involving other members of your team in the discussion can yield major benefits later in the process.
For one, it helps establish common priorities among the staff, which in turn establishes positive sentiment toward the search and the eventual destination you choose as your next address.
Are people most worried about the commute? Proximity to clients and partners? More meeting space? Of course it’s impossible to satisfy every opinion, but the more inclusive you make the process, the more pride and ownership your team will take in the new office. Plus, they may have some invaluable suggestions.
8. Don’t be shy, make an offer!
If you find office space you like, even if you’re not one hundred percent sure it’s “the one,” don’t waste the time. Make an offer. Doing so is a non-binding step in the leasing process. You can withdraw the offer at any time without penalty, making it a low-risk, proactive move that can yield a high reward.
Plus, the more offers you make on available office space, the more likely you are to get one, even if it’s not your first choice. An unfortunate reality in commercial real estate is that even the most sure-thing deal can fall through at the last minute. In which case, you want to be ready to move onto the next best available office space.
9. Consult a designer
Once you’ve settled on a space, you need to transform it into a beautiful, functioning office space.
You can negotiate the cost of renovations (aka “build-out”) and who covers it during the leasing process (another critical area where your broker adds value), but here are two basic options you might encounter.
- Turnkey buildout. In a turnkey build-out, the landlord pays for and manages the construction of all agreed-to modifications. If the landlord is in the driver’s seat, though, that means he determines the cost and quality of the materials and contractor. Cutting corners isn’t unheard of.
- Tenant improvement allowances. Landlords may opt instead to offer a tenant improvement allowance, a monetary contribution to help cover build-out costs. Some landlords offer it in the form of free rent (expressed in dollars per square foot). With a tenant improvement allowance, you can hire your own contractor, designers and upgrade or downgrade materials according to budget. You’re the project manager. You call the shots.
In either case, if you don’t have any experience overseeing projects like this, consulting a designer (even in an unofficial capacity, like a friend with good taste and strong DIY sensibility) will help you make more informed decisions during renovations and layout planning.
10. Be patient as lease signing approaches
Unlike leases for apartments, commercial leases can take some time to negotiate and close. There’s not much you can do to fast-forward this step.
Each commercial lease is its own unique agreement, but here’s a look at the different types of commercial leases you may encounter in the process and the general framework they provide.
Lawyers on both sides (yes, you should enlist legal counsel for this part) review the language in the lease meticulously, circulating red-line corrections until both sides are satisfied. That can take several weeks, and in most cases, you’ll be glad it does. You’ll want to make sure the language in the lease reflects exactly what you intend to agree to.
With these tips, you’ll be able to navigate the office search process like a pro. At SquareFoot, we’re here to help you find your next office.