Ready to move out of your home office? Or just looking for a new space that better represents your company?
Finding the right office space is already difficult, but actually negotiating the lease can be even more complex and overwhelming. Especially if you’ve never done so before. A carefully selected lease is vitally important to the health and growth of your company.
First, Identify Your Needs
Before you can begin shopping office space it is important to determine what you can and cannot live without in your office. At first this may seem a bit challenging, especially if you have never rented an office space before and you don’t know exactly what you want. By touring different facilities and keeping your options open you will soon be able to tell what are necessities for your space, and what you can do without.
Here just a few of the options you’ll have to consider:
- Office location (research business guidelines and rules within each particular city)
- Size of office space needed
- Number of offices needed
- Access to meeting rooms
- Phone answering services
- IT support
- Proximity to dining options
- Kitchen needs
- and so much more!
The list may seem to go on forever, but finding an office space is a lot like buying a house: when it’s right, it’s right. Otherwise, just keep looking.
Next, Begin Lease Negotiations
There are several factors to your office lease. These factors include the length of the lease, the rent increases, tenant improvements and more. So before you sign the dotted line it is important that you understand the terms being offered you and also your ability to negotiate those terms to better fit your needs.
This is the amount of time you wish to lease the office. This has a lot to do with the age of your business. Lease terms for commercial office space can range anywhere from 1 year to 10 years. For a lot of small or startup businesses this is an unrealistic commitment. What if your business really begins taking off and you have to handle rapid growth within a limited space?
Most small or startup companies tend to ask for a shorter lease in order to have the flexibility to grow into a bigger space if needed. Another factor to take into account is that you may personally enjoy working from home more than from an office. So a full time office space devoted just to your business may sound like a good idea, but its not necessarily a fit for your culture or needs. Having a short term or flexible lease can help with the uncertainty of a first time office space.
Percentage Rent Clause
This clause means that once your business reaches a certain point in sales, a percentage of the gross sales goes to the landlord, which ultimately increases the cost of the rental. A good way to handle this, if the landlord will not remove the clause altogether, is to negotiate that the percentage rent doesn’t start until the business has hit their sales figures for 12 months in a row. This ensures that if a business has one really good month or season, but sales die down again, that business is not stuck paying for that one month of great sales.
If the space needs a lot of improvements, focusing on having the landlord provide them at no cost to you can be the best thing you can do. Often, if you are willing to sign a long-term lease, the landlord will be much more willing to do so. An alternative to tenant improvements if the space is already up to par, is to ask for a few months of free rent. This may even be part of the initial offer when signing a longer term lease.
Beginning Date of Lease
If you’re taking advantage of tenant improvements or you’re renting a brand new space, you want to be sure you’re not paying rent until you actually are able to move into the office space. Be absolutely sure to negotiate to not pay rent until the space is opened officially.
Subleases and Assignments
Some landlords will allow you the right to sublease or assign your space. This allows you to have another tenants take over your space if you need to move out, or allows you to initially sublease your space if you need some time to grow into all of it.
Ultimately, with any office space lease negotiation it may save you time and money to hire and involve an expert. And always reach out to your network of trusted advisors for experience and extra guidance to make sure your lease process runs smoothly.
About the Author: Jeff Reinstein has been the CEO of Premier Business Centers since October of 2002. He has helped the company grow from 9 locations to over 70 throughout the country. When he's not working, he loves spending time with his family, fishing, surfing, and mountain biking.