By: First Union
Office Space Rental: Some Do's and Don'ts
Finding and renting that perfect office space for your company can be a hugely important process depending on the nature of your business. You want to be sure your office reflects the essence of your brand, that it is welcoming to customers and that it's overall a comfortable office space in which you and your team can run your company. That said, how do you find that ideal office space rental? It may not happen overnight—in fact, most of the time it can take several months to find that perfect office. Patience is a must in this process. The other thing to keep in mind when searching for an office to rent is that you want to consult with experts as you go. That is to say, working with an attorney and potentially a real estate broker can help facilitate the process, not to mention, ensure that you're protected. In this article, we look at some of the dos and don'ts associated with finding an office space rental.
Do pay attention to the location
This is where research is going to come into play, potentially a lot of research. Several factors are going to affect your location choice. For one, where is your target audience-centered? Having an office near where your customers are can be a great advantage. Also, think about the overall community/neighborhood in which space is located. Is it suitable as far as your needs? Is there adequate traffic (if this is relevant/)? What is the overall feel of the neighborhood? Don't underestimate how pivotal location can be to your office.
And then of course, in terms of location, there are going to be certain addresses that cost more than others. More highly trafficked areas are likely going to be on the pricier side. Location and rent go hand in hand. You want to make sure that space is both affordable and desirably situated.
When signing any lease, some things you may want to ask the landlord:
Are there any tax incentives in the citytown that might apply to you if you were to rent there?
What zoning laws apply? Certain zoning regulations could restrict certain types of businesses. You need to have any information to this end first before signing that lease.
Given the location, is crime an issue? This will affect several factors from your general peace of mind to your insurance premiums.
Don't neglect your budget
Maybe it so happens that you are shown an office space rental that ticks all of the boxes. It is your dream space, and you can completely see your company fitting in nicely there. And then, you are hit with the monthly rental fee. Unfortunately, it's a bit more than you had hoped to spend on an office space rental. Looking at real estate (even to rent/) can be a tricky thing. We are often guided by an emotional response versus a sensible one. Have those budget numbers first and foremost in your mind when you go office hunting. Making it so that you are stretched with rent and therefore have to make other cuts can be problematic. It likely will be problematic in the long run.
Something to ask about too as far as the rent goes is if there are yearly rate hikes anticipated. Rate hikes can put an office that is otherwise perfect budget-wise out of reach the following year. Know exactly what you are getting into.
Do be prepared for the commitment
The lease terms are important, so do not overlook these. How long will you be locked into that lease? With commercial leases especially, these tend to be of a longer duration—sometimes as long as ten years or more. There probably is room to customize a lease to better suit your specific company but understanding landlord expectations upfront is so crucial to a harmonious relationship.
If your business is newer, you are going to be better off looking for office space rental that has a shorter term, at least initially. That said, if you do sign a longer lease, the landlord may be willing to negotiate certain things and make some concessions such as covering a percentage of the utilities.
Don't overlook the details
The clauses contained within the lease should never be overlooked. This is also why having an attorney help with the process and consequently review all documents is a smart idea. For example, what does the lease stipulate about subletting? While you don't anticipate having to close up shop and abandon your office space, it can happen. Being able to sublet the office out and therefore avoid either having to come up with the rent or face legal action is important.
You may also want to ask about an exclusivity clause which can be critical to some businesses. This essentially states that the landlord cannot rent out any adjoining or nearby space to direct competitors. Another clause that may be of concern to you depending on the nature of your business and the office space itself is a co-tenancy clause. If for example, a development is anchored by a major tenant who is also a major customer draw and they leave, you might be eligible for rent reduction given that you stand to lose revenue as sales could then drop off.
Do think about giving yourself room to grow
For most business owners, the hope is that over time the company will grow. That said, you want your office space to be able to accommodate this growth. A space that is too small and just barely houses all of your business needs now is not ideal if the plan is for you to eventually expand. Maybe there are other floors within the same building that you can lease in the future. Or perhaps there is the possibility of renovating down the road. Think about your long-term needs when assessing any potential office rental.
First Union Lending is here to help. If you need additional funds for office-related projects/purchases, we have a program for you. Call today!