5 Important Tips for Leasing Your First Office Space
Your company is expanding, and you’re ready to lease your very first office space—that’s exciting! This big, new step for your business can quickly turn from thrilling to stressful, as you mull over office locations, read through long contracts, dig into details about clauses and more. Luckily, there are some tried-and-true tips that can make leasing your first office space a breeze. Make this potentially daunting experience as exciting as it should be with these guidelines.
- Know Your Needs
Before you start looking at office spaces, analyze your needs as a business. Is moving into an office space necessary or beneficial for your business? To determine this, you may want to ask yourself:
- Are you in a position to commit?
- Can you afford it?
- Do you have help from an agent and legal professional?
There are a few questions to ask before starting the office hunting process, according to “Golden Rules for Renting your Office Space.” This puts you in a position to find the best opportunity for you, and your business, right now.
- Think About the Fun Stuff
Much of the commercial renting process is unexciting—but thinking about what you want nearby, what would make your employees happy, and how you can create an office space people want to be in is fun. It also dictates where the office will be located, what it will look like, what amenities you’ll have access to and more.
Write a list of dream amenities and office features and consider whether you want to be within walking distance from anything specific—think: restaurants, office supply stores, post office, etc. Take this list to your tenant rep (more about this in the next section), which is when you’ll start narrowing down and separating “wants” from “needs” and “the reality of the area” restrictions.
- Get a Tenant Rep
Save yourself the headache and hire a professional commercial real estate agent. Like buying a home, you want someone on your side who can provide guidance and advice as you move through the process. According to 5 Reasons You Need a Tenant Rep, there are a wide range of benefits to working with someone who specializes in leasing commercial space:
- They speak the same language, and can understand leases and other complicated legal paperwork. Not to mention, they know your rights and can fight for you if necessary.
- They level the playing field, taking the advantage away from the landlord.
- They can help you find less-obvious options that may be better suited for your needs.
- They can assist with negotiations, which can be stressful and challenging.
- It doesn’t cost you anything—really. “Unless otherwise noted, the tenant doesn’t pay commission to their rep, the property owner covers the commission for both sides of the transaction (to the listing agent and the tenant rep) when the lease is executed. This means you can get expert advice, negotiation assistance and industry insight at little to no cost to you.”
- Double-Check Your Lease
Landlords use form agreements that can be very one-sided, suggests Richard Harroch, a Forbes contributor. This means that the first contract presented will likely be very favorable for the landlord, but not the tenant. Some of the most common landlord-favoring clauses include, according to Harroch:
- The right to pass on any additional operating costs to the tenant, such as building repairs or property taxes
- Trying to disclaim the property from compliance with environmental laws
- Trying to get the tenant to pay tax increases if the property is sold
- Reserving the right to terminate the lease at any time
- Prohibiting sub-leasers
This list is by no means comprehensive, which is all the more reason to have a professional guide you through the process to make sure you’re getting the best deal.
- Protect Yourself For the Future
Before you sign a contract, think carefully about your business goals. North Forest, office space experts, suggests that you prepare yourself for the best-case scenario (expanding into a new office space) as well as the worst-case scenario (terminating the lease early). For example, to protect yourself if you need to expand, put a relocation clause in the contract. This gives you the right to leave should your business expand beyond the landlord’s premises.
You can also ask for a right of first refusal, which, according to North Forest, “means that you would like the landlord to ask you first if you would like to lease any adjacent spaces to your current office before they can lease it to another customer.” This is beneficial because moving to a new office space is far more expensive than expanding into a larger space.
For the worst-case scenario, include the right to assign the lease or sublet some (or all) of your office. This will keep you from having to terminate your contract in the event that you need to leave for any reason.
- Consider Purchasing
There are circumstances when buying a commercial property to operate your business from makes sense. Buying a building can lock in your monthly payments via a fixed mortgage so you don’t have to worry about rising rents. Pros include tax benefits and building equity. For more information, check out this article from FitSmallBusiness.com: Buying vs. Leasing Commercial Real Estate.
If a purchase is the right fit for your business, check out the SmartBiz Loans Commercial Real Estate page for details about SBA loans available to purchase commercial property. Note that the property must be 51% occupied by the business owner in order to qualify.
Not sure if you qualify for an SBA loan? Try the new SmartBiz Advisor™ online, educational tool to learn about how you can get your business SBA or bank loan ready – no cost involved. You can assess key criteria banks consider and where your business stands on each. Learn more about SmartBiz Advisor here.
Jessica Thiefels has been writing for more than 10 years and is currently a full-time writer and content marketing consultant. She’s written for LeadPages, Manta, StartupNation and more. Follow her on Twitter @Jlsander07 for money-saving ideas, health tips and more.