2torial #0924:
Learn2 Rent Commercial Space

An office of one's own

If your business has officially outgrown your spare bedroom, we congratulate you. Now the trick is to find an office that will keep your business growing, whether it's on Wall Street or Main Street. Sounds simple, but you'll have to balance several factors--size, cost, location, and services--to find the right equation for your business. We'll explain how to find the correct mix so your business stays on track.

Renting commercial space is a lot like renting an apartment--just more complicated. First of all, you have to consider not just your own needs, but also those of your clients and employees. Further, offices tend to have more complicated infrastructure needs, from wheelchair accessibility to souped-up wiring for phone and computer networks. Finally, leases tend to have many factors to consider (and negotiate), from length (which can range from one to five or more years) to infrastructure improvements your business may require.

As a result, novices should seriously consider the services of a commercial real estate broker. These professionals can help you define your needs, find appropriate rental properties, and negotiate a lease that takes your best interests into account.

Know what you can afford

What is the biggest danger entrepreneurs face when renting commercial property? Choosing a space they can't afford. Young businesses are generally the most vulnerable, but a long lease on expensive office space can spell cash-flow disaster for any promising venture.

To avoid this problem, come up with realistic business projections, and then calculate the maximum you can afford to spend on office space. Many people assume that a fancy office is somehow going to help generate business, and thus pay for itself. Maybe--but don't count on it.

On the other hand, if you plan on receiving clients on-site, you should consider their convenience and comfort, and remember that a professional image is essential. However, that doesn't mean you need to rent in a building with marble floors and spectacular views. Perhaps you should invest in "dressing up" a more modest site with furniture or landscaping instead.

Define your space needs

If you choose a space that's too large, you'll be throwing money down the drain. On the other hand, a growing company needs elbow room to make way for future expansion. As you're determining square-footage needs, consider the following questions:

• Do you need a reception area for clients and other visitors?

• Do you need a conference/meeting room?

• Which workers require quiet and/or privacy? How many will require private offices, and how many can work in cubicles?

• How many people do you intend to employ by the time your lease is up?

• Are bathrooms sufficient for the number of employees?

• Do you need a kitchen or some other communal space where employees can gather informally?

• Do you want distinct areas for different divisions of your company (i.e. marketing, technical, administrative, management, etc.)?

Choose a location

Your business's location is an essential ingredient to its success. Don't rent office space just because it's convenient for you personally. Think about clients and employees as well. You wouldn't want top-notch job candidates to cross you off their list because of a long commute. And if you plan to woo clients at your offices, make sure it's as easy as possible for them to get there.

When deciding on location, consider the following questions:

• Is the building zoned for your particular commercial use?

• Is parking available to both employees and clients?

• Is the office convenient to public transportation?

• Is it within easy commuting distance of a population from which you can attract quality employees?

• Is it convenient to the kind of business services you're likely to require (printers, suppliers, shippers, and the like)?

• Is it in a neighborhood or region that will lend prestige to your business (for example, Beverly Hills for deluxe goods, Silicon Valley for computers and e-commerce, or Wall Street for investment banking)?

• Is it convenient to restaurants, parks, or shopping so that you and your employees can spend your lunch hours pleasantly?

Establish service needs

To get your office humming, you're going to need more than four walls and a roof. Make sure the spaces you're considering can handle your complete infrastructure needs. This could include any of the following:

• Electrical outlets that will meet your power needs

• Telecommunications wiring, or the possibility of installing it easily and afordably

• Computer network wiring, or the possibility of installing it easily and affordably

• Sufficient heating, cooling, lighting, and ventilation systems to keep your workforce comfortable

• Services such as cleaning, garbage removal, and security

Negotiate a lease

A broker or agent has shown you several places, and you've settled on one. Now's the time for negotiation. Commercial leases are generally much more complicated than residential leases. Make sure you and your landlord come to an understanding on all the following points:

Length of lease. Business leases tend to last a minimum of three to five years. If you want a shorter lease, expect to pay more. Make sure you understand the penalties you face for breaking the lease, and how you can get out of the lease legally before the end of the term. For example, find out whether you can sublet the space should you need to move.

Tenant improvements. Often, businesses must make alterations or improvements to an office space. Make sure your lease gives you free reign to make any capital improvements you need at your own expense, like network wiring, additional bathroom or kitchen facilities, building or tearing down walls, or adding heating or cooling systems.

Indemnification. As an employer, you and your business face a lot of potential liabilities. Your lease should make it clear who will be financially responsible if someone is injured in your office, or if an accident or natural disaster damages equipment or prevents you from doing business.

Services. If your landlord provides cleaning and security services, are the costs included in the lease? Don't get blindsided by unexpected expenses.

Commercial leases can be very complex. No doubt, the first draft will be slanted in favor of the landlord, but a good broker can help you negotiate better terms. Finally, always have a lawyer review the terms before you commit. Then just sign on the dotted line, and you'll be ready to open up shop in no time.

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