There’s a lot to consider when leasing a commercial space, especially if it’s your first time doing so. The process can be complicated, and numerous factors can impact your decision as to what location to lease and under what terms. If you know what to look for, though, you can find the right office space for your organization. We’re breaking down everything you should know when leasing commercial space so you can find an office where your company will thrive.
If you think you’re ready to sign a commercial lease, here are the most important things to know for a successful experience.
Much like shopping for a home or an apartment, looking for an office can be simultaneously exciting and overwhelming. If you’re thinking about leasing a commercial space, take stock of your team’s needs before officially starting your search.
“The tenant has to think through lease location versus cost, lease terms and duration … and whether or not the office space … provides options for growth or expansion of the business,” said Jeb Ory, a board observer at Quorum.
Preparation can mitigate the stress of searching for the ideal office. Don’t dive into the process without having a clear idea of what your organization wants and can afford, said Bobby Goodman, head of growth at NavigatorCRE, a company that helps businesses find office space.
“To make the process seamless and successful, I recommend taking pause and prepping in advance of the search,” he said. “This includes knowing how you will use your space, what amenities are desired and setting ‘price guardrails’ to prevent going over budget. Each office space will have different features, so it’s important … to understand [your] priorities.”
You should also consider your business’s trajectory and objectives for the near future to ensure a potential space can grow with your organization. “Before touring any spaces, companies should ask themselves where they see the business in one, three and five years,” said Goodman.
When you need a new office for your growing team, you might be tempted to rent the first space that meets your needs. However, Ory said it’s best to take your time and preserve your options for as long as possible, which may mean embracing short-term leases while you search for your perfect long-term space.
“Locking in a multiyear lease when your business is growing quickly can inhibit growth and possibly even require you to stand up two different offices at the same time, which can create logistical challenges and cost inefficiencies,” he said.
Ory noted you may be able to find fully furnished office subleases and temporary coworking spaces until you’re ready for a long-term lease.
“Our company moved four times within a single WeWork coworking space before we moved out to our own office,” he said. “We saved tens of thousands of dollars by taking our time to find the right space rather than moving to a place in a hurry.”
After assessing your organization’s needs and, with any luck, finding office space that meets those needs, it’s time to sign on the dotted line. But unless you’re well versed in commercial real estate, you’re likely going to run up against some confusing phrases in the lease agreement.
“Much of the needed information regarding the office search is communicated in industry terms instead of everyday language that tenants can understand,” Goodman said. “For example, a tenant might understand ‘total rent costs’ but not a ‘triple net lease,’ which a broker might say.”
Don’t ignore these unfamiliar terms or brush them off — make sure you go over the lease with a fine-toothed comb, said Eddie Navarette, CEO of FE Design & Consulting.
“Ambiguity can be common when it comes to the terminology in leases,” he said. “It may be unclear who is responsible for payments, and these details may not be uncovered until down the line when it’s too late. Don’t be afraid to ask questions to get what you want — no one cares about your business more than you do.” [Think you may want to purchase instead? Find out the best time to buy commercial real estate.]
Don’t rush the process — take time to research and ask as many questions as necessary so you know exactly what you’re committing to before signing a commercial lease.
Here are a few other things to keep in mind if you want to rent commercial office space.
As you determine what you want in an office space, figure out if it’s in your best interest to rent on a long- or short-term basis. Many lessors expect you to rent their space for one to three years and may provide you with a contract that asserts this. If you’re not willing to make that kind of commitment, adjust your search accordingly.
Remember that tricky terminology we mentioned? A commercial real estate expert, such as a trusted broker or attorney, can help you make sense of anything you don’t understand. No matter how much research you conduct, there’s no replacement for talking to someone who has been working in real estate for many years. There will always be elements of the process that you don’t fully grasp or understand, leaving you vulnerable to making major missteps and getting stuck with unfair terms. However, if you regularly consult with a seasoned professional during the leasing process, you can minimize these risks.
Even if you take excellent inventory of your company’s office needs and don’t rush the process, you may not be able to find a location that hits every preference on your list. Be willing to make reasonable adjustments and alterations to your plans as needed. If you are 100 percent married to a certain vision and refuse to consider other options, you may miss out on great properties that could serve your business well, even if they aren’t what you originally intended. Plus, as you tour various spaces, you may notice that your priorities and desires for an office space change.
The shopping process when looking for office space isn’t all that different from the buying process you’d follow if you needed new software or equipment. Research the market, assess your options, consider each option’s limitations and drawbacks, and factor in costs. Make lists so you can keep track of the information you’ve collected and can easily compare and contrast properties. Then you’ll be able to more confidently make a final decision. [Read related article: Property Leases: What SMBs Need to Know]
As remote-work trends suggest such arrangements are here to stay, you might be wondering if renting a commercial office space makes sense for your business in this day and age. After all, many people today prefer virtual setups where they can work from home or their favorite coffee shop. Read on to consider the pros and cons of leasing commercial office space in today’s working environment.
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Signing a commercial lease is a big commitment, so it’s important to be diligent in your search. If you’ve evaluated your organization’s growth needs and determined now is the right time for new office space, don’t hurry. Take as much time as you need to research, tour spaces, and find an expert that can answer all your questions. Commercial office space can benefit your company tremendously — as long as you take the right path to find it.
Natalie Hamingson contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.