Growing a company can be exciting, but it can also be pretty trying. Even handling the infrastructure can bring headaches. If you find yourself saying “We’ll just squeeze Bob in here,” when your new hires are about to start, perhaps it’s time to consider a move to roomier headquarters.
A commercial real estate broker will help you find office space, but before you even start talking to one, you should calculate roughly how much space you’ll need. Private offices range between 120-200 square feet each, workstations 36-80 square feet, and conference rooms 200-375 (up to 10-12 people) square feet. You’ll likely also want to consider other ancillary spaces like storage areas, closets, a faxing/mailing room, or a kitchen.
Then, spend some time thinking about where you’d like to move, as well as what that space should look like. Is it important that you be near public transportation or your customers? Or perhaps an alarm system is a must-have. Knowing what you’re looking for beforehand can help you get a sense for costs, so that you can adjust your budget or your criteria as necessary.
Real estate costs – measured in dollars per square foot, vary greatly. The Building Owners and Managers Association (BOMA) classifies buildings according to their location, appearance, and cost. Class A space, for example, is typically a modern, attractive, secure building in desirable location. But Class A space in a metropolitan area is far more expensive than Class A space in a less-populated region.
Once you know what kind of space you want and how much you can pay, it’s time to find a broker. Brokers are plentiful, and each tends to specialize in a particular type of space (manufacturing vs. office, for example) and geographical area. Particularly in a hot market, it’s advantageous to find a broker who is intimately familiar with the area you are eyeing, because they often get the inside scoop on space that’s about to become available; you can at least have a chance of getting to it before it’s widely marketed. Brokers also can provide insight on the quality of different landlords.
However, there are brokers who work for the building owner, not you. Some brokers work on commission, which is paid by the landlord and usually ranges between 3-7 percent of the cost of the lease. This practice can lead to situations where your broker is not working in your best interest.
With that in mind, make sure you get a disclosure statement upfront, which details whether the broker is representing the landlord or the tenant or both. The Commercial Investment Real Estate Institute (CIREI) mandates that all members adhere to their Code of Ethics and Standards of Practice. It’s best to look for brokers who are affiliated with the Society of Industrial and Office Realtors (SIOR) and are Certified Commercial Investment Members (CCIM). These designations will ensure that you’re dealing with an educated and recognized professional.
Once you have found your broker and a site you like, you are ready to start the hard part – negotiating. But tips on getting the best deal will have to wait for a future column.
Think long-term. Consider your longterm growth plans when deciding on a new space. You don’t want to find yourself needing to move when you’ve got a year or so left in your lease.
Interview brokers. Some things to consider: SIOR and CCIM designation and whether the broker is representing the tenant or landlord.
Consider a sub-lease. If your company is growing quickly, you won’t want to lock into a long lease. The rub is that landlords prefer long lease terms; one way to get around that is to try subletting space from another business.
Luke Albarn is a freelance writer based in Tarzana.