Q: What should entrepreneurs look for when renting an office?
A: There’s much to consider, from hiring a real-estate broker to finding the right location to fine-tooth-combing through the lease.
Bill Armstrong, treasurer of the National Association of Realtors, who has toiled for 30 years in just about every aspect of commercial real estate, advises finding a broker who is experienced in commercial real estate and familiar with the pertinent geography.
“You have to interview, if you will, a broker, and have a sense of comfort with his competency,” Armstrong says. “I think you can meet with them and find out what they know in really short order.”
OK, time to find your office. First determine how much space is necessary for you to operate. Armstrong cautions: Be realistic. If you lease more space than your business requires, your monthly rent could consume an excessive chunk of your precious resources. If you’re a start-up, you’ll want to account for future growth. But how much? Be thrifty.
“Don’t take on more space than you need,” Armstrong says. “That’s critical.”
Once you’ve determined the square footage your business requires and homed in on a space to match, figure out whether the existing layout suits your needs. If it doesn’t, you may want to embark on what’s known as tenant improvement, or TI.
If your desired space requires extensive renovations, find out whether the landlord will contribute to those costs. “This is another big thing,” Armstrong says. “The entrepreneur needs to say, ‘What kind of help can I expect with respect to TI?'”
Armstrong says landlords generally are more willing to share TI costs when a tenant has agreed to a long-term lease. If you’ve signed on for only a year or two, you may be on your own.
About that lease – it’s a mighty important document. Be sure you know the meaning of every syllable. Armstrong says it’s imperative that the lease protects your interests. Consider hiring a real-estate lawyer to review it.
As you peruse the lease, Armstrong says, watch for costs beyond your per-square-foot rental price, such as utilities and common area maintenance (CAM) fees, which cover the expense to maintain the building – cleaning hallways and restrooms, removing snow, keeping up the landscaping. If you’re not sure whether the rental price covers CAM or utility costs, by all means, ask.
After all, the terms of your lease are just as important as your rent. “I may need, in a year or two years, to double my space,” Armstrong says. “I might want a one-year lease with a three-year option or a five-year option. If I need to grow, I need the ability to come out of there without a long-term commitment.”