3 Biggest Mistakes Startups Make When Renting Commercial Real Estate

mistakes startups make when renting commercial spaceIf you are a startup or new business at some point you will have to rent commercial real estate. You try to avoid having that expense for as long as you can however as your headcount grows and your business needs change you have no choice but to find office, retail, or warehouse space for rent. There are many mistakes that I have seen made however below are the 3 big ones.

Leasing Too Much Commercial Space

Many times new businesses or startups lease way too much space. You typically only need about 150 to 175 sf per person as long as the buildings parking ratio allows it. Also, they get too caught up in having all the cool fun space right off the bat. Yes it’s nice to have a game room with a ping pong or foosball table, or a lot of fun trendy lounge areas, however if you are a startup or new business you need to be smart about this.

I know you want to impress your visitors and want to recruit and retain employees however it’s important that you keep your operating expenses low until the business is more stable. You can rent a bunch more office space later on to turn into fun hangout areas later on. But for now lease as little space as you can get away with.

Renting the Most Expensive Commercial Real Estate

I know recruiting and retaining employees is important however you don’t have to rent the most expensive commercial space to accomplish this. Everyone knows that most startups are not profitable for the first few years and have to watch the numbers. So go find a nice class B or C space that you can live with for now. Ikea has lots of inexpensive cool furniture that you can buy to make your space look trendy. Keep your costs low and your investors will love you for it. When you are making lots of money then consider renting the most expensive commercial space.

Signing a Long Commercial Lease 

In a hot market many landlords will try to force you into a long term lease. Don’t be pressured into doing so unless it makes business sense. Find a commercial space that will allow you to lease for 3 years or less. If you search hard enough you will find a handful of property owners that will do shorter term leases. When your company is more established and stable then consider signing a 3-5 year lease. 

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