How to Lease Commercial Office Space

How to Lease Commercial Office SpaceLeasing commercial office space is a big step for your business and one of the largest operational expenses.  Knowing your potential commercial office space needs is very important before you begin shopping around.

Steps to Leasing Commercial Office Space

  1. To determine which location is best for your commercial office consider where your employee talent will come from, where your competition is, what conveniences are nearby, and where your potential customers are located.
  2. Determine how many sf of office space you will need.  Most commercial office leases are 3-5 years so calculate the number of employees you have now and try to estimate how many you will have 1, 2, 3, 4, or 5 years from now.  If a property has good parking and the landlord allows it most tech companies are leasing 150 to 175 sf per person.  Average maybe 175 to 200 sf per person.
  3. Consider engaging an experience commercial real estate agent.  Commercial agents that exclusively represent tenants can help you find great location and negotiate the best deal.
  4. Prepare a budget for your commercial office lease.  Expect your monthly rent payments to be at least 4-5% of your total operating expenses.
  5. Have your agent research properties that meet your needs and then tour each one with them.
  6. Landlords typically want 3-5 year leases however that depends on the total improvement costs, lease rate, etc.  Find out what landlords are going to require.  They may consider a shorter lease depending on the condition of the space and commercial office market.
  7. Make sure you know all the costs involved in leasing the office space.  Calculate the total costs so you have a good idea what your total monthly and yearly costs will be.  Depending on the property and landlord lease rates are quoted differently.  Some building rates include electric while others don’t.
  8. Request proposals on your favorite spaces and negotiate with the landlord to get the best lease rate, terms, and concessions possible.
  9. Request a copy of the lease agreement
  10. Hire and experienced commercial real estate attorney to help you review and negotiate the lease points.  There are literally hundreds of clauses in lease contracts and an attorney can help you understand them.
  11. Once you are good with the lease sign it.  You will also be required to provide the first months rent up front as well as the security deposit.

Other Tips

  • Make sure you understand the parking situation at each office building.  Landlords have parking ratios to adhere to and if you take up too many parking spaces you could be in default.
  • If you only need small office space or are in growth mode and need shorter lease terms then you might consider researching sublease options where companies want to sublet some of their space.
  • If your company plans on growing sooner than later don’t lease space that you will grow out of too quickly.  If you think you will grow out of your space before your lease expires then consider leasing more space now or getting a right of first refusal on additional space.
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