So you are a new company that is currently leasing coworking space or an executive suite and have suddenly experienced a huge growth spurt……..and NOW those spaces are no longer suitable for your needs. What do you do? Finding and leasing office space poses a new challenge for new startups and business owners if they have not done it before.
Consider the below tips before beginning your office lease process:
Get your Financials in order – I have summed this up pretty nicely in this post. Overall the building owners will want to make sure that you can pay rent and who will be financially responsible if you do not. The owners will typically require a security deposit equal to one month rent or a personal guarantee if they see you as a risk. Be prepared to provide tax returns, profit/loss statements (if you have those), and/or a letter of credit. If at all possible try to avoid signing a personal guarantee however some landlords may require it in order to get a deal done. If you are required to then try to put limits on it.
Get Help – Before looking at office space consider hiring a tenant representative that specializes in office space leases AND that is experienced in working with startups. They will understand your needs and be able to sell your startup to the landlords. They also ONLY represent your best interests. Their service cost you nothing since their fees are typically paid for by the owners. You should also make sure to hire a good real estate attorney. By the tenant rep and attorney working together they will be able to make sure you are taken care of. You are busy running and growing your startup so there is no reason to try and do this on your own. Get help!
Don’t lease too much or too little office space – Office space is expensive. If you think you will grow then only consider buildings that will give you option rights on available space. In a tight market you might also consider leasing more space than you need and subleasing the extra space until you need it, however make sure to negotiate this right in your lease. Also make sure you have the right to assign the lease with few limitations. This will come in handy when subleasing and getting acquired by another company.
Know your total monthly costs – Make sure you understand who pays for what! Some landlords charge extra for after hours hvac or have other hidden costs you may not be aware of. Make sure you ask a lot of good questions and get a handle on who is responsible for paying for things such as electric, janitorial, trash removal, freight elevator use, etc. You want to know exactly how much your monthly rental costs are going to be!
Negotiate your special needs up front – Besides determining who will construct the tenant improvements you may have special needs or requests such as antennas, after hours hvac, back up power, soundproofing, above standard energy needs, above standard internet needs (e.g. fiber), etc. Make sure you address and negotiate these up front. Once you have signed the lease it will be too late.
Your startup company may have grown and be ready for its own space however YOU need to be ready first. With help from the right advisors, you will be one step closer to leasing your own office space!