Things to Consider When Choosing Office Space
Be prepared ahead of time when you’re ready to look for a new office space. Follow these simple rules and you’ll find the task a bit easier.
You’ve made the decision to relocate your office or start a new business. You’ve hired a commercial real estate broker to help you. In the highly competitive NYC market, the more thought you’ve put into what you’re looking for the better equipped you’ll be to make an offer quickly.
At this point your broker has your list of must-haves and non-negotiables, which will save you both lots of time by narrowing down business locations for rent. The best way to keep track of the properties you tour is by using a checklist of some sort. It can be as simple or as detailed as you like, but it’s the only way you can easily compare the spaces you’ll see. Your broker can also help jog your memory along the way.
Location, Location, Location
It’s as the old saying goes, and you hear it all the time because it’s true. On top of location in general, the more highly desirable areas create high competition. From Alphabet City to Yorkville, finding office space to rent takes some planning.
Think about where your employees commute from and where your customers are. How will they get to a new location? New York City has one of the world’s most robust transit systems, so knowing the demographic of your customers and say for example, that the majority of your employees commute from New Jersey, will help you pinpoint the right neighborhoods.
If you operate a retail establishment or a professional medical office, it might be helpful that there are complementary businesses nearby. A specialty medical office in the vicinity can be a good source of new referrals, or perhaps you need to be close to a hospital.
Write down all of these factors. It might be that you thought you wanted to locate your office in Midtown, when really it’s better that you focus on Chelsea. If you’re a clothing designer or financial services company, your decision might be cut and dry for which neighborhood is best. Again, lean on your broker who knows the market. Always keep him in the loop.
Budget plays a large role in choosing your office space and goes hand in hand with location. Even if you start with a price range, after you’ve looked at a few properties you should be getting a feel for what you get for your money.
What’s included in the lease affects your budget too. Are utilities included? Do you pay a portion of the property taxes? When figuring out your budget, know how to adjust for what type of lease is being offered at the property. A gross lease, net lease, and modified gross lease all include different expenses.
Have you heard the term “loss factor?” This is how it works. You will be agreeing to what’s called rentable square footage, the space detailed in the lease agreement. The building where the office space is has common areas including elevators, lobbies, hallways and restrooms. Usable square footage is the portion left after the common areas are taken into account. If a building’s common space takes up 25% of the footprint, your usable square footage is 25% less than the rentable square footage. Make sense? It’s something to keep in mind when you’re comparing properties.
It goes without saying that if your business relies on visibility, it’s worth paying the most you’re able to for the best location. The increased traffic flow, either vehicle or foot, will make up for the higher rent. Pricing shouldn’t be the sole factor in your office space location search, but it’s an important one.
Space for Now and the Future
Think of all the direct and indirect parts of your operation. You’ve got employees and their offices, a kitchen or break area, storage, a conference room or meeting space, and maybe a waiting area or lobby. Is there a workflow to map out? Medical office space can be even more elaborate depending on the procedures performed.
The industry standard averages 125 to 150 square feet of general office space for each employee. If you want to keep things cozy, opt for 100 square feet per employee.
A good piece of advice is to pick space that your business can grow in to. The cost of moving an office is very expensive, and as hard as it may be, try to predict your needs for a few years out. It’s always possible to rent out any extra space to freelancers, or a smaller company that isn’t ready for its own office. Use the general rule of 10 to 20 percent more space in planning for growth in the years ahead.
We’ve just given you some solid calculations to estimate how much space you need now and down the road. Is it still large enough to tell your brand’s story if it needs to? Think about the retail stores that display a large number of tech products for customers to touch and try out. Research your industry standard for sales-per-square foot as a starting point. Restaurant and retail spaces have their own requirements that are different from general office space.
The last thing you want to do is overspend. You’ve got many other expenses to take into account, be as smart as you can without shooting too high for the stars. If you’re in a pinch and know that you need space for the short term, that’s another story.
Do you see the start of a domino effect here? The right amount of space in the right location for the right price.
Building Infrastructure and Aesthetics
On to more considerations. Believe it or not, even a bustling metropolitan area like New York City has slower internet in some places. If quality broadband is imperative to your operations, then ask about internet speed for each property. High technology requirements could also determine if a building would be suitable or not, if it doesn’t have the power capability.
Do you need special plumbing for your medical office? How about ADA compliance?
Older buildings may have lots of charm and character, but can you operate without some of the more modern updates, or even basic ones like an elevator? Improvements and renovations are always possible and can make many spaces fairly close to what you’re looking for, if not exactly.
Let’s talk class. Office space is categorized, much like models of cars and grades of beef. Class A is the cream of the crop and exudes excellence, prestige and state-of-the-art technology. Law firms, financial services businesses, and global entities typically lease Class A office space to impress clients and employees.
Benchmark criteria of a Class A space include outstanding tenant services, quality décor and distinctive architecture, 24/7 security, and a prime location. Tenants enjoy high level amenities like daycare, pet care services, onsite dining, fitness centers, hair salons and dry cleaners.
Class B encompasses the words average, good and general. Rents are at-market as opposed to the high rents of Class A. Average amenities and building condition, generally good location but not premier, good quality tenants and average building services.
Tenants of a Class B office can expect to rent in a good building at market value. They won’t be paying for superior bells and whistles and a super-polished environment.
That leaves Class C, which is a functional but outdated building. These tend to be the hardest offices to lease, but ideal for a call center or a business that won’t host clients or customers. Maybe this would be a good first step for a new business just starting out. Landlords are more apt to give concessions and sign short term leases to fill vacancies.
When it comes to aesthetics, it’s entirely possible to create beauty and artistic taste in most any space. A popular cliché says beauty is in the eye of the beholder. Class C office space can be altered to the level of what aesthetics are appropriate for the tenant.
The overall look and feel of a building and its office space has an effect on staff morale and your company’s image. Open concept floor plans work well for many industries, most notably the creative industry. Loft style office space is appealing as well.
When planning any open concept workspace, just make sure that there are some private spaces built in for those who need to work in absolute quiet. The sharing of ideas fosters creativity yes, but confidential conversations and meetings are just as important.
Lease Terms and Improvements
As you’re comparing business locations for rent, ensure that the lease terms fit with what you’re comfortable signing. Generally, the longer the lease, the lower the rent will be. The landlord will also be more amenable to concessions.
Improvements will often be needed to some degree. Sometimes it will be extensive. Will the landlord foot the bill? If it’s a turnkey build out the landlord will pay for, and manage, the work to complete the improvements that you need to make the property work for your business. The landlord decides the who, what and how for completing the job. You might have little to no input. You might not know the quality of work of the chosen contractor.
On the plus side, it’s all done for you. If you don’t have the time or inclination to manage a renovation project this would be the way to go.
The look and feel of your office space is important to you and you want to make sure it’s done right. A tenant improvement allowance is going to be what you want to talk about. In this case, a negotiated amount will be contributed by the landlord towards the build-out to your specifications. This credit could also come in the form of free rent.
In conclusion, as you’re asking yourself how to find office space that is functional, inspiring, and allows for growth, think hard about your needs. Some criteria will be based solely on necessity and practicality. Have in mind your company’s vision and mission, always, and rely on your support system including your broker. He or she can bring you back down to earth when your plans get too lofty for your budget.
Advice from an experienced broker, we’ll say it again, will save you time and money. Especially in NYC where there’s such a great mixture of art, entertainment, finance, tech, manufacturing and creative industries, there’s a place for everyone.
Here’s to your success in relocating or starting up your business.