As an entrepreneur or small business, the initial process of looking for office space can be exciting, inspirational and fun. Moving out of your home office or local coffee shop often is a more than symbolic sign that your business is “moving on up.” Therefore, the prospect of looking at available office spaces and designing it just the way you want it can be quite exhilarating.

Tip: Hold your horses.

Searching for an office space without first determining both your long and short term business and real estate priorities is a recipe for disaster. Below are some important business and real estate issues to consider BEFORE beginning your search for office space.

Business
From a business standpoint it is important to consider the following:

Corporate Image- Will your customers/clients visit your office on a regular basis? The quality of your office space can make a strong statement about your company’s brand.

Examples: You’re a small boutique architectural firm and expect to regularly meet with clients in person. An inviting reception area, nice furnishings and a clean bathroom will say a lot about your company’s professionalism and eye for detail.

You’re online t-shirt company consists of yourself and two employees. Rarely if ever do your customers visit your office. A fresh coat of paint, three computers and desks might just do the trick while allowing you to preserve capital…a clean bathroom would not hurt in this case either.

You’re a freelance web designer and occasionally meet with new and existing clients to discuss their projects. A coworking or executive suite space with a nice amenity package might serve as an inexpensive option to hold occasional meetings with clients while making a strong statement about your company and increasing your network.

Organization- How quickly and/or large is your company projected to grow? Do you envision adding new employees of perhaps downsizing your current staff? Are you merging with a new company ?

Example:
Three months after you move into your space, your company lands a major contract which requires you to hire an additional 4 employees. Is your space big enough to handle the additional workstations? Is there an available adjoining space in the building that would allow you to expand?

A well-planned work environment can help improve the morale of your employees and lead to a more productive work environment.

Leasing too much or too little office space can result in a cramped environment or a desolate one. See Mistake #7 Either way, the morale of your employees will potentially suffer.

Technology- Does your company require a unique technology that is only available in select locations?

Competition- Where is your competition located? Will it affect your company to be situated in a close proximity to them ?

Budget- Clearly, it is a waste of everyone’s time if you are looking at spaces that are beyond what you can afford. A well written business plan will help dictate the amount your company can afford to spend for an office space. It is important that you are aware of all the costs involved with securing and maintaining an office space. See Mistake #5

Real Estate
An accurate projection of your current and long term business priorities will have a direct impact on your real estate needs.

From a real estate standpoint it is important to consider the following:
- Space Requirements (How much actual space does your company require? Do you know the difference between rentable and usable space? See Mistake #7

Space Estimation Calculator
- Required amenities (parking, conference room, cafeteria, private entrance, security desk, video conferencing, AV equipment, mailbox, furnished, fitness center)
- Business services (secretarial, administrative)
- IT/Communications Infrastructure
- Hours of building access (are the HVAC systems accessible 24/7?)
- Conference room availability
- When do you want/need to move into your new office space?
- Parking (How many spaces are actually allotted for your company? Is free public parking available nearby? Will you need to subsidize the parking expenses of your employees?)
- Mass transportation
- Signage
- Environmental considerations
- Local dining and coffee shops
- Daycare

Use Our Real Estate Profile Checklist to help organize your company’s long and short term business and real estate priorities.

In most cases, entrepreneurs and small businesses cannot afford to divert the attention required to learn all the ins and outs involved with leasing a commercial space . As such, it is always a good idea to consider involving a (tenant representative) commercial real estate broker to help with the process.

The difference between a (tenant representative) commercial real estate broker and a (listing agent) commercial real estate broker is that the former represents the interests of the tenant while the latter represents the interest of the building owner.

It is important to note that even though the tenant representative is working on behalf of the tenant, their fee is still often covered by the landlord. Many entrepreneurs shy away from involving a tenant representative as they believe it would not fit in their budget.

A good commercial real estate broker will fully understand your company’s needs before showing you a location. They will provide insight into the local markets, available locations, traffic flow, rates, terms, lease incentives, laws, trends, landlords, demographics and also help with lease negotiations.

A few good questions to ask your tenant representative before you make the decision to hire them:

- Do you have experience working with companies of my size? Can you give a few examples?
- Do you have experience working with companies in my industry? Can you give a few examples?
- Who pays your commission?
- How many tenants have you represented in the past 2-3 years? How many have resulted in successful transactions?
- Can you give me an overview of the local market conditions?
- Do you have a few references I can contact?
- Can you briefly re-iterate my space requirements to ensure we are on the same page?
- Are you comfortable with handling all aspects of the process including a working knowledge of the documents involved in the process? (i.e. request for proposal, letters of intent, lease agreements and work letters)

A few signs that you chose the wrong tenant representative:
- The locations you are shown clearly demonstrate the broker does not understand your company’s needs
- The broker fails to demonstrate an acceptable level of local market knowledge
- The broker fails to demonstrate an acceptable working knowledge of all steps involved in the process
- The broker cannot stop talking about how successful they are without being able to provide specific examples/references
- They just don’t feel right

Neighborhood Knowledge – Commercial real estate agents can help shed light on intimate details about a neighborhood such as:
- Is there a predominance of a certain type of business in a specific location/property?
- Have similar businesses to yours tried and failed in a particular location/property?
- The proximity of the location to your required amenities

Help With Issues After You Sign Your Lease - It is not uncommon for questions or issues to arise after the lease has been signed. A diligent commercial real estate agent will still be within reach even after you have signed the lease.

Space efficiency – Experienced commercial real estate agents can provide basic suggestions on to how best to design your office layout after you have decided on a location.

Technology and Data – Commercial real estate agents often have access to technology and localized data that can help you make more educated decisions.

Whether you are looking to move into your very first office space or relocating from an existing office space, not leaving yourself enough time for the process can result in the following consequences:

- a weakened negotiating position (resulting in higher rents and less favorable lease terms)
- a decreased number of options to choose from

The search for space, lease preparation, lease negotiation, property inspection, architectural planning, obtaining of building permits, construction (build-out), systems installation, etc. can take several months to a year.

Even if a tenant agrees to take a space “as-is” the process can still take up to a few months.

Considerations: Are you required to remove the previous tenants “junk? Can you really move into the space “as-is” or does it require a heavy duty cleaning and a fresh coat of paint? Does the “as-is” space provide all of your technological requirements? Are there any legal issues with previous tenant that might cause a delay? Does the space require a build-out?

The size of the space, complexity of the tenant’s requirements, local bylaws, and amount of renovation needed in a particular office space will affect the length of the process. Working with an experienced professional can help keep the length of the process in check.

As cost-conscious entrepreneurs, our business decisions are often made solely based on price. When it comes to selecting the right office space, this is a mistake that can lock your company into a bad situation for several years.

Don’t be penny wise and pound foolish.

In addition to price, here are some of the other major factors that should be considered BEFORE you make a decision:
- Long and short term business and real estate priorities See Mistake #1
- Location (travel time, accessibility via public transportation, proximity of: clients, customers, competition, suppliers, vendors, partners, hotels, etc.)
- Branding image (What does your office space say about your company? Do you care?)
- Space requirements (How much actual space your company requires)

Space Estimation Calculator - Amenity requirements (i.e. Conference room, business/secretarial services, parking, cafeteria, security desk, furnished, mailbox, etc.)
Before jumping into a space because the price falls within your budget, entrepreneurs and small businesses should take the time to familiarize themselves with the multitude of affordable alternative commercial real estate options that are available.
Many of these alternatives not only offer more affordable pricing than a traditional lease, but also include other amenities that could help to bolster the image of your company, save you time and attract and retain great employees

Some of these affordable alternative commercial real estate options include:
A Sublease
A sublease occurs when an individual or company rents all or a portion of a space they hold the lease for to a third party.

Executive suites
A serviced office also known as 'executive suite' is an office or office building that is fully equipped and managed by a facility management company, which then rents individual offices or floors to other companies.

Executive suites typically offer their tenants amenities and business services such as: a mailbox, telephone system, high-speed internet access, video, receptionist and secretarial services, faxing, photocopying, conference rooms as well as other support.

Executive suites can help you project the image of a professional operation and are generally able to offer more flexible rental terms than a conventional leased office.

Shared office space
When a company has unused space within their existing office, they will sometimes elect to re-rent this space to a smaller company looking for flexible workspace.

A shared office space can create a new revenue stream for the existing spaceholder while providing an inexpensive and flexible alternative to a smaller company, as compared to a traditional lease.

In addition to the financial benefits offered by a shared office space, these environments can often foster networking and collaborative opportunities.

Coworking space
Co-working as defined by Wikipedia is "an emerging trend for a new pattern for working. Typically work-at-home professionals or independent contractors or people who travel frequently end up working in an isolated way. Co-working is the social gathering of a group of people, who are still working independently, but who share values and who are are interested in the synergy that can happen from working with talented people in the same space.

While a coworking space might provide or rent individuals access to basic workplace amenities, the emphasis of a coworking space is really on the people, culture, and collaboration rather than the facilities.

When planning a budget for an office space, it is imperative that you are aware of all the costs that are involved with securing and maintaining your space.

Underestimating these costs can have a direct impact your bottom line. Examples of hidden costs might include:
- Maintenance and common charges (ex. snow removal, HVAC repairs)
- IT/communications charges
- Heating and cooling
- Lighting
- Furniture
- Insurance
- Build-out (construction)
- Office equipment/supplies
- Interior design furnishings
- Moving

It is also very important for you to understand the type of lease you are getting yourself into as this can significantly affect the cost of maintaining the office space. A few common lease types include:
Full service lease - An all inclusive payment covering rent, operating expenses, taxes and lessor's insurance, subject to escalations when these expenses increase after the first year of the lease.

Gross lease - A gross lease, as distinguished from a "Net Lease," includes real estate taxes, heating and building services in the base rent. Office and loft leases are nearly always of this type.

Single Net Lease - In a single net lease (sometimes shortened to Net or N), the lessee or tenant is responsible for paying property taxes as well as the base rent. Double- and triple-net leases are more common forms of net leases because it passes all or the majority of the expenses are passed on the tenant.

Double net lease - In a double net lease the lessee or tenant is responsible for real estate taxes and building insurance. The lessor or landlord is responsible for any expenses incurred for structural repairs and common area maintenance. "Roof and structure" is sometimes calculated as a reserve, the most common amount is equal to $ .15 per square foot. Double net leases are rarely used in the industry because if two tenants are willing to cut their costs to halves, they are typically willing to cut their costs to thirds.

Triple net lease - A triple net lease is a lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three 'Nets') on the property in addition to any normal fees that are expected under the agreement (rent, etc.). In such a lease, the tenant or lessee is responsible for all costs associated with the repair and maintenance of any common area.

Source: Wikipedia

Selecting a location for your office simply because “an area seems cool”, “the price is right” or perhaps “you love the coffee at the local coffee shop” might negatively impact your company’s image, worker productivity, bottom line, growth potential as well as your ability to hire and retain the highest quality employees.

As you consider the available options for your new office location, it is important to consider things such as building access, applicable state laws, public transportation, demographics, zoning laws, as well as your proximity to: workers, clients, customers, competition, suppliers, vendors, partners, hotels etc. See Mistake #1 and #4

An experienced commercial real estate broker should take the time to fully understand your company’s needs and subsequently show you properties that are aligned with these needs.

The longer you plan on staying in a given location, the more important it is to weigh ALL of these options very carefully.

In addition to the total dimensions of the space, a few other considerations should also be factored into your decision. These other considerations include:
· Does the workspace provide acoustical and visual privacy?
· Can walls be moved or are they structural (cannot be moved)?
· Is there access to natural light or only artificial lighting?
· Will the layout work disrupt your natural flow of business?

As you begin your search for office space, it is very important that you carefully assess your space requirements both from a short and long term perspective.

While a small and cozy space might cost a little less initially, if there is a strong possibility your company will need to expand its staff within your lease term, choosing this less expensive space might be problematic down the road.

Conversely, while it is nice to have a football catch across the office, taking on too much space can result in a big drain on the company’s bottom line.

Estimating how much office space you will need is not an exact science. The nature of your business, corporate culture, workflow and even your individual preferences might vary significantly from other company’s. These variations make it virtually impossible to standardize a specific guideline that will work for every company.

Our space estimation calculator can help you generate a basic square footage requirement for your company. These estimates can be individually adjusted upward to provide a more spacious layout or can be adjusted downward to provide a more efficient use of office space.

As you contemplate the amount of space your company actually needs, it is important that you understand the difference between rentable and usable space.

Landlords charge tenants based on the number of rentable square footage leased. The rentable square footage is calculated by adding the usable square footage (the amount of square footage to be used exclusively by you, the tenant) to a portion of the common area (areas shared by all tenants such as the lobby, restrooms, shared hallways, etc.).

The distinction between the two is especially important as you estimate the amount of usable space that will best suit your company.

Future Growth
As many leases will lock you into your space for at least two years, it is important that you carefully consider your company’s future growth before you make a final decision regarding how much space you need.

Terminating your lease early because your company outgrew its space will cost your company money, time and probably serve as a major distraction from your normal course of business.

Hiring a professional workspace designer can help you to accurately estimate the right amount of space required by your company, as well as assist in strategizing the best design to maximize the efficiency of your workplace.

Signing too short or too long of a lease can both have negative consequences. Some companies feel that by signing a short term lease they are buying themselves more flexibility. While this might theory might be true in some instances, this flexibility often comes at a price. This price might include a higher rent, less favorable lease terms as well as the time and disruption required to move your company

Conversely, some companies feel that by signing a long term lease they are buying themselves more stability. In today’s volatile commercial real estate market this might prove to be a huge mistake as companies could be locking themselves into lease payments significantly higher than current market rates.

Example: Currently the market is flooded with company’s that are subleasing their unused office space for pennies on the dollar as they signed a 7-year lease during 2007 expecting 2x growth.

While predicting your company’s future with 100% accuracy is impossible, a careful assessment of both your long and short term business/real estate priorities can help you to more accurately assess a reasonable lease term for which to negotiate. See Mistake #1

Judging the condition of a perspective office space based on a simple walkthrough is as dangerous as shopping for a car, and basing the condition on its shiny new coat of wax.

As you begin to zero in on a list of properties that might be a good fit for your company, it is imperative that you ensure all systems within these buildings are working properly and are capable of handling your company’s needs.

Some of these systems include: data, power, networking, and HVAC capacity.

Even if a space looks pristine and has just been vacated by a previous tenant, the buildings infrastructure could be have problems, and this might not be apparent from a cursory glance of the space.

It is always a good idea to try and have the landlord guaranty the space is up to current building, fire, safety, zoning and ADA codes and that all electrical, plumbing, heating and air-conditioning systems are in good working condition.

Tenants should propose a clause to the lease which automatically adjusts the start of the lease start if delays are encountered which are beyond the control of the Tenant.

It also important for language that dictates which party is responsible for any repair costs that are incurred during the lease term.

Landlord Incentives
Inexperienced tenants, acting on their own behalf, often settle for lease terms which do not contain as many incentives as they could have negotiated. See Mistake #2

As the commercial real estate industry continues to suffer, landlords are more willing than ever to offer lease incentives to secure new tenants. These incentives can potentially add up to a significant savings that could directly affect your company’s bottom line.

A few typical incentives include:
- Several months of free rent both before and after lease begins
- Discounted rent for various time periods
- A contribution from the landlord toward the tenant's build-out costs
- A landlords direct improvement to the space
- A limit on future rent increases

In addition to incentives which can be obtained from the landlord, when a company relocates, it is also possible that incentives can be obtained from your local government.

These incentives might include tax rebates, relocation assistance, payroll subsidies during employee training, infrastructure improvements and others.

As mentioned in Mistake #2, entrepreneurs and small businesses cannot be expected to become commercial real estate experts at the same time they are focusing on making their companies successful…this includes being aware of all the incentives they could negotiate for.

A commercial real estate professional working on your behalf can help insure that you are negotiate the most favorable lease terms with the landlord, and that you are up to speed on any outside incentives you might be entitled to.

Note: While our Top 10 list does include some of the most common mistakes made by company’s when leasing office space, they are certainly not the only ones.

To share your own experiences please feel free to add comments below. You might just be featured in our sequel…Top 20 mistakes made by companies when leasing office space.