Q: My home office has outgrown and I need to find office space for myself and two part-time employees. I’m very excited to open my first official office, but I’ve never rented commercial space before and I don’t know anything about how this process works. What are some things I should consider before signing a lease? I really want to start!
— Jay P.
A: Congratulations on growing your business, Jay, and I understand your enthusiasm. Putting your name on a commercial lease is one of the first tangible commitments an entrepreneur makes to their business, and searching for that first office or commercial space can be a truly exhilarating experience.
We entrepreneurs like to imagine ourselves as modern-day explorers, heading out into the cold, cruel business world to plant the company flag on our little rented lot. I remember that feeling of triumph when I rented my first office all those years ago. It’s funny how you never get the same feeling when claiming a future office space. For us veterans, searching for a new office space is as exciting as watching paint dry on a new office wall.
However, for entrepreneurs who have never rented commercial space before, moving into that first office or storefront serves to validate their membership in the Official Entrepreneurs Club and makes them feel like they’ve arrived.
They’re like business-minded debutantes at a big cotillion. They stage an elaborate ribbon-cutting ceremony involving the mayor and a giant pair of scissors. They invite all members of the chamber of commerce, all their customers and suppliers, strangers they meet on the way to work, and all their friends and family. The more the better!
There’s a big cake with their logo on it and they pass out quarter pens that have the company name printed on the side and everyone has a good time.
Then reality sets in and they realize that they used one of those 2,500 pens to put their name on an ironclad lease that is invariably skewed in favor of the owner. When they use that pen to sign next month’s rent check, they often find themselves sitting in a rented space that doesn’t suit their needs, looking at a 5-year lease they don’t really understand, wondering what the hell they’ve gotten themselves into. .
Many entrepreneurs get so caught up in the swell of their first commercial space that they don’t see beyond their immediate needs. You can’t predict the future, but the biggest mistake you can make when renting space is giving too little thought to whether the space will suit your long-term needs.
So my first advice to you is to lower your enthusiasm and call a professional to help you find the perfect space for your business. A good real estate or commercial leasing agent can not only save you time and money, but can also help you avoid mistakes that can cost you thousands of dollars over the course of your lease. They can help you locate the property, negotiate with landlords, and possibly spot issues with the space or neighborhood that you might have missed.
My second piece of advice is this: once you find a space that suits your needs, have an attorney review the lease before you sign it. A commercial lease is a legally binding agreement that should not be taken lightly. I’ve found that many business owners don’t even take the time to read the lease until they try to get out of it, which is always impossible to do. When you sign a lease on behalf of your business, you are the one who must pay the remaining cost of the lease in the event your business declines and you no longer have income to cover the rent. It is worth paying an attorney to make sure your interests are covered.
My third piece of advice is to imagine your needs in the future, not just here and now. Rarely will you find a landlord willing to grant a one-year lease. Most leases are for three to five years, which means you need to factor in future growth when looking for space. It wouldn’t be wise to sign a 5-year lease on a 1,000-square-foot office if you think you might outgrow the space in a year or two. That’s why it’s a good idea to ask for a clause in the lease that gives you a way out if your business outgrows the space.
Here are some other points to consider when buying commercial space:
Rent, rent, rent. Is the location convenient for your customers? Is the neighborhood growing or going downhill? Are major upgrades or renovations underway, or are businesses moving in droves? Also make sure the property is zoned for your type of business.
Is there enough parking for customers and employees? Parking is especially important for a retail store, but also for any business that might have customers coming and going. Very few customers will park four blocks away and walk back to your door. Lack of parking can drive you out of business.
How many employees do you have? The number of bodies inhabiting the space will help determine the amount of space needed. Employees get very cranky when they are stacked like firewood (trust me on this). It should have enough space for everyone to work comfortably.
When renting commercial space, the problem is often in the details (which are overlooked). If you’ll be using computers and lots of electronics, make sure the building’s electrical system meets your needs. It’s a terrible feeling to turn on the computer and burn out all the light bulbs in the room.
If you like a quiet work environment and your office windows are twenty feet from the street, you’re in for a rude awakening when rush hour traffic hits.
If the air conditioning in your office is controlled by the thermostat in a neighboring suite that is inhabited by an elderly woman who freezes in ninety-degree weather, you are in for a very long, very hot summer.
Move into that first office space slowly or you may quickly regret it.