How to Move into a New Space or Lease Your First One
5 Steps to Find, Lease and Occupy a New Space
Thursday, August 19, 2021
CoStar
Whether leasing office space for the first time or moving to a new location, the process of assessing space needs, creating a budget, touring space, and moving can be daunting. One of the elements that makes leasing space so challenging is that there is no universal lease, nor standard building. The good news is that even though the particulars of the leasing journey will differ for every tenant, the general path each must follow is very similar.
Below, we've summarized five major steps in the leasing process. Those steps include:
1. Understand Leasing Process.
2. Assess your space needs.
3. Develop a budget.
4. Select a location and a building.
5. Move in!
1. Understand Leasing Process
By understanding the steps in the process and how much time each can take, you can set realistic expectations about the amount of lead time required for you to procure a new location. Small blocks of 500 square feet may take a few weeks to button down, but larger blocks of 5,000 square feet or more may require months to secure and build out to your company’s specifications.
There are a few critical activities to carry out during the early stage of the search. For the most part, these tasks involve time, focus and organization rather than an outlay of cash. They can be completed concurrently and will take between one to six months to complete.
Be clear about why or if your firm needs a space.
A company's stage of life is often a good guide for determining why, or even if, a company needs a space. A nascent business looking to move out of the founder’s house might consider a coworking or executive suite arrangement. An established business may be growing, so a larger office suite or an additional office in a different location might make sense.
Core Activities
Understanding the needs of the key people involved with your business is very important. So, determining if there is a client base you need to be close to or if employee commuting patterns are a priority is a good place to start. Do you want to be located close to public transit or major highways? These are just some of the considerations you will need to attend to when assessing locations and buildings.
2. Assess Your Space Needs
Figuring out how much space to lease and how the office will be laid out is an important early step in the process. To get started, conducting a back-of-the-napkin calculation can help you generate a reasonable estimate. To accomplish this, multiply the number of employees you need to accommodate by the average number of square feet per worker in the U.S. According to CoStar, this figure currently sits at around 190 square feet for an office use.
So, if you have 6 employees that will each need their own desk or office, you will likely need 1,140 square feet. This figure will rise or fall depending on a host of factors, such as conference rooms or a kitchen that your firm may require; if you will need more offices than cubicles; if you will create a reception area; the column spacing and window line of the buildings you are considering, etc.
3. Develop a Budget
Understanding how much you can afford to pay in rent is critical. Here again, a back-of-the-napkin calculation can help generate a decent approximation. Continuing with the example above, if you lease 1,140 square feet and pay $22 per square foot per year in rent, your monthly rent will be $2,090.
Concerning the $22-per-square-foot figure, you will need to be clear about whether a space is being offered on a full-service or a triple-net basis. The former means that all taxes, utilities and management fees are included in the rent and the latter indicates that you will pay for those expenses in addition to the $22 rent figure. We offer both, depending on the building. Also, those operating expenses can vary widely, anywhere from about 5% to 25% of the base rent.
Remember, if you are looking at a space with a NNN asking rent, you have to factor in all of these additional costs to “gross up" the rent to be equivalent to the other asking office rent types: "net of electricity" or "full service gross."
Spaces that generally quote by a "net of electricity" and "full service gross" amount include the NNN base rent, plus the operating expenses and janitorial services. The only difference in a "net of electricity" lease is that the tenant pays separately for electricity. Universally, rents quoted on a net of electricity or full service gross basis are more expensive on the surface, but since they include all of the additional cost elements, they may not be as expensive overall relative to a NNN equivalent.
Key Categories to Budget for Early
For overall context, here's a list of the major upfront expense items to consider when searching for a space. They are organized into three broad categories: lease-related expenses, construction-related expenses and move-related expenses.
Lease-related expenses
First month’s rent.
Security deposit (refundable).
Construction-related expenses
Construction costs.
Construction management fees.
Permitting fees.
Move-related expenses
New furniture.
Equipment (new and/or relocation of existing).
Signage.
4. Select a location and a building.
In addition to considering where your employees live, you will also want to evaluate where your customers are located. This factor will be particularly crucial for customer-facing organizations, such as retail or medical tenants, but it will also notably impact professional services tenants, including hair salons or . This element also needs to be appraised in reverse; perhaps your company doesn’t host its clients very often, but your employees frequently visit their customers. As with your employees, conducting an analysis of customer zip code information can reveal the most convenient locations for your business from a client perspective.
Flexibility
Commercial leases typically cover long periods of time. During that kind of interval, a lot can change for your business. For this reason, we offer greater flexibility than most companies, flexibility that can be critical when evaluating a potential property. You’ll want to be assured that you’ll have the ability to grow or adapt.
5. Move in!
Notifying clients, filing certificates of occupancy, determining what furniture to keep, purging old files and ensuring that the lights are on at the new office location are all components of a business move. This is the last step in the process after searching, touring, calculating costs, and possibly constructing. While the steps involved in moving may seem intuitive, it is important to plan for the move and set expectations, especially among any employees. Being prepared for each phase of the process will ensure you are open for business in your new location.