8 Quick Tips For Leasing Office Space
 By Greg C. Horn

Signing a commercial lease can be a confusing and intimidating process for small-business owners, especially for those moving into office space for the first time.

Commercial lessors speak a language all their own, and the details and small print on a lease are enough to make anyone’s head spin.

But leasing office space doesn’t have to be a no-win situation. By keeping these tips in mind, you can secure a lease with the most favorable terms possible for your business:

1. Determine your square footage and type of space needs
Before you begin looking for space, first get a good idea of how much and what kind of space you need.

How many employees do you have now, and do you expect to grow your business in the next couple of years? If so, you might want to lease more space than you need right now to accommodate growth.

Do clients visit your office? If so, you might consider high-end office space. Also be sure to plan for some space where you can meet and greet and perhaps even entertain clients.

2. Understand the main types of leases
There are two main types of commercial leases.

With a full service (or gross) lease, the landlord pays all expenses, and the tenant simply pays a fixed rent amount.

But with a triple net lease, the tenant pays for everything (including maintenance, utilities, taxes and insurance).

Negotiations between you and a landlord can result in a lease that is some kind of variation between these two options.

3. Determine who is specifically responsible for what
You don’t want there to be any questions later about who’s responsible for paying for leaky roof repairs, furnace and air conditioner breakdowns, common area maintenance and other expensive items. So get as much of this down in writing as possible.

Note: Making repairs and paying for repairs is not necessarily the same thing. A lease could stipulate that the landlord must make repairs, but the tenant must pay for them.

4. Understand how property is priced
Most commercial property is priced per square foot ($12 per square foot, for example). To get a total price, simply multiply the square-foot price by the total square footage of the property.

Make sure the square footage being quoted is for usable inside square footage, not outside square footage. To be safe, measure the interior of the space yourself.

5. Don’t limit your options
This is rule No. 1 in any negotiation, and it holds just as true when leasing office space as it does when buying a new car or home.

Make sure you have at least two or three options to choose from, so you can walk away from a deal that’s not fair or to your advantage.

6. Think business first, emotions second
Remember that renting office space is not the same as renting or buying a home.

Sure, you want to choose space that is comfortable and meets your needs. But the decision should be based more on business factors than emotional ones.

At the same time, if you prefer one office over another, but it costs an extra dollar a square foot, lease it if you can afford it, all other things being equal. There’s clearly value in you and your employees being happy in your workspace.

7. Negotiate with flexibility in mind
Things can change quickly in your business, so you want as much flexibility as possible in your lease.

Most commercial lessors will try to secure as long a lease term as possible – perhaps three or even five years. Try to negotiate options in the lease term that will give you an early out, with minimal penalty.

Items such as the right of first refusal to lease additional space for growth and cost-of-living rent increases at various intervals are also usually negotiable.

8. Talk with prospective neighbors
Don’t overlook this important but simple step. It’s the best way to find out the real story about the area in general and/or the property itself.

Ask nearby businesses about safety issues, traffic, the tenant mix and the landlord’s responsiveness in handling other tenants’ problems and requests.

(Posted November 2007)

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