There are many things to consider when leasing commercial space for your business. The type of business you have will help shape your decision. I will outline the different product types which are office, industrial, and retail and what each entails in greater detail. Today’s post will involve office properties and the different types and what questions to ask yourself when searching for space.
The same rule that applies in commercial real estate also is true with residential real estate and that is, location is vital. The location will determine the price you can afford and the type of property available. Generally, the closer to the city the less space will be available. The closer in you are, the more the price will be per square foot. The CBD or Central Business District will have the most expensive space and the quality of the building will for the most part be a Class A property. This means a first class property with plenty of amenities such as security, garage parking, café, gym, etc. will be onsite. These buildings are also the best built properties in the best locations that have excellent property management and quality tenants. If having a strong attractive presence for your clients is necessary, then this may be the type of property you want. However, be prepared to pay a premium for space in these properties. Also, you will be required to pay expenses on top of your monthly rental amount. The expenses include taxes, insurance, and common area maintenance. This is known as a triple net lease or NNN.
Class B properties can be a really good value. These may have been Class A buildings years ago and it more than likely has strong property management along with a good tenant mix. Some of these properties have gross leases in place, which means the expenses are included in the rental price. They are generally much cheaper than their Class A counterparts. Some really good opportunities can be found with Class B buildings.
Class C properties are usually older and in need of renovation. These property types are not in as desirable areas as the other two property types mentioned. They will also be much cheaper and will have gross leases in place.
There will be several questions you will need to ask regarding your business, such as:
How many employees do you have?
How much can you afford per month for your space? Next to payroll, leasing costs will be your biggest expense each month.
Will customers or clients be visiting frequently?
Will you need several individual offices or a large open area for a call center or cubicles?
Parking can be a big issue if your company has a large amount of employees. Different properties have different parking ratios but 3/1000 is a good target. That is, 3 employees per 1,000sf of office space. Also, if do you have a call center the employees may need availability to public transportation. So being on the bus line may be necessary.
How much square feet will be needed? The general rule of thumb is one person per 250sf. This is a little generous and can probably be tailored down to one per 175sf. It all depends on the type of business you have.
As you can see, there are many things to consider when searching for office space for your company. With a little research and answers to these initial questions you will save a huge amount of time and resources and be in much better shape than just blindly looking for space for your company.
In the next posting I will discuss what is needed in acquiring industrial space.