This article is part of a larger series on Starting a Business.
You can find and lease office space for rent by identifying spaces through online listings or brokers that meet your business’ current needs, budget, and potential for growth. Brokers are either listing brokers or tenant-brokers, which can help identify properties, schedule walk-throughs, and negotiate leases. Use a broker as well as do your own research.
One thing that can make or break an office space is access to reliable internet, phone, and network services. Business Services Connect is a telecommunications cooperative that offers an instant-locator tool to help you find communication providers for your location. You can compare plans from major providers servicing your area, including Spectrum, Atlantic, and Comcast, to find the right fit for your needs.
1. Evaluate Your Office Needs
When choosing an office for your business, the first step is to define the needs of your business and your employees. Decide how much space you need, estimate your overall budget, and determine what class of office space is required. Also, determine your parking requirements, office layout, and potential company growth before searching for and touring potential office spaces.
You can evaluate your office needs in the following way:
Determine How Much Space You Need
Your spatial needs depend on the number of employees you have, what kind of workspace your employees need, whether you need conference rooms, and other factors. Typically, assume that each employee will need 75 to 150 total square feet, with management-level employees needing 150 to 400 square feet, which accounts for dedicated work and office space per employee.
In addition to the amount of workspace you need, evaluate whether you’ll need conference rooms, a waiting area, or other client-oriented spaces. Finally, add in space for office services like a copy room, break room, kitchen, or file and mailrooms.
In general, estimate the square feet per employee (above), multiply by the total number of existing employees, and add 30 percent to account for common areas, etc. Then, to account for future growth, add 10 percent to 20 percent or another number more consistent with your business model.
Evaluate Employee & Client Needs
In addition to understanding how much space your employees need to perform their jobs, consider what else your employees and clients need from your office space. Depending on the type of business you have, you may benefit from a specific interior layout, access for employees and clients with special needs, and parking availability.
Things to consider when evaluating employee and client needs include:
- Interior layout – The ideal layout of your office building depends on the type of workspaces your employees need, the amount of meeting space and client service areas you need, and whether you need a kitchen, mailroom, etc.
- Parking availability – Your parking needs will differ based on the number of employees your business has and how many clients regularly visit your office.
For example, a tech company may need an open, more collaborative work environment, whereas a doctor’s office would prefer more divided workspaces with individual, private rooms.
Determine Your Location Needs
Your new office space should also be located in a place that is convenient for employees, clients, and suppliers. Consider how easily accessible each potential office is by major roads and public transportation. Before signing a lease, make sure the new office is close to your target clientele and any businesses you work with or rely on as part of your day-to-day operations.
- Proximity to target clients – If you have a business where clients frequently visit your office, your office should be located close to your core clientele.
- Accessibility – Your office’s proximity to major highways and public transportation will determine how accessible it is to employees and clients.
For example, a law firm may want office space within walking distance of the courthouse, whereas a restaurant could benefit from proximity to food suppliers and preferred patrons.
Choose a Class of Office Building
An office’s class generally describes the quality of its structure and amenities, and is determined in relation to other building classes. There are three main classes of office buildings—Class A, Class B, and Class C—each with varying age, amenities, and quality of tenants. Once you evaluate your needs based on your specific business operations and employee and client needs, determine which class of space is ideal for your business.
The three classes of office buildings are:
- Class A – Class A office buildings are the highest-quality spaces on the market. These spaces are generally the newest buildings, are well-managed, and have high-profile tenants. They’re often best for legal, marketing, design, and financial firms that need offices to impress clients.
- Class B – Some Class B buildings are older Class A buildings, but still have the potential to be restored to a Class A-quality space. Other Class B structures, known as purpose-made Class B buildings, were purposefully constructed to provide functional office space for a cheaper price than Class A space. Choose this type of building if you want a nice space but don’t need the best of the best.
- Class C – Class C office buildings are generally the least desirable because they are older, located in less popular neighborhoods, and require extensive renovation or maintenance. These buildings are typically 10- to 15-year-old Class A buildings or 5-year-old Class B buildings, and are perfect if you just need a cheap space to operate your business.
Address Time Constraints
When choosing an office, consider how quickly you’ll need to move into your new space. Whether you have a startup or an established business, it’s important to maintain continuity in business services, even during a move. If you need to move into your office within a specific time period, identify spaces that can be leased within your time constraints.
Your preferred lease period can also affect your options. Commercial leases typically range from three to ten years, but some buildings may only be available for minimum leasing periods. A short lease is more flexible because it shortens the time you’re obligated to remain in the same space. In contrast, you can lock in a lower price for longer with a long-term lease, but committing to one space for several years can limit growth or cause financial hardships.
2. Estimate Your Budget
Estimate a budget for your office based on average local rental costs, your needs for space and services, and financial constraints. Determine your ideal budget by multiplying the average local price per square foot by the space your business needs, found in step one. Then, add in maintenance and utility costs and review your financial records to estimate a realistic budget.
Steps for estimating your rental budget include:
Determine Average Price per Square Foot
The price per square foot for office space depends largely on geographic location. For example, in Atlanta and Dallas, office spaces cost $1.74 and $1.92 per square foot per month, respectively. However, in San Francisco and New York City, office space costs an average of $5.43 and $6.16 per square foot, respectively.
Calculate the monthly cost for your desired office by identifying the average cost per square foot in your area, taking into account the class of building you want as well as its location, and multiplying it by your ideal amount of space based on an evaluation of your business’ needs.
Add Common Area Maintenance Fees
Common area maintenance fees are what you pay to maintain common areas of your office building like the lobby, elevators, and hallways. CAM fees are typically calculated based on square footage and range from 15 percent to 35 percent of the total lease amount, depending on factors like the age of the building and insurance rates. Research typical CAM fees in your market and build that number into your overall budget.
On average, electricity for an office building costs $1.34 per square foot per month. Unlike some residential rentals that include utilities in the monthly cost, commercial office building leases do not generally include the cost of utilities. Once you decide how much space you’ll need, use average utility costs to calculate an estimated utility budget that fits your needs.
For example, if your price per square foot is $2.00 per month, your desired square footage is 1,500, and you estimate paying $1.75 per square foot per month in CAM and utilities, your monthly lease budget should be forecasted at $5,625.
3. Identify Office Space for Rent That Meets Your Criteria
Once you identify your needs and estimate a budget, hire a tenant-broker to identify properties within your ideal parameters. A broker will provide local knowledge, assist during lease negotiations, and save you time. However, a broker isn’t required, and if you want to do it yourself or do some preliminary searching, try LoopNet’s online search tool.
Work with a Tenant-Broker
There are two types of commercial real estate brokers: listing agents, who work for the landlords, and tenant-brokers, who represent tenant interests. Listing agents always have a duty to act in the landlord’s best interest, but the tenant-broker doesn’t always owe the same duty to the tenant. Listing agents earn a commission between three percent and six percent of the total lease (paid by the landlord) and tenant brokers typically earn a percentage of that commission.
Real estate brokers aren’t required, but have invaluable expertise, knowledge, and connections that would take the average business owner years to gather. Websites like Regus and LoopNet provide helpful resources, but can’t replace the expertise of a real estate professional. In addition to providing insider knowledge, real estate brokers can save you time, help you with the lease negotiation process, and more.
Commercial brokers can help you with specific things like:
- Local knowledge – A local broker will have an in-depth knowledge of your area and may even have previous experience working with potential landlords.
- Pocket listings – Many local real estate agents are aware of properties that haven’t yet been listed or that may become available in the future. These so-called “pocket listings” are a great way to discover in-demand properties before they’re officially available.
- Negotiations – As in any contract negotiation, it’s best to have a professional on your side. Having a leasing agent will help you understand the terms of your lease and avoid common pitfalls like limiting your right to sublease the space.
- Saving time – Identifying, researching, and touring offices is an extremely time-consuming process. A broker can reduce the time you spend looking for an office and allow you to dedicate it to building your business.
Remember that because a tenant-broker isn’t legally obligated to act in your best interests, make sure you ask questions when hiring a broker that address their experience, size of practice, compensation structure, and knowledge of the market.
Find a broker with local real estate knowledge using an online platform like The Broker List, where you can search by name, company, or zip code. Alternatively, reach out to your network to see if anyone has had experience with local brokers.
Do the Legwork Yourself
In addition to hiring a real estate broker or leasing agent to assist with your search for office space, use a website like LoopNet or CoStar to identify properties that are available in your area. On LoopNet, simply select the “For Lease” option, choose the type of space you need from the dropdown menu, and enter your geographic area. You can then sort spaces by price and size, view walkability and transit scores, and more.
Using an online resource is a great way to familiarize yourself with the local real estate market before working with a real estate agent. Websites like LoopNet can also help you point a commercial broker in the right direction so you don’t waste time looking at buildings that don’t meet your needs.
We recommend using a local broker to help find an office space for your business. However, you can choose to go it alone. Just keep in mind that you’ll have to handle several stages of the leasing process without the guidance and local knowledge of a real estate professional.
Without a broker, you’ll have to handle each step of the leasing process on your own:
- Identifying available office spaces
- Scheduling and attending walk-throughs and inspections
- Negotiating a lease
4. Research & Tour Available Office Space for Rent
Narrow your options down to the most promising office spaces that meet your criteria, collect background information, and contact the listing agent to schedule tours. Research security features, the age of building mechanicals, and utilities before each tour to familiarize yourself with the property. When you visit, observe surrounding neighborhoods, parking availability, and other features important to employees and clients.
If you’re working with a commercial broker, he or she will provide background information on each property and work with listing agents to schedule walk-throughs. Your broker will then attend each walk-through with you and make sure all of your questions and concerns are addressed. If you choose to lease an office without the help of a broker, you will need to contact the listing agents to schedule visits and attend walk-throughs on your own.
Things to consider when evaluating potential office spaces include:
The area surrounding your office is important for your employees and clients who visit for meetings. When you tour an office building, make sure the neighborhood suits your business as much as the office space itself. Plus, if you’re interested in the walkability of an area, a tour of the building and surrounding area is the best way to evaluate whether there are footpaths, sidewalks or other conditions that will help pedestrians find your business.
Ease of Access
Again, office building accessibility is a valuable consideration for your employees and your clients. If you typically limit your work to one or two specific communities, make sure the office is convenient for them. Regardless of the type of business you have, make sure your new office space is handicap accessible as required by the Americans with Disabilities Act.
The importance of security features depends on your business and the location of your office. If you’re willing to house your business in a less desirable area to save money or to be closer to potential clients, make sure the building has adequate outdoor lighting, gates, surveillance cameras, or other appropriate security features. Security is especially important if your employees will be working at night or if your business keeps a large amount of cash or valuable inventory on-site.
Age of Building Mechanicals
A building’s mechanicals include plumbing, elevators, escalators, and heating and air-conditioning systems. You may not be responsible for repairing or maintaining mechanicals under the terms of your lease, but you don’t want to lease an office building where the air conditioning or plumbing is always on the fritz. Ask the leasing agent when the mechanicals were last updated to make sure you won’t face issues with the building.
An office building’s amenities are additional in-house services that are available to tenants of the space. Some larger office buildings have cafes, dry cleaning services, gyms, and day care services. If these services are important to you, have the leasing agent show you what’s available when you tour the building and find out if there is an additional cost associated with the various amenities.
Pay close attention to the type of tenants in each building you visit. If a tenant brings in clientele that aren’t consistent with your professional brand, consider a building better suited to your practice. It’s also important to consider who the anchor tenants of the building are. If an anchor tenant goes out of business, the space may become less appealing than anticipated.
If the office building does not have a dedicated parking lot, find out how many parking spaces you’ll be entitled to if you lease the office. Depending on the number of employees in your company and how often clients will visit the office, some buildings may not offer the parking spaces you need to succeed.
5. Organize Your Business’ Financials
The financial strength of your small business impacts the kind of office space you can lease. Two to three years of profit and loss statements, up-to-date credit reports, and references demonstrate to potential landlords that you’re a reliable source of rent. Prepare financial records before you negotiate a lease so you’re ready to move forward when you find an office that fits your needs.
Steps for organizing your business’ financials before leasing an office include:
Compile Financial Documents
Before beginning your search for the ideal office, organize your business’ financial documents, including balance sheets, tax returns, profit and loss statements, and bank records. We recommend obtaining documents going back two to three years, but that may not be possible if you have a startup. Regardless of the age of your business, organize financial records to demonstrate your current and long-term ability to meet the financial obligations of a lease.
Assess Your Credit Score
Your personal and potentially your business credit are among the first things a potential landlord will look at when considering your offer to lease an office. It’s best to have a comprehensive understanding of your creditworthiness, but that can require a hard inquiry, which can negatively impact your score.
If you don’t want a hard inquiry into your credit score, use a service like Nav to research your score and provide it to potential landlords when making an offer. They provide a free personal credit score as well as a business credit report summary.
Building owners often require references from a potential tenant’s prior landlords. Reference letters let a landlord learn more about your business’ rental history and informs the decision of whether to let you rent office space from them. Obtain letters of reference from your previous landlords early in the leasing process so you’re prepared as soon as you find a new building.
Sign a Personal Guarantee
A personal guarantee is a statement that the owners of your business will comply with the terms of the lease, even if you vacate in the middle of that lease. Some landlords will require a personal guarantee as part of the leasing process. Prepare to sign a personal guarantee by assessing your personal finances to demonstrate to a landlord that you’re personally capable of covering the rent if your business is unable to do so.
6. Choose an Office & Negotiate Your Lease
Once you identify an office that meets your needs and budget, negotiate a lease. If you hired a broker, he’ll negotiate the terms and ensure you get the best deal possible. However, if you chose not to use a broker to reduce commissions, watch out for terms regarding rent escalation and subletting before signing your lease.
There are three types of leases for commercial office space:
- Full service lease – Under a full service lease, the landlord is responsible for paying the expenses associated with the property, including property taxes and insurance, repairs and maintenance, and utilities and janitorial services. This is the most common commercial lease and the best type of lease for the tenant.
- Net lease – A net lease is a lease agreement where the landlord charges a lower annual rent as compared to a full service lease, but can include monthly “usual costs” such as property taxes, property insurance, and common area maintenance (CAM) fees.
- Modified gross lease – Under a modified gross lease, a tenant pays for their portion of property taxes, property insurance, and CAM fees as a lump sum along with their rent. This means that the rent on a modified gross lease is fixed and there are no hidden costs or unexpected charges.
Check out our guide to leasing commercial real estate for more information on the types of leases you’ll encounter when finding a new space for your company.
Things to Consider When Negotiating Your Lease
Most commercial leases contain terms regarding base rent, lease term, rent escalation, and tenant improvements. Make sure you understand the maximum amount of rent you’ll have to pay each year, how long you’re entitled to use the space, and what your landlord will be responsible for under the lease. Familiarize yourself with these important considerations before signing a lease.
Factors to consider when negotiating your lease include:
Base rent is the amount of rent you will have to pay each month for usable space and will be presented as a cost per square foot per year. This value may include usable space, which is the space your office actually uses for operations, and rentable square feet, which includes your business’ share of common space within the building. When negotiating your office lease, consider the rentable square feet before agreeing to a base rent.
Length of the Lease Term
Commercial leases typically range from three to ten years. Make sure your lease doesn’t require you to stay for longer than you are willing. Conversely, if you prefer a longer lease period, confirm that the space is yours for as long as necessary to meet your needs.
Tenant Improvement Credits
If an office requires renovations before you can successfully operate your business, make sure the lease contains tenant improvement credits to cover related expenses. These credits give a tenant the ability to make necessary leasehold improvements at the expense of the landlord.
Rent and Rent Escalations
Beyond listing the monthly and annual rent, your office lease will also describe any future rent escalations. By including such a term in the lease, a landlord can legally increase the rent during the lease. Rent escalations of three percent per year are fairly common, so make sure your lease doesn’t contain an abnormally high percentage.
Things to Avoid When Negotiating a Lease
In addition to ensuring the lease meets your business’ needs, there are several boilerplate lease provisions you should avoid when you’re renting office space for small business. Lease terms can give the landlord the right to terminate your lease at any time without cause, the ability to pass along building maintenance costs, and more. Watch out for red flags like these when negotiating your office lease.
Red flags to watch out for when negotiating your office space lease include:
A use clause describes the type of business that may operate within a specific commercial space. For example, a lease may limit the use of a space or building to retail or office. Before signing your lease, make sure that the use of the building is not restricted in a way that will limit your ability to operate your business. A use clause can also interfere with your ability to assign the lease to another business, so negotiate as broad a use clause as possible.
Termination Without Cause
Sometimes landlords reserve the right to terminate your lease without cause to maintain flexibility in their operations. This can be extremely detrimental to your business if your landlord chooses to exercise the right and forces you to leave before your lease is complete.
As with residential leases, a lease must be assignable for a tenant to sublease or otherwise transfer the office during the lease period. If you think you might leave the space before your lease ends or if you might sell your business with the lease in place, make sure the lease allows for assignment and subletting.
Increased Property Taxes
In a commercial lease, the landlord typically pays property taxes for the space. However, if you lease an office, you may be responsible for paying any increases in property taxes from when the lease was first signed. If you’re not comfortable with this potential increase, review your lease for language stating you’ll be responsible for paying any increases in property taxes during the lease period.
An as-is clause is a section of a lease that attempts to relieve a landlord of his duty to repair or improve the leased space. This section includes language stating that the tenant will accept and occupy the building in AS IS condition—as the building existed on the date of the lease—and that the landlord is not obligated to improve or repair the premises. Though this language gives you the right to inspect the property prior to signing the lease, you should reject this language if possible.
Mistakes to Avoid When Renting Office Space
Choosing an office space is a major business decision that is fraught with challenges. Businesses often lease a new office space only to find that it is too expensive, too small, or otherwise inconsistent with their needs. When identifying your company’s ideal office space, watch out for the common mistakes businesses make when selecting an office.
Mistakes to avoid when renting office space for small business include:
Spending Too Much
A major mistake when leasing an office is committing to a high monthly payment and overextending your business. If you lease an office that doesn’t fit conservatively within your business’ budget for overhead, you risk harming the company’s long-term success or going out of business. Identify and commit to a conservative budget before you start looking for offices and don’t get caught up in fancy amenities you can’t afford.
Going Too Small
When choosing an office, it’s important to consider the long-term needs of your business. It’s impossible to know where your business will be in one, three, or five years, but you should carefully consider your company’s goals as you search for an office. Then, each time you tour a space, evaluate how you would fit in the space if your company’s growth mirrored or even outpaced those goals.
Choosing the Wrong Location
Location can make or break a business, so familiarize yourself with surrounding neighborhoods and transportation options before signing an office lease. If you have an existing customer base, focus on their preferences but don’t ignore the geographic needs of your target market as a whole. Spend time researching surrounding businesses, local services, and more before choosing an office location.
Missing Important Lease Terms
A lease is a legally binding contract between a landlord and the business leasing office space. Many lease terms are extremely landlord-friendly and, if ignored, can have major financial consequences for a small business. Watch out for use clauses, transfer limitations, as-is clauses, and other lease sections that can cost your business money and limit flexibility.
Pros & Cons of Renting Office Space for Small Business
Depending on your needs, there are several pros and cons to renting office space for small business. Leasing an office can be cheaper than purchasing, but doesn’t build equity in real estate and can leave you susceptible to your landlord’s actions. Familiarize yourself with the pros and cons of leasing before signing on the dotted line.
Pros of Renting Office Space for Small Business
The pros of renting office space for small business include:
- Less expensive than buying – Leasing office space can help your small business cut back on overhead expenses over purchasing a building. Your lease payment may be less than a mortgage payment and you won’t have to worry about other expenses like taxes and insurance.
- Lower maintenance – When you lease your office space instead of buying, you’re not responsible for the maintenance of the building. This will save you the time, money, and energy associated with maintaining your own building.
- More options – Depending on your market, you may have more options for renting office space for small business than buying. If you’re in a seller’s market, consider renting office space until the real estate market swings in your favor.
Cons of Renting Office Space for Small Business
The cons of renting office space for small business include:
- Less flexible – When you sign a lease, you’re committing to the same office space for the entire lease term. This reduces your ability to change the location to meet the evolving needs of your company.
- Still expensive – Depending on your market and your business’ needs, leasing an office may still be outside your budget.
- No equity in the property – Though lease rates can be less expensive than purchasing an office, the money you pay each month is not a long-term investment. If you want equity in your office, consider using a shared workspace through WeWork until you can afford to purchase an office.
- Unstable – As a renter, you’re often subject to the whims of your landlord—the building’s owner. Depending on the terms of your lease, your landlord may sell your office building to someone else or otherwise modify the property during your lease period.
If you’re trying to decide whether to rent or buy an office, check out our guide to buying vs. leasing commercial real estate for the benefits and drawbacks of each.
Bottom Line – Office Space for Rent
Before renting an office, you should understand your company’s needs, budget, and plans for growth. We recommend hiring a licensed commercial broker to identify properties, schedule walk-throughs, and negotiate a fair lease. However, you can research offices yourself using a service like LoopNet. Follow our six steps to guide you through the leasing process.
Don’t forget to check that the office space you’re looking at has access to reliable internet and networking services. Business Services Connect is a telecommunication cooperative with an instant-locator tool that makes it easy to find the right local internet, phone, and networking providers for your space.