Small Business Matters: The Real Estate Hunt

 

 

Harry Klaff
Managing Director
Jones Lang LaSalle 
www.joneslanglasalle.com/

 

After personnel costs, rent accounts for the most significant portion of a business' expenditures. For business owners not schooled in the intricacies of leasing, here are some points to consider:

 

Define Your Space Requirements-What size and layout do you need? What image and quality do you want to project? Are there geographic constraints? What can you afford? Is there room to expand?

 

Plan for the Future-Leases generally run from 5 to 10 years. While immediate space needs must be considered, an understanding of your organization's long-range plan can help accommodate future growth. It is common to project out 3 to 5 years and lease space to accommodate that growth.

 

Understand the Classes of Office Space-Offices come in a variety of grades or levels. Trophy offices are premier properties with numerous amenities in or near the building. They are located in the best neighborhoods and near transportation. You can expect to pay top dollar for such properties.

 

A Class buildings are quite nice but may not have as many amenities. B and C Class buildings tend to be older and perhaps not as well located but are cost effective. You want to match the quality and location of the office building to support your organization's mission, culture, and budget.
 
Analyze a Building's Infrastructure-You wouldn't buy a car without looking under the hood, and office space is no different. Find out the age of the building and its physical condition. The roof, boilers, and chillers can require significant capital expenditures as can re-facing the building and upgrading the lobby, elevators, and bathrooms. These operating expenses can be passed on to tenants. It is critical to have a professional investigate the building and provide an analysis of any deferred maintenance items or performance issues with its infrastructure.     

 

Evaluate Security-Tenants look for services such as lobby security, guards around the clock, card key-activated elevators, and secure floors. These factors are especially important for businesses whose employees work long hours.    

 

Negotiate the Lease-A tenant representative can craft a lease that represents your best interests. It should include such items as the length of the lease and lease rates, an exit strategy, sublease capability, and favorable renewal options.

 

Consider Timing and Schedule-Some businesses begin the process of finding new space 2 to 3 years before they plan to move. Determine the best time to approach a landlord as it relates to your current lease expiration date, market trends, and interior construction.