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The Ultimate Guide to Leasing Office Space for Your Growing Startup

Published: 07-18-24 Category: Leasing/Renting

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Starting your own business is a uniquely exciting time, although you'll sometimes feel that there aren't enough hours in a day to accomplish everything you planned.

This may also apply to the task of finding the right office space for a growing startup business.

As you bring on more staff and/or equipment, the office space you lease should offer you the flexibility to expand. Ideally this will be within the same building.

Ensuring that you lease the right office space is crucial for fostering growth and productivity. It also means you can provide the same levels of service to your customers, which earned you the repeat business that's fueling your growth.

Here, we'll walk you through the process of leasing office space, from initial planning to signing on the dotted line. You'll also learn more about the changing face of commercial real estate (CRE) and the non-traditional options now available.

The first step for any commercial lease is the same: to analyze your lease budget and space requirements.

Creating a Leasing Budget

Grab a pencil and paper, or crank up your laptop's financial spreadsheet application.

Determine how much you can afford to spend monthly on rent.
Factor in the usual additional costs. These may include utilities and maintenance.
Decide if expanding your business will require renovating your new premises.

After you've come up with what appears to be a doable monthly rent budget, consider the impact on your current cash flow and growth projections.

Space Requirements

This may be somewhat tricky, especially as predicting your business' growth is never easy.

Start with your current space requirements, so you'll have a baseline for expansion.

Estimate the square footage needed based on your current team size.
Consider different office layouts.
Think about additional spaces your staff and customers require. These may include meeting rooms and break areas.

Now, you're ready to check out the different types of commercial office spaces in your preferred area or areas.

Traditional and Beyond

Office leasing options have changed dramatically in the last decade, especially as more businesses recognize the advantages of a hybrid (part in-house, part remote) workforce.

Depending on your location, you may have several or all of these commercial space and leasing options available to you.

Traditional office leases often require a longer, three-to-five-year term. These offer tenants more control over the space's decor and customization but may require a larger up-front investment.

You may be able to negotiate a lease that will allow you to move into an adjacent space in the same building if and when you outgrow the initial space.

Coworking office leases generally offer flexible terms. You may be offered month-to-month leasing options. These are often fully furnished, including meeting rooms with video conferencing.

You may discover that a coworking building offers unique opportunities for networking and collaboration with other growing businesses. However, your opportunities for brand-building may be limited.

You may also have privacy concerns, depending on the products and/or services you offer.

Serviced office leases are similar to coworking leases. The main difference is that serviced office spaces tend to look more corporate, while coworking spaces have contemporary decor.

If you decide to check out both coworking and serviced offices, you'll want to compare their amenities, meeting spaces, and parking.

Subleases involve taking over part of another business/ or company's lease. They can be an ideal “stepping stone” from a smaller to a larger office, so if you're in a similar transition phase, they're worth considering.

You may find one that's more affordable and has a shorter lease term than other office leases in your area. However, you may have less control over the space than you'd like.

Now that you're familiar with your options, you can begin checking out available office spaces for lease.

Exploring Potential Office Spaces

Even though your growing business keeps you busy, it's important not to rush when looking for your business' next home.

Here's a checklist to take with you:

Take photos of each space so you can ask for second opinions later.
Assess natural light and views. You don't want to work in a gloomy place.
Evaluate the building's security measures, both during and after office hours.

If possible, ask current tenants about the reliability of the building's internet connectivity and cell phone coverage.

When you've found the ideal office space or have narrowed the options down to two or three possibilities, it may be time to ask future landlords for an initial lease contract.

You'll want to go over the initial lease carefully. Ideally, you'll have a business partner or CRE broker who's willing to read it and spot any potential problems.

Understanding Lease Terms

Before deciding which office space is your first choice, you'll want to ensure you understand common terms in commercial leases, especially for offices.

Be sure to review these terms carefully if they're included:

Common Area Maintenance (CAM) charges: Your share of building operating expenses;
Tenant Improvement Allowance: Funds provided by the landlord for renovations; and
Sublease and Assignment Rights: Ability to transfer the lease to another party.

As you draw closer to finalizing your new office lease, locate the right person to review the legal aspects of the lease contract (unless you're an attorney, of course).

Reviewing Your Legal Rights as a Tenant

It's important you understand your rights as a tenant, even if you've opted for a coworking space or serviced office.

Pay special attention to clauses about maintenance, repairs, and dispute resolution.

If suitable for your anticipated growth, consider requesting that your landlord include an option that gives you first right of refusal on an adjacent space.

Your office is more than a place to work. Even if it's a transitional space, it still reflects your company's culture and should welcome customers and staff alike.