How to Select Office Space
Lots of people are starting businesses at home these days, and those that are successful are often faced with a difficult decision: Should I continue to work at my house, or do I need to lease office space? This is a very difficult decision, especially if you have not leased office space before. The purpose of this article is to highlight the important items that need to be considered prior to signing a lease. I live in the Indianapolis area, so I will use it for examples.
How Much OIffice Space Do I Need?
Office space is leased by the square foot, so the first thing you need to determine is how many square feet you need. If you are just looking for an office for yourself, you might consider office space that includes a common receptionist. If you have multiple employees, here are some guidelines:
- Head Honcho: 200 - 400 square feet
- Other managers: 150 - 200 square feet
- Other employees: 100-150 square feet
- Temporary employees: 100 square feet
- Reception area with receptionist: 100 square feet + 25 square feet per person waiting
- Conference room: 25 square feet per person
- Most other rooms (file storage, mail room, etc.) will be 100 - 200 square feet
The trickiest part is not determining how much space you need now, but how much space you will need in the future. Most landlords will probably want you to sign a lease for at least three years, and there will be a stiff penalty for early termination. After calculating how much space you need, it might be a good idea to add another 10 to 20% to allow for future growth.
Choosing a Location for Your Office Space
Choosing a location can be tricky. If it's just for you & you don't have to meet clients there, you can just a location that is convenient for you. If you have employees, you need to find something that is convenient for them as well. If you will be meeting clients at your office, there are additional factors to consider. Obviously you want something that will be close to your clients, but also an office and location that will make a favorable impression on them. If you are a financial adviser looking for high net worth individuals, you don't want a run-down office in area of town with a high crime rate. Instead, you will need a nice office in a nicer part of town. Obviously, this is going to cost more, but it will be worth it.
There are numerous other factors to consider. Is parking available for your employees and clients? If so, is it free or do you have to pay for it? Even if you have a nice office downtown, the cost or difficulty of parking may annoy your customers. If you do a lot of work over the Internet, make sure the office space you are considering has a reliable, high-speed connection. If you plan on using your cell phone for business, make sure you get a good signal. Check out how many bars you get in all areas of the office space when you inspect it.
Checking the Budget
After you have determined how much space you need, it is time to check prices. By doing a search on Google for office space rates, I found this page. By perusing it, I could see the annual rates vary from $9 to $24 per square foot. Those at $9 per square foot may seem enticing, but you need to check the condition of the space and the quality of the neighborhood. Some of them are at 33rd Street and Post Road. My wife used to work in that general area, and the neighborhood is a little rough.
After you have found the going rate for an area that looks suitable, it is time to figure out the total cost and take a good hard look at your budget. Keep in mind that this is a major commitment. You will be required to sign a multi-year lease. You need to make sure the cost fits in your budget. Also, is your financial situation strong enough to handle adversity like the loss of a key client or a general economic slowdown? If you are hit by either of these, your landlord is still going to expect full rent payment. You may need to pare back the amount of office space that you will rent. You might also conclude that it is more prudent to wait until your business is financially stronger before taking the plunge.
Final Selection of Office Space
At this point it makes sense to contact a commercial real estate agent. Just go to Google and search for one in your area. Hopefully you can find some with reviews. These professionals can help guide you through all the intricacies of the local market. When you compare different properties, it is important to make sure that you include all costs. For example, Windridge Office Building rates include:
- All utilities
- Weekly janitorial services
- Conference room
Their annual lease rates start at $13 per square foot. If you are comparing them to another location that doesn't include these things and you need them, be sure to figure out what they will cost and add them in to make a fair comparison.
Once you have made your final selection, you will want to get your agent's advice concerning details like:
- Damage deposit
- Length of lease
- Renewal right / rent increase at end of lease
Good luck with your business! I hope you become the next Facebook.