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Office Space: How to Find the Right Location and Negotiate A Lease

By Laura MacPherson on December 17, 2018

Leasing your first office space is a milestone worthy of celebration. It means your business is growing and your hard work is paying off.

But what kind of office do you need? And how do you figure out what a fair lease looks like? Here’s what you need to know before you begin your search.

First, do you really need an office?

Plenty of companies, including Basecamp, Toggl, and Zapier, have teams that are dispersed across the country—even the globe. Employees love the flexibility, software lets you collaborate as if you were in the same room, and, you don’t have to have a fancy office. If your work is mostly online (marketing, software, ecommerce), it’s worth giving this a serious look. (The CEO of Basecamp even wrote a book trying to convince other CEOs to make the remote switch).

That said, some businesses do need dedicated office spaces. Health service providers like chiropractors, physical therapists, and psychiatrists need a professional place to meet clients. Some consulting firms regularly host clients onsite. And businesses selling products will at least need warehouse space, if not office space.

Traditional office spaces vs. coworking spaces

Before jumping into a long-term lease or a traditional, stand-alone office space, consider trying a coworking space. You can lease everything from day desks, 24-hour desks, and small offices, to large suites with boardrooms. Your business can move up through the larger spaces as it grows, with no long-term commitment. You’ll pay a bit more for the space you get in a coworking office, but the flexibility is worth it if you’re on the fence about the whole office thing.

What to look for in an office

If you’re sure you need a physical office space, it’s time to make a list of your non-negotiables. Here’s what to consider.

  • Location: The city will give you access to a greater pool of talent, but city rent is also more expensive. Can you attract the talent you need away from the city? Are your clients spread out through the city? What would your commute be like? These are the main questions to start with.

  • Visibility: Do you need to build brand awareness? If so, an office that’s highly visible may help. If you’re a B2B company, however, it’s unlikely that they people walking or driving by are your potential clients. And if you serve a niche market, visibility won’t really matter.

  • Lease Period: How long a lease period can you commit to? Leases are typically available with 5-year and 3-year terms. Coworking spaces usually allow 1-year, 6-month, and month-to-month commitments. Generally, the longer your lease, the better rates you’ll get.

  • Size: How large a space do you need? Are you expecting to grow during the term of your lease? It can be tough to foresee what size space you’ll need in three to five years, but you don’t want to lock yourself into anything too small if you’re planning for growth. In this case, shorter-term leases can be your best bet, even if the monthly cost is higher.

  • Budget: Your budget will separate your must-haves from your nice-to-haves. Manny Skevofilax, a CFO business consultant, suggests basing your budget on two primary criteria: the consistency of your revenue and your ability to pay yourself a salary each month. You don’t want to sacrifice your income in order to make your rent payments.


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How to negotiate the lease

Leases can be complicated. It’s best to ask an attorney to evaluate a lease before you sign it. But there are a few questions to ask to narrow down your options when comparing spaces.

  • What is and isn’t included in the price? Will you need to pay extra for utilities, parking, renter’s insurance, or other essentials?

  • What are the upfront costs? Base rent isn’t the only thing you’ll need to pay. You may also be responsible for a deposit, attorney’s fees, and tenant improvements. Find out the total cost required for move-in. It’s also smart to do your research to find out if the rent is competitive. Look for similar spaces online and compare pricing. You may also want to chat with other business owners in the same neighborhood to find out what they’re paying.

  • Who will handle repairs and maintenance? If the lease makes you responsible for all repairs and maintenance, you’ll want to know that before signing.

  • Could the rent increase during the lease term? Some leases include an “escalation clause” which describes how and when rent may increase. Look for any language that allows rent increases and what governs them.

  • Can you hang a sign? If you want visibility, you’ll want a sign. Find out not only what the lease allows but also what your city regulations permit.

  • Can you sublease the space? If your company outgrows the space or if you don’t grow quickly as expected, it’s helpful to sublease either your entire space or part of your space.

  • What happens if the building faces foreclosure? It’s unlikely that your landlord will go bankrupt, but if it happens, you want to make sure you’re protected.

If you don’t like what you hear, you can always ask to change it. Many landlords are willing to negotiate, especially if a property has been available for a while. Just phrase your request as a question, not a demand. Unless you’re well into the process and you’re sure there are no other tenants lining up to lease the space.

A tenant rep can guide you

Trying to find an office space can drain your time when you’re trying to run a business. If you plan to sign a multi-year lease, consider working with a tenant representative who can guide you through the journey.

A good tenant rep will help you learn whether a space has competitive rent, help you negotiate a lower rate, and even negotiate improvements to the space. And a tenant representative won’t cost you extra. Similar to a buyer’s agent in residential real estate, the tenant rep gets paid by the listing agent.

Also, talk to any friends who have leased space. Since they’ve actually done it, they can tell you what to avoid and what to look for.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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