Real Estate for Entrepreneurs and High Growth Companies
As an entrepreneur and commercial real estate advisor, my goal is to support other entrepreneurs in their real estate decisions. I recently wrote the Real Estate Guide for Entrepreneurs and High Growth Companies to help business owners find a space that supports their company goals.
I wanted to make the information a little more digestible for busy professionals, so here is a summary of the eBook:
The Timing
You should start looking for a new space at least 12 months before your current lease is set to end. Your company may need to relocate early to accommodate your growing staff, so a sublease clause in your current lease will work in your favor.
The Property
Before beginning your property search, meet with your key stakeholders to identify which elements of real estate are the most crucial to the success of your business and rank potential properties based on criteria such as the following:
Lease Length
Lease length is often negotiable, but you’ll still want to look for properties that match your preferred lease length. Some landlords are open to shorter leases while others may require longer lease terms.
Location
Location should play a large role in your real estate decision. Prioritize proximity to major freeways, public transit and local amenities. You should also seek out properties located near your strategic partners, vendors and clients to preserve the relationships that are key to running your business. You will also want to choose a location that can be easily accessed by your employees.
Space
Consider how many square feet of space you will need for your employees. Square footage is determined by the need for private offices, conference rooms, reception areas, break rooms and storage spaces. You should also consider the space’s flexibility to accommodate more employees as your business grows.
Amenities
Be sure to evaluate the amenities of each potential space. Features to look out for include communications, power, signage and ingress/egress. You’ll want an office that showcases your business and attracts new clients.
Landlord
You should also consider the reputation of the landlord. Talk to former tenants and read online reviews to make sure the landlord is trustworthy.
The Deal
Once you choose a space, you will begin negotiating lease terms, such as the following, with your landlord.
Lease Rate & Type
The landlord will have a predetermined lease rate that is often negotiable. You should base your starting offer off current market rates and your monthly real estate budget.
You’ll want to understand different types of leases to have a better understanding of what you will be required to pay each month. Some common lease types are gross, modified gross and triple net leases.
In a gross/full-service lease, you pay a base rent that includes all associated fees.
In a modified gross lease, you pay a base rent that includes all associated fees except utilities and janitorial service.
In a triple net lease, you pay a reduced base rent and your portion of all associated fees.
Concessions & Tenant Improvements
Consider negotiating for concessions such as a reduced security deposit, moving cost stipend or free parking. In most transactions, landlords will offer some type of rental abatement. You can also negotiate for a greater tenant improvement allowance to cover the costs of installing new floors, painting and completing other repairs.
The Future
At some point, you may wonder whether you should continue leasing or if you should purchase your own space. If you have a clear growth plan, you may benefit from buying a property. If you do purchase space, you could one day free up equity through a sale-leaseback option where you sell your property to an investor and sign a lease with the new ownership.
The Broker
In most, but not all, situations, the cost of a tenant representative is paid by the landlord. If a broker tells you tenant representation is always free, you can know that you are not seeing 100 percent of the options. A broker should oversee your real estate strategy and negotiate the best possible deal for your business. Choose a broker you trust who has experience working with businesses like yours.
For additional insights, download the free Real Estate Guide for Entrepreneurs and High Growth Companies or reach out to me directly at tanner@menlocre.com.