Practical Tips to Selecting The Right Office

Selecting the right Office Space in New York City, Chicago, or realistically anywhere, involves significant due diligence.  Since office related expenses are commonly the second largest cost to hit the bottom line, examine the complete spectrum of workplace options to ensure that you select the solution that is optimal for your business now and for tomorrow.

There are really four options to consider:  Traditional space, sublet space, business centers and home working.  In future blog posts, we will dissect each option in greater detail.  But, for now we will look at some core elements of the decision-making process.

Total Occupancy Cost:

When examining price, ensure you are including all the factors of this very complex equation. To be very clear, square foot pricing is not Total Cost of Occupancy.  Price per square foot is simply one factor.  At a very high level, consider all the costs for fitting out your office so that it is “business-ready” (don’t forget about the common areas including reception, meeting rooms etc…) and then running and managing that facility.  Then factor in that cost when the space is totally utilized and when it’s not. For expediency sake we’re proving a very high-level overview. In an upcoming blog post, we will address the true definition of Total Occupancy Costs. 

Other factors in your decision-making process should be:

Term of the agreement. In today’s dynamic marketplace your business needs to be agile.  Long-term, fixed leases do not enable business agility. There is a clear disconnect between what landlords and business owners need. Business Week quoted a stat that 50% of a typical company’s office space sits empty.  You can mitigate this risk with agreements that have flexible terms and allow you to expand and contract your office space according to business needs, which leads to the next thing to consider.

Rent increases.  Even with long-term leases, rent tends to increase.  So when you find an option with a shorter, less risky term, you want to cover yourself from potential rent hikes.  Ask for a clause that correlates rent increases to the Consumer Price Index (CPI).  With today’s marketplace, you can request a shorter term and ask for a rent freeze for the first year. Watch out for increases tied to “fair market valuations” and stick to CPI.

Building maintenance and utilities.  With every office comes office related bills – as the cost to actually run the business.  Remember to ask for a definitive list of what’s included and what additional charges you would have each month. If the services and utilities are all charged separately, you may see that your low rent price per square foot option is no longer a wise choice, which leads me to the next point.

Complete office and support package. You know how to run your business and each minute you are distracted from it negatively impacts your output.   To ensure you are optimizing each hour, select options where your office management is included in your monthly price.  Business Centers offer options for a receptionist to answer calls, to give a warm welcome to greet visitors and can even help arrange meetings as needed.  To many, these services immediately equate to savings in headcount or from utilizing that staff for business driving efforts.   Using shared business equipment cuts overhead and utilities are generally included in your monthly cost.  For many, the networking in such a shared business environment has lead to new revenue gains.  Finally, a long-term lease agreement that doesn’t support your dynamic business needs could prove devastating to your business.

Risk:

For most, running a real estate function is not a core competency.  Identifying the space where you want to office is one thing.  Forecasting the right amount of space so that you can optimize utilization, negotiating a 50+ page lease agreement, establishing a business-ready environment is another.  Making the wrong office decision can really be a noose around the neck of a business for years to come.  Consider all options that mitigate that risk.