Look Before You Lease

How you search for a business location can spell success or failure. Here's the scoop on negotiating a deal that won't foil your firm

Real estate professionals often say the three most important factors in choosing a business space are location, location and location. For certain types of businesses, this may be true. But for others, things like cost, style and tech readiness of a building are at the top of the list.

Whatever the requirements, finding a facility is essential to starting a business. Whether uptown, downtown or even in your home, every operation should have a space from which to sell its products and/or services. While choosing an outside location may appear to be easy, it’s a very structured and time-consuming process. If not handled properly, it can be the death knell of your business.

For most start-up firms, selecting a site boils down to dollars and cents. Few businesses have a budget big enough to purchase a building, so nearly all new enterprises start out in a leased space. Many businesses prefer to lease quarters throughout the entire life of the business because it allows them to move once their space needs change.

Some small businesses also consider subleasing, a situation in which an existing tenant will lease part of his or her space to another tenant. For example, if Company A has leased 30,000 sq. ft. of space — the measurement by which commercial space is priced — but only uses half of the area, Company A may lease the remaining 15,000 sq. ft. to Company B. Subleased space is often offered at a discount, sometimes $5- $10 less per sq. ft. than the going rate. This type of arrangement also cuts costs in outfitting your area because most subleased space already contains furniture and other office equipment.
Whether you choose to lease or sublease, commercial real estate is going to cost you. Like a roller coaster ride, prices over the last couple of years have gone up and down and up again. Currently, major metropolitan areas such as New York City, Chicago and Los Angeles are experiencing a boom in the real estate market. Vacancy rates are low and rental rates are high. “There are buildings now that are 100% leased [in New York],” says Elizabeth Martin, president of E.L. Martin & Co., Inc., a commercial real estate firm in Manhattan. “Then you have buildings that in the past couple of months have upped their prices by $5 and $6 per sq. ft.,” she says. This is good news for landlords, but bad news for business owners in search of space.

Matching your budget to a location that works well for your business can be difficult, but it is not impossible. However, it requires more than just combing through the classifieds. Before you put on your walking shoes and start your search, first assess your needs. Ask yourself a few questions: What can I afford? How much space do I need? Do I want my of fice in the city or the suburbs? Is it important to be near my competitors, clients/suppliers and/or staff? What type of building do I want? Do I want to

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