Congratulations. Your startup has hit a growth spurt. You’re generating revenue, you’ve hired your first employees and the garage is no longer cutting it as HQ. It's time to upgrade to an actual office.
Finding and leasing a professional office space that both meets your needs and your budget is both exciting and stressful for beginning entrepreneurs, often mostly the latter. But it doesn’t have to be. Not if you’re empowered with the right information and tools from the outset, says Andrew Bermudez, co-founder and CEO of Digsy, an online commercial property listing location service.
Bermudez, 34, is no stranger to the time-consuming tests of patience that typically go hand in hand with searching for the perfect-fit office space, both as an entrepreneur himself and as a veteran real-estate broker. Before launching his Irvine, Calif.-based startup in December 2014, he worked just shy of 13 years as a senior vice president for Lee & Associates, a national commercial real-estate brokerage, placing clients like Jim Beam Brands, Skyy Vodka and Lowe’s Home Improvement, to name a few.
Here are Bermudez’s top seven tips for finding the perfect office space for your startup:
1. Know how much space you need.
Typically, a good rule of thumb is budgeting for about 1,000 square feet for every four to six employees. “Depending on the layout, you should be able to squeeze everyone in comfortably using this basic formula,” says Bermudez.
2. Be considerate of your employees.
Map out where your employees live and, from there, seek out an office space that’s relatively convenient for each to travel to on a regular basis. “Coming up with a centralized location is the most important consideration in the process. If you make it easy for everyone to get there, you’ll retain more talent, existing and future.”
3. Be open to subleasing an office.
If you’re just starting to pull in revenue, but you’re not profitable, you might not have enough in the bank to convince a landlord to rent a commercial space to you for longer periods of time. If this is the case for you, Bermudez suggests you sublease your first office space. Shorter term subleases are often month to month and, more rarely, week to week. Some can also last a single year. “If you’re still firmly in growth mode, subleasing is one of the better, more realistic options.”
4. Work with an agent people you trust recommend.
Err on the side of caution and don’t work with an agent who has never successfully found an office space for someone you know. Similar to when you move somewhere new and search for a new doctor, you wouldn’t want to leave something this important up to chance.
Once you’ve rounded up personal recommendations, if you feel it’s necessary, do some additional homework. Look up the agents on LinkedIn and Zillow and see what former clients are saying about them online. “I can’t tell you how many agents are out there who make promises they don’t keep,” Bermudez says. “They never follow up on searches they say they’re doing for you. Go with someone you and your network trusts from the beginning and you’ll avoid getting burned.”
5. Consider setting up shop at a co-working space.
This is likely your best bet if you’re working with a tight budget and require a flexible, lower-cost arrangement, Bermudez says. “You’ll be around other startup types who are like-minded and, if your needs change, even suddenly, you can always move back to the garage in a pinch.”
Depending on the specific co-working location, you could rent a range of spaces -- from team-friendly environments, to dedicated individual desks, to entire meeting rooms -- on an hourly, weekly or monthly basis, or even indefinitely. Some websites specializing in connecting startups with shared work atmospheres that Bermudez recommends are LiquidSpace, ShareDesk and PivotDesk.
6. Make sure you don’t end up with an awful landlord.
Bad landlords are right up there with bad bosses. They can make your life -- and the lives of your employees -- miserable. To ensure you end up with a landlord who is professional and plays fair, talk to tenants in the building (or co-working arrangement) you’re considering renting space in. “You don’t want to move into a building and a lightbulb or something worse goes out and the landlord never fixes it or sticks you with it," Bermudez says, "plus all of the materials and maintenance costs.”
Related: How to Negotiate a Lease
7. Know that everything’s negotiable, even rent.
There are no hard and fast rules when it comes to nailing down an office space. For example, just because the rent for an office is listed as $5,000 a month doesn’t mean it’s actually $5,000 a month. “You should always negotiate rent down between 5 to 20 percent below the listed price. You’d be surprised how much people are willing to go down.”
Bermudez says you can even ask for free rent, depending on the state of the market. For example, for every year you sign a lease, you might be able to score one-month’s rent at no charge. So, if you’re in a one-year lease, request one month of free rent. For a two-year lease, ask for two months rent-free. While it may sound too good to be true, Bermudez says this is something commercial real-estate agents do all the time. “And there’s no reason you can’t do it, too. The worst that can happen is you get a no.”