NFIB

Time to Grow
03/ 14/ 2002


Many microbusinesses start out at home and make their first plunge into the commercial real estate market a few years down the road. Regardless of when you begin the search for an office, or if you're looking for a new office, there are several points to keep in mind -- things that building owners will already know when you come to them with questions.

Workshop contributor Amy Cates found a guide for anyone looking for new office space and has a review here.

In his book, Office Space, A Tenant's Guide to Profitable Leasing, Jack Saltman is the voice of experience. In 20 years, Saltman has leased more than four million square feet of office space to clients and is considered an expert on major office markets. To level the playing field for tenants, he identifies the "Seven Most Deadly Mistakes Made by Office Tenants":

1. Before looking for office space, know your business and personal needs, and develop them into a "statement of requirement."

Among business needs:

-- The type of business may determine your location.

-- Your company's image may be enhanced by locating in a high-quality building.

-- Establish how much you can afford so spend on office space over the next three to five years.

-- Does the space afford you future expansion possibilities?

Examples of personal needs:

-- Job security

-- Locating facility near your home or retail and restaurants

-- Image enhancement

2. Keep your confidence in check.

Establish a plan for your search for office space, then:

-- Read the business section of your newspaper and local business publications to learn about the local office market.

-- Learn and understand key terminology common to the office building business.

-- Ask questions about the building, space measurements and potential hidden costs.

-- Seek assistance from someone other than the owner or employee of the owner.

3. Know who works for whom. The only thing you have in common with the building owner and his staff is that you would like to lease space and they'd like to lease it to you, so be cautious when seeking their advice or opinion.

4. Get the whole story. Rate and square footage mean nothing if you don't ask the right questions. Ask about:

-- common area factor -- areas in a building that are of common use to all tenants; usually includes the lobby, hallways, janitorial and electrical closets, bathrooms, etc. The building owner determines how much square footage makes up the total common area of the building, figures out what percentage of the building this represents and passes the cost onto the building's tenants by adding the percentage of common area to the amount of square footage the tenant has within their own office space.

-- usable space or usable square feet -- amount of square feet within the confines of the space you physically occupy.

-- rentable or leasable space or square feet -- usable square feet plus your proportionate share of the building's common area; this is the amount of space you'll be paying rent on.

Saltman offered this illustration: One building has a common area factor of 10 percent and another has a common area factor of 20 percent. For you to occupy 2,500 square feet of usable space in building No. 1, you would pay rent on 2,750 square feet. In building No. 2, to get your 2,500 square feet you must lease 3,000 square feet.

5. There's no such thing as free rent. If a leasing agent offers you free rent, the fact is it's simply a "pay me now or pay me later" approach to leasing.

6. Know when to employ a broker. "When a building owner or leasing agent tells you they won't work with brokers or you will have to compensate the broker yourself, beware," Saltman said. It's a nice way of saying, "I'd rather deal directly with the inexperienced or uneducated prospect, so I can make a killing on this deal."

7. And finally, remember you are the customer:

-- Negotiate hard. You're going to be living with these people for three to five years.

-- If the building isn't well maintained when you visit, it won't be after you move in.

-- If the receptionist is rude when you call or visit, you can't expect him/her to be pleasant after you move in and have a problem.

-- If the leasing agent doesn't volunteer information about hidden costs without being asked, walk away.

-- If you're offered "side deals" that aren't put in writing, then they're not good deals.

-- If the property manager is too busy to meet with you before signing the lease, he/she won't be accessible when you have a problem as a tenant.

Remember, your office space reflects your company's image and may determine its profitability and ultimately its survival.
To learn more, visit Saltman's Web site at http://www.aisg.com/officespace. To order his book, call 1-800-699-4901.
workshop.microbusiness.fri
4.3.1998

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