Evaluate your options. Shared, co-working, sublease, direct, etc…
There is a direct correlation between your lease term and the number and types of options you will have. Landlords typically ask for and may require 5- to 7-year lease terms on a direct lease. Some will accept a three-year term on a direct lease but the longer your lease term, the more space choices you will have.
If you are a startup or small business, before you enter into a direct lease with a multi-year lease requirement, exhaust the shared space alternatives including co-working, incubators, sub-lease and executive suites. Each of these options has trade-offs and may not suit your needs but they will all have more flexible (shorter) term lengths than a direct space lease.
In an incubator, accelerator, co-working space, or executive suite, they assume the financial and liability risks associated with multiple tenants sharing space. You avoid having to collaborate with other tenants on space requirements, tenant improvements and costs, selection criteria, timing, and legal liability. As a result, these shared spaces tend to be more turnkey than sharing space under a direct lease, but you typically will pay a premium when you do the math on rent/square foot.
If you plan to share space with another company under a traditional lease space (provided this is allowed by the landlord) either one or both parties will be on the financial hook for the lease. Regardless as to who is on the hook, what happens if one of the parties has financial problems 12 months into a 5-year lease? That’s where the awkwardness arises that often leads to confusion, disagreement, and conflict with your shared space partner.
You may want to explore subleases provided they fit your timeline and flexibility. You’ll be able to find sublease space at below market rates, but your trade-offs will include limited or no flexibility on tenant improvements, renewal options, and financial liability. Even though you are a sublessee, what happens if the lessee has financial problems 12 months into a 5-year lease? Your options will be to relocate or assume the lease.
There are other positives and negatives with each of your options for office space. Be sure to work with a tenant representative to evaluate your options. Tenant representatives work exclusively for you and have a fiduciary duty to represent only your needs. More than 90% of commercial real estate brokers represent both landlords AND tenants. This creates a built-in conflict of interest that few tenants understand and even fewer brokers discuss. Avoid this conflict of interest by working with brokers that only represent tenants and never landlords.
Tenant representatives are typically paid by landlords, so you have the benefit of an expert real estate advisor without being out of pocket.
There is a direct correlation between your lease term and the number and types of options you will have. Landlords typically ask for and may require 5- to 7-year lease terms on a direct lease. Some will accept a three-year term on a direct lease but the longer your lease term, the more space choices you will have.
If you are a startup or small business, before you enter into a direct lease with a multi-year lease requirement, exhaust the shared space alternatives including co-working, incubators, sub-lease and executive suites. Each of these options has trade-offs and may not suit your needs but they will all have more flexible (shorter) term lengths than a direct space lease.
In an incubator, accelerator, co-working space, or executive suite, they assume the financial and liability risks associated with multiple tenants sharing space. You avoid having to collaborate with other tenants on space requirements, tenant improvements and costs, selection criteria, timing, and legal liability. As a result, these shared spaces tend to be more turnkey than sharing space under a direct lease, but you typically will pay a premium when you do the math on rent/square foot.
If you plan to share space with another company under a traditional lease space (provided this is allowed by the landlord) either one or both parties will be on the financial hook for the lease. Regardless as to who is on the hook, what happens if one of the parties has financial problems 12 months into a 5-year lease? That’s where the awkwardness arises that often leads to confusion, disagreement, and conflict with your shared space partner.
You may want to explore subleases provided they fit your timeline and flexibility. You’ll be able to find sublease space at below market rates, but your trade-offs will include limited or no flexibility on tenant improvements, renewal options, and financial liability. Even though you are a sublessee, what happens if the lessee has financial problems 12 months into a 5-year lease? Your options will be to relocate or assume the lease.
There are other positives and negatives with each of your options for office space. Be sure to work with a tenant representative to evaluate your options. Tenant representatives work exclusively for you and have a fiduciary duty to represent only your needs. More than 90% of commercial real estate brokers represent both landlords AND tenants. This creates a built-in conflict of interest that few tenants understand and even fewer brokers discuss. Avoid this conflict of interest by working with brokers that only represent tenants and never landlords.
Tenant representatives are typically paid by landlords, so you have the benefit of an expert real estate advisor without being out of pocket.