The world of the startup has changed. Gone is the model of a few people working in a garage. By 2020, freelancers will account for over 50 percent of the U.S. workforce. But while the environment has changed, your need to build a good team has not changed.
Similarly, the criteria you use to select commercial space may have changed somewhat. But the overall goal remains the same. Your company needs a space where its workers can collaborate on projects without worrying about the technical details of the lease. In addition to traditional factors like location and price, here are some ways to do just that.
It usually takes some time to collect your workforce and get everyone on the same page. Be sure your obligation to pay rent does not begin before that date. A miscalculation here could put your company in a serious financial bind. Try to get the latest starting date possible. If that means the property must be vacant for a couple of weeks, consider upping your monthly rent payments by a few dollars to compensate the landlord for the loss.
Most landlords insist that commercial tenants assume the space in “as-is” condition. Normally, that is not a problem. The landlord has a legal obligation to clean up the space and make it ready for the new tenant. But if there are compliance issues, the “as-is” arrangement may be a problem. For example, the space must comply with the Americans with Disabilities Act and other state, federal, or local laws. Be sure you and your landlord are on the same page. Your landlord is probably legally responsible for any fines that may come about, but it’s better to avoid the matter altogether.
Most landlords like long-term leases. These arrangements decrease their risk. But for most startups, a long-term lease is a bad idea. More than likely, in another year, your business will have either outgrown its current space or have ceased operations. Let’s hope for the former. So, you need flexibility in terms of items like:
- Initial lease term
- Renewal price
- Right of renewal
- Leased space
Do not leave the renewal price up to market value. If the landlord insists on such a clause, add language which dictates how the parties will determine the market rate.
Subletting and Assignment
Most leases have landlord-friendly restrictions in these areas. But a startup may not know exactly how much space it needs until it actually begins operations. So, make the lease language as flexible as possible. If the landlord refuses to work with you, do not hesitate to look elsewhere, or at least threaten to look elsewhere. Finally, bear in mind that assignment may also affect things like your ability to take on partners or change business models.
Office Space Search Tips
You office space has a lot to do with your team’s success. The right space is essentially a launch platform; the wrong space can be a financial albatross. To make a better choice, reach out to a commercial property specialist to help.
Do a Google search on the term “property management firms” to find ones near you. Top firms do more than talk about their services on their website. For example, JGM Properties in the Minnesota area provides an online 3-D view of many of their listings. This makes it easier for companies to narrow down their property search before doing site visits.
Property management firms can help you find space that makes sense for your business needs. Once you’ve found the right space, use a real estate attorney to go over the final lease terms.