Moving into your first office or retail space is a balancing act. Too much room and you’ll feel the burden in your bottom line; too little room and you’ll outgrow the space in a short amount of time and be forced to start the process all over again.
Making the jump into your first true brick and mortar location speaks volumes about your confidence in your business and its ability to grow. As you’re preparing to make this jump, there are a few key actions that you’ll need to take in order to be successful.
Set a budget
Budget is most likely your number one concern when it comes to moving your startup out of your residential or online space into a brick and mortar building. The location you ultimately select will partially determine how much you’ll need to budget for. Properties that are closer to downtown areas, major public transportation hubs, hospitals, and universities will all tend to go for higher listing prices and sell more quickly.
On the other hand, you get what you pay for. It’s tempting to look for cheap spaces, especially when your startup is strapped for cash. Be careful though, as looking for office space that is too expensive can lead to businesses not being able to cover important costs such as hiring a maintenance company, who offer regular cleans and maintenance for your office space. However, a cheap office won’t make a good first impression on visitors, nor will it attract new employees. So it’ll be important to balance a reasonable expectation for your rent, but also to find good value for your money.
Decide on a lease length
Unless you are in the extremely fortunate position to afford purchasing a space outright, you’re likely looking to lease your new location. Leases typically run from one to ten years, with office and retail spaces typically looking at five to ten year leases. The general rule of thumb is that larger tenants have longer leases, so first-time lessees will typically have shorter terms upfront.
If you’re anticipating rapid growth within your startup, you may want to look for shorter leases. This is especially true if you anticipate hiring a significant number of new employees in the next few years, which will cause you to outgrow this new space.
Set a timeframe for your search
While it is possible to find a retail or office space within 30 days, it’s unlikely that it’ll happen. Looking for a new space takes time, effort, and attention to detail. If you’re anticipating an extremely busy next quarter, it might be wise to hold off on your search until you, or your point person, have enough time to devote to the process. A general guideline would be that if you’re looking for a space that’s less than 10,000 square feet, you should give yourself six months prior to your desired move-in date. Spaces that are more than 10,000 square feet will probably take you anywhere from six to twelve months to find and close on.
Do your homework
Just like with all your major business decisions, purchasing or leasing an office or retail location requires some serious due diligence. While you’re beginning your search process, you’ll encounter commercial properties that are both already in use or are build to suit. You’ll have to ask, what can/can’t the property be used for?
This might become an issue when you’re purchasing a property that hasn’t previously been used for commercial purposes. Depending on your state or city, there may be specific property codes that limit the type and scope of construction, what sorts of businesses can enter that specific neighborhood, and what the property can be used for.
Hire an expert
Commercial real estate is a complicated beast. The tax codes alone could make anyone’s head spin, let alone the legal process of buying and selling properties and negotiating financing. If you work for yourself, then you probably know just how different it can be filing taxes when you’re self-employed. That said, most people will more than likely need to hire outside experts to help with the transaction. These experts will likely include an accountant, mortgage broker, a commercial real estate lawyer, and a commercial realtor. More complicated properties mean you’ll likely need even more outside help, especially if you are planning for construction.
We all have heard that the three keys to real estate are location, location, location. They’re not wrong, especially if you’re looking to move into your first retail space. Location and convenience are key when your customers are looking to shop in-store. They want to be able to reach your location easily, either through access to major highways, roads, or public transportation, and quickly. They also want to be able to shop at other places when they visit yours. So while moving into a busy shopping center might mean paying higher leases, it can also drive your foot traffic and incentivize customers to make the trek to your location.
Location is also key for office and corporate spaces. Your employees want to work somewhere that is convenient for them to get to and is fairly central to where they are already located. If you don’t have a team yet, it’s wise to look for a space that is in an area that has larger pools of potential talent, like a downtown area. You also want your first space to be accessible for your partners, investors, and contractors.
Learn to recognize a good deal
Commercial real estate is very different than residential property, so even if you’ve purchased residential properties before, the skills aren’t as transferrable as one would hope. Commercial property is valued different than a residential property since income is directly related to the amount of usable square footage. This is more of a minute point that can be left to a commercial real estate agent, but it’s important to research what you’re getting for your money.
Finding your first corporate or retail space will be an extensive undertaking but is an exciting step in the lifespan of your startup. While you’re beginning your search, seek out the advice of real estate experts who can give you a good sense of the most attractive or cost-efficient areas in your city or state.
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