Commercial real estate
Mie-Yun Lee, Editorial Director, BuyerZone.com
August 16, 1999
Growing a company can be exciting, but it can also be pretty trying. Even handling the
infrastructure can bring headaches. If you find yourself saying "We'll just squeeze Bob
in here," when your new hires are about to start, perhaps it's time to consider a move
to roomier headquarters.
A commercial real estate broker will help you find office space, but before you even
start talking to one, you should calculate roughly how much space you'll need. Private
offices range between 120-200 square feet each, workstations 36-80 square feet, and conference
rooms 200-375 (up to 10-12 people) square feet. You'll likely also want to consider other
ancillary spaces like storage areas, closets, a faxing/mailing room, or a kitchen.
Then, spend some time thinking about where you'd like to move, as well as what that
space should look like. Is it important that you be near public transportation or your
customers? Or perhaps an alarm system is a must-have. Knowing what you're looking for
beforehand can help you get a sense for costs, so that you can adjust your budget or
your criteria as necessary.
Real estate costs -- measured in dollars per square foot, vary greatly. The Building
Owners and Managers Association (BOMA) classifies buildings according to their location,
appearance, and cost. Class A space, for example, is typically a modern, attractive,
secure building in desirable location. But Class A space in a metropolitan area is far
more expensive than Class A space in a less-populated region. For example, while the
national average for commercial real estate was $18.19 per square foot per month in 1998,
according to BOMA, New York City's office space averaged $38.39.
Once you know what kind of space you want and how much you can pay, it's time to find
a broker. Brokers are plentiful, and each tends to specialize in a particular type of
space (manufacturing vs. office, for example) and geographical area. Particularly in
a hot market, it's advantageous to find a broker who is intimately familiar with the
area you are eyeing, because they often get the inside scoop on space that's about to
become available; you can at least have a chance of getting to it before it's widely
marketed. Brokers also can provide insight on the quality of different landlords.
However, there are brokers who work for the building owner, not you. Some brokers work
on commission, which is paid by the landlord and usually ranges between 3-7 percent of
the cost of the lease. This practice can lead to situations where your broker is not
working in your best interest.
With that in mind, make sure you get a disclosure statement upfront, which details whether
the broker is representing the landlord or the tenant or both. The Commercial Investment
Real Estate Institute (CIREI) mandates that all members adhere to their Code of Ethics
and Standards of Practice. It's best to look for brokers who are affiliated with the
Society of Industrial and Office Realtors (SIOR) and are Certified Commercial Investment
Members (CCIM). These designations will ensure that you're dealing with an educated and
recognized professional.
Once you have found your broker and a site you like, you are ready to start the hard
part --negotiating. But tips on getting the best deal will have to wait for a future
column.
Quick tips
Think long-term. Consider your long-term
growth plans when deciding on a new space. You don't want to find yourself needing
to move when you've got a year or so left in your lease.

Interview brokers. Some things to consider: SIOR and CCIM designation and
whether the broker is representing the tenant or landlord.

Consider a sub-lease. If your company is growing quickly, you won't want to
lock into a long lease. The rub is that landlords prefer long lease terms; one way
to get around that is to try subletting space from another business. |