What kind of insurance do I need?
After the wreck, Hobson discovered that he still had to pay rent on the unusable space.
Conscientious landlords ask tenants to buy their own general liability insurance because it ends up being cheaper than if they buy it and pass the cost along to you in the form of operating expenses. Attorney Stroman suggests you consider business interruption insurance to make certain that you will have your expenses covered if you have to move to a temporary location following a fire or a flood. Hobson of Comfort Experts concurs -- business interruption insurance helped him tremendously when he had to move to a temporary location after the train hit. He also advises that you update your content insurance annually. He'd originally taken out a $100,000 policy on his equipment but didn't bother to update the amount when he bought new direct-mail printing machines worth $200,000. The railroad will eventually have to pay up for the lost equipment, but Hobson could have collected that insurance money several months ago.
How much space do I really need?
On average, companies need about 250 square feet per employee, but that number fluctuates greatly depending on the type of business. A company such as a law firm with a lot of executive offices could need from 800 to 1,000 square feet per employee, while a call center could get away with only 180 to 200. Keep in mind that unlike residential space, specs for commercial space will typically include community space like hallways. Dintrone of NETexponent says he's found that a loss factor of 20% is typical. "If the landlord says there's 5,000 square feet, only about 4,000 is usable," he says. And bring a tape measure because stated dimensions can always be wrong.
How do I plan for future growth?
It's the classic dilemma: You don't want to pay for space you don't need just yet, but neither do you want to find yourself stuffing workstations into the supply closet. Roger Staubach recommends that you make flexibility one of the most important negotiating points. How do you do that? Ed Chaney always negotiates several options to renew the lease in five-year increments that cover an additional five to 15 years at a prenegotiated rate. Expansion options are also a good idea. Laura Roberts of Phoenix-based Pantheon Chemical moved her chemical company from a 2,500-square-foot office to a 6,000-square-foot office only nine months ago, but her company is growing so quickly that she may exercise her expansion option by the end of the year.
I'm in a bad lease. How can I get out of it?
If cost is the issue, you can try to extend your current lease in exchange for lower rent. Some landlords are eager to hold on to the tenants they already have and might be willing to make concessions.
If the building or the landlord is the issue, and you just want to get out of there, you can try to find another tenant to sublease the space or take over your lease (a so-called "lease assignment," in which the new tenant assumes all responsibility for the remainder of the lease). Another option is to shop around and see what prospective landlords have to offer. Some are so hungry for tenants that they might be willing to pay the difference on your old lease.
How important is it to use an agent?
The trick is knowing whom the agent is working for. Are you paying the broker or is the landlord? Often, even for some buy-side brokers, your best interests and the broker's are in conflict, since the broker gets paid a percentage of the lease. And as an entrepreneur, you may be more adept at negotiation than the broker. Chaney of Sunchain says that in each of his nine leases, the brokers were less willing than he was to press for a deal they said was below the industry standard. "They'd say, 'This is the best you can get. Don't bother asking for more than that," recalls Chaney. But when he prodded them to try harder, they came back with better offers. Pantheon Chemical's Laura Roberts had a better experience. Her broker orchestrated an auctionlike scenario in which several landlords were bidding against one another for her business. He also helped her locate buildings in designated zones that offered her tax advantages.
I need space now. How can I speed up the search?
Some property owners offer "plug and play" offices. Because approximately 75% of all new leases last year were for spaces of 5,000 square feet and smaller -- most of which went to smaller firms -- Chicago-based Equity Office Properties Trust, one of the nation's large commercial property owners, started a plug and play program called Fast Office. The company offers small companies prebuilt suites with private offices, a conference room, and space for cubicles. The space can come furnished and with telephone and Internet service already installed. The company also offers a shorter lease term of about a year and a shorter lease form (five pages compared with the standard 18-page lease).
These and other developments in the commercial real estate market underscore the fact that now is the time to make a deal. Alba Aleman, for one, is already thinking about expanding into another office in her swanky new building, though she's trying not to get too accustomed to luxurious environs. "We won't sacrifice our profits for a pretty space," she says. "But," she adds, perhaps recalling the musty odor in her first office, "it is a blessing."
