First, let's start with what the other guys are doing. Around the turn of the century (that would be this one), you couldn't get office space in San Francisco without first showing your potential landlord your business plan and offering stock options. You had to pitch your landlord the same way you did your venture capitalists. Landlords realized they could pick and choose tenants and interview them, rather than vice versa. Since the dot-com bust, however, that has changed drastically. The vacancy rate in San Francisco jumped from 2% in 2000 to 9% in 2001. Now, landlords are less picky and will often divide up floors of their buildings to suit smaller tenants. Here are a few numbers for the statistic-happy among you...
At the end of 2000, the regions with the lowest average vacancy rates were the:
- Northeast with a 4.7% vacancy rate
- West with a 6.9% vacancy rate
- South Atlantic with a 7% vacancy rate
- Midwest with a 8.9% vacancy rate
- Southwest with a 11% vacancy rate
Some of the fastest growing rental rates at the end of 2000 were in these cities:
West Coast Market
- San Francisco -- almost double that of 1999 ($63.65 psf average rental rate)
- San Jose -- 41% increase over 1999 ($46.73 psf average rental rate)
- Seattle -- 16.2% increase over 1999 ($31.62 psf average rental rate)
- Oakland-East Bay -- 25.2% increase over 1999 ($31.61 psf average rental rate)
- San Diego -- 14.7% increase over 1999 ($24.07 psf average rental rate)
- Austin -- 16.7% increase over 1999 ($26.17 psf average rental rate)
- DC -- 7.7% increase over 1999 ($35.82 psf average rental rate)
- Boston -- 19.2 increase over 1999 ($42.09 psf average rental rate)
- New York -- 23.4% increase over 1999 ($50.82 psf average rental rate)
Source: REIS, Inc.
So, you can see that as of the end of last year, things were still pretty much booming in the world of commercial real estate, albeit slightly less so than in 1999 and 2000. Does that mean you'll have a hard time finding office space? That depends on where you're looking. In most markets, space is readily available (San Francisco being the least easy market). The area itself will dictate what you have to pay, so check out the average prices per square foot, and think about the location needs of your business long and hard before making your move.
Other trends include more telecommuting and working from home offices. According to the William Olsten Center for Workforce Strategies, more than 50 percent of companies in North America offer some form of telecommuting to their employees and about 75 percent have plans to expand the programs. According to the U.S. Census Bureau, home offices have also jumped from 4 million in 1990 to 11 million in 1997. The number is expected to increase to 20 million in 2001. Allowing telecommuting has a definite impact on your office space needs. Those workers still need space when they come to the office, but they don't need a designated desk that sits empty three days out of the week. The key is to have central workstations available that anyone can plug into when they're in the office. This reduces the space requirements for your office, and still allows your telecommuters to get work done while they're in the office.
What About Virtual Offices
Do you really need real estate in order for your business to succeed? Obviously, if you are planning a large manufacturing venture, you'll need commercial or industrial space in which to do it. But what about the smaller guys who are beginning a consulting service? How many hours would you or your employees spend in an office anyway? Do you need face-to-face contact with your employees, or would phones and e-mail suffice? Video conferencing is also widely available. Is a physical office really worth the expense and upkeep? Perhaps a good virtual office would really be the most you need. By taking advantage of technology and other new office services, you can offer your clients many of the same benefits as your real estate-leasing counterparts. You can even have a prestigious sounding address complete with a suite number available through places like Mailboxes Etc. and other packaging and mailing businesses. Most of these businesses offer the equivalent of a post office box, but with a "suite number" rather than a P.O number. You can receive packages, and have 24-hour access to your box.
Office Space Options
If your work involves traveling, you have many options for where you can get your work done. The most obvious, and least comfortable, is the parking lot outside your client's building, or the seat you find at the airport while waiting to board your plane. Other more comfortable options include:
- Telecenters This is a business center that rents space along with access to clerical assistance, e-mail, voice mail, fax services and a receptionist. These are useful for work forces that travel the majority of the time. Most major cities have several of these centers.
- Tenant space These are rented spaces that are used for specific projects for short periods of time (usually weeks or months).
- Hotelling Popular in the consulting, financial, and high tech fields, this system allows you to buy or lease a smaller space than you would otherwise need. It works for businesses that have the majority of their employees on the road most of the time. With this system, employees reserve workspaces for specific blocks of time and keep all of their files with them on a personal computer or other electronic device. The whole process is facilitated by a "concierge".
- Executive Suites These can be leased for as little as $100-200 per month. (For very limited use.) This type of arrangement provides you with a receptionist, voice mail, e-mail, and other services, along with access to private offices, a reception area, a meeting room, and more that is shared with other businesses and managed by a management firm.
- Business Incubators These are groups that foster new business startups by providing the usual office space and services, as well as management and finance assistance.
- The Ultimate Home Office In the not so distant future, it is projected that many urban areas will have what is called Live-Work Condominiums. The idea is to take advantage of office space that is only used 8-10 hours out of the day, and turn it into combination housing and work environments.
For those of you who know you need some type of permanent office space, let's look at the possible functions you may need in office space.