How Finding Office Space Works


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­Your business plan is written, you've gotten a loan, you're hiring employees... but ­where is all of the hard work and success going to take place? In your garage? Maybe. It's worked for many. Look at Apple Computer. But... maybe the garage isn't the best choice for your business. Besides, where would your car live? What are your options when it comes to office space? Should you buy or lease your space? Would a virtual office work? Could your employees telecommute? What about the location?

In this edition of HowStuffWorks, we'll take you through the process of figuring out how much space you need, finding the right location, inspecting the place, and negotiating the deal. And as always, we'll provide you with lots of links to resources that can help you make it happen.

 

 

 

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Current Office Space Trends

­ 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
Source: REIS, Inc.

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)

Southwest Market

  • Austin -- 16.7% increase over 1999 ($26.17 psf average rental rate)

Eastern/Northeastern Markets

  • 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.

What Functions Does the Space Need to Serve

When deciding what purposes you need your office space to fill, think about your expected everyday activities. For instance:

  • Will you expect clients to visit your office? -- Think about....a nice reception area, easy parking, product display areas, conference areas

  • Will those clients stay for extended periods of time? -- Think about.... larger meeting rooms, audio/visual rooms, the impact and impressions that the rest of your office space will make on them... Should there be a closed-off area that clients visit?

  • Will groups of your employees have regular project meetings? -- Think about.... having several small meeting rooms with white boards, computer hook-ups, overhead projection systems, etc.

  • Will many of your employees travel extensively or telecommute? -- Think about.... setting up central, non-assigned workstations where anyone can plug in and do their work with access to e-mail, and voice mail.

  • Will you need open spaces that will foster creative thinking and teamwork? -- Think about.... setting up separate areas where collaborative efforts can easily be discussed and brainstormed without disturbing others.

  • Will you have employees involved in phone negotiations, research study, and other tasks that require more quiet concentration? -- Think about.... private offices where more independent work and private discussions can take place.

  • Will you have employees or clients with sight or hearing impairments, physical challenges, etc.? -- Think about.... special accommodations for employees or clients with special needs.

  • Will you need a break room? -- Think about.... lunch room space, kitchen appliances, games and activities to relieve stress and foster creative thought, restful decor, energetic decor, etc.

  • Will noise be an issue in any respect? -- Think about.... sound proofing meeting rooms, break rooms, product development areas, manufacturing areas, etc.

  • Will you need loading and shipping dock areas? -- Think about.... future ventures into product lines you may not offer now, receiving large orders of supplies, etc.

There are probably other uses for your office space, so make sure you've thoroughly thought through all of the activities you see being performed on a routine (and even a non-routine) basis and write them down. Your final selected space should accommodate most if not all of those needs.

So now you know the uses the space will have, but how much square footage should you look for? Let's go to the next session to find out how to estimate the size office you need.

How Much Space is Enough Space?

­ If you know you need a physical space for your business, and you know what features you need in that space, then your next question is probably, "how much sp­ace do I need?" According to OfficeFinder.com, in typical office scenarios, you can estimate 175-250 square feet per employee. If you know, however, that you'll need a couple of large executive offices then you need to estimate more square footage for those. Typical "presidential" offices range from 150-400 square feet. Secretarial and administrative space, on the other hand, will range from 60-110 square feet.

Don't forget about meeting room space. Conference rooms should allow 25-30 square feet per person for a traditional conference room arrangement. If you're using it in a classroom (or theatre) style setup you can estimate 15 square feet per person.

Your reception area should accommodate your receptionist, as well as the average number of people you would expect to enter at any given time. If you expect to routinely have groups of 6-9 people arriving and waiting in your reception area, then make sure you have at least 300 square feet. For smaller groups of 3-5, you need at least 200 square feet.

Other space requirements, like filing areas, library space, break rooms, mail rooms, and general storage should not be left out either. The space requirements for these types of areas will vary depending on your use and needs. Here are a few more guidelines:

  • For filing cabinets, allow 7 square feet per cabinet.
  • In your library, remember to account for people as well as your media shelving.
  • People-space can typically be estimated at 15 square feet per person for sitting at tables for break rooms, libraries and meeting rooms.

Remember to plan accordingly for telecommuters and other "transient" workers. If a large portion of your workers telecommute, or are out of the office for a majority of their time then set up non-assigned workstations that they can use when they come in. In most cases, designated office space is not necessary for employees who work from many locations. You can save tremendously on your square footage by using this type of system. It may mean that more filing cabinets, printers, etc. are necessary in employee's homes, but you'll still come out better in the long run.

These are just a few guidelines for determining your space needs. Many web sites offer space calculators. The Links section of this workshop provides links that will take you to more of those sites.

To ensure that space is measured on a consistent basis, most building owners follow the Building Owners and Managers Association Guidelines (BOMA) Standard Method for Measuring Office Floor Area in commercial real estate buildings. Make sure the property you are interested in has been measured using these guidelines so you don't end up paying for space you don't have.

Next, let's move on to your time frame. How long is this whole process going to take? Probably longer than you think!

How Long Will This Take?

­ Befo­re you even begin looking for space, make sure you've thought about exactly what you need. You'll save yourself some considerable time pounding the pavement, as well as eliminate a lot of wasted effort. Also, begin the process as early as possible to avoid being rushed into making the wrong decision.

  1. Estimate your space needs as accurately as possible, but keep in mind future growth and account for that as well.
  2. Know what features you need in the space. (See our sidebar for additional office features that you may not have thought about)
  3. Have an "ideal" timeframe in mind, but remember it may not be feasible.
  4. Know your budget. If you know the upper limit of what you can spend, you'll not waste time looking at spaces out of your ballpark.
  5. Know the length of lease you need. Don't let yourself get tied into a long contract for space you know you'll outgrow too quickly.
  6. Get familiar with the lingo. Don't let a communication breakdown lead to paying too much for your space. Know what they mean when they say "usable square feet" versus "leasable square feet."
  7. Have a list of questions ready to ask about each location that include items like "what utilities are included in the lease?" or "what are your maintenance responsibilities?" Having a list ready will help you more efficiently compare each property and not leave items out.

OK. So, now you are a little more prepared to begin this process. To give you an idea of the length of time this might take, here are some guidelines for spaces up to 50,000 square feet. (More detailed schedules are posted by TenantWise, a company that will help you search for, negotiable and finalize your property deal, and OfficeFinder)

  • Determine your needs -- estimate anywhere from 2-3 days to two weeks.
  • Conduct the search -- 1-4 weeks
  • Walk the spaces and narrow your choices -- 1-4 weeks
  • Lease it! -- 2-4 weeks (includes negotiation and legal work)
  • Modify the space -- 4-5 weeks for simple construction modifications, or 6-12 weeks for major construction modifications

So, by pulling out the old calculator, you can see that this endeavor may be over as quickly as one month, or may drag on for almost 7 months. Planning for what you need and can afford along with understanding the terms of leasing and real estate in general will help tremendously.

Leasing vs. Buying

­ You should compare the benefits of leasing versus buying your property from ­a cash standpoint, as well as the more obvious needs standpoint, such as long term space requirements and expansion possibilities. While there are benefits to both options, for startups there appear to be more benefits to leasing than buying. Cash flow is, of course, an issue and buying takes a larger portion of your hard earned cash up front.

Here are some other monetary benefits of leasing:

  • Your credit rating will not be quite as critical for leasing as it would be for buying. So again, for startups, this might be a sticking point.
  • Your monthly lease payment is tax deductible because it's a business expense.
  • You may be free from paying for building maintenance.

Here are some non-monetary benefits of leasing.

  • Freedom to sublet and move to another location if you find the need to.
  • No hassle of selling before you can move to another location.
  • No loss from owning a building in a bad real estate market.
  • No assignment of personnel to oversee property issues that the owner should oversee.

Buying also has its benefits. It all depends on your situation and the type of business you're in. Here are some of the monetary benefits of buying.

  • Interest on the mortgage loan is tax deductible.
  • You can take annual depreciation deductions on your taxes.
  • In the long run, you'll probably come out ahead because you won't be facing increases in rent.
  • You'll benefit financially if the real estate market is good when you sell.
  • You may be able to lease out a portion of the building if you determine that you have excess space.
  • If you need to make substantial changes to the building to accommodate your business, those changes are owned by you and not your landlord.

Non-monetary benefits of buying include:

  • You can make any changes you want to the property.
  • The hours of your business can be whatever you want them to be.
  • You are free to stay in the same location as long as you wish.

Cash Flow Analysis
If you can't make a decision based on these pluses and minuses, you can (and probably should) do a cash flow analysis to see which option makes more sense from a cash standpoint. Before you can do this, however, you have to have all of the necessary information for making your comparison. This includes information like the full cost of purchasing, the terms of the lease, the depreciated value of the property at the time you would want to move, an estimate of the property's value at that time, estimates of maintenance costs, and your tax rates.

To do the cash flow analysis, complete cash flow budgets (sample Cash Flow worksheet in Microsoft Excel format) that include all of the expenses you would incur for either buying or leasing over a set period of time. For the lease analysis, you'll need to determine your net cash outlay, which is the amount you end up spending on the lease once you've subtracted the tax savings you receive from it. (Remember your lease payment is considered a business expense.)

In order to compare apples to apples from a cash flow standpoint, you also have to take into consideration the change in the value of today's dollar versus a dollar five years from now. This are known as the discount factor and can be calculated using most spreadsheet applications.

You'll also have to know the amount of your interest deduction that you will get on your business's taxes. You can arrive at this number by multiplying the interest rate of the loan by each month's preceding balance.

Now for the tricky part... remember above where I mentioned estimating the value of the property when you would be selling it? This is the number that will ultimately determine who wins in the battle of the benefits of buying versus leasing. Obviously the longer you stay in the building, the better off you will be because you will be gaining more and more equity. However, do you know how long you will actually be there? Do you know what the real estate market is going to do in that time period? Not unless you have a crystal ball.

So, study the current market, as well as trends and predictions for as far into the future as you can get. Keep in mind that the farther out the prediction, the less reliable it will be. Arm yourself with as much knowledge as you can, and then make your best estimate. You know your business and you should have a good idea of where it is headed. If you know you want to be in an area for the foreseen future (say 10 or more years), the market is strong, and you've identified a building that will suit your needs for that timeframe then go for it. Ten years of equity can be substantial. If you can get a good deal on the property (at or below market value) then it certainly makes sense to buy if you'll be there for ten years. If you know the building is priced at or above the fair market value, or if you think five years may be more the length of time you'll be there then think about offering to lease.

Let's move on to the leasing process and how you can educate yourself and avoid some pitfalls.

Lease Warnings

Losing the Terminology War
Remember when I mentioned that you need to familiarize yourself with the commercial real estate lingo? Well here's why. When you ask to see properties of a certain size, what the agent will show you is usable space. But, usable space is just the space you actually occupy physically. It doesn't include the common areas such as the entrance hallway into the building, rest rooms, etc. The square footage these areas occupy is indicated as a percentage of the usable space, and if you add the amount of square footage for this common area space to the usable space you are asking to see, you'll get the rentable space (aka leasable space) WHICH IS WHAT YOU WILL PAY FOR. So, don't stroll around with the real estate agent while figuring the price in your head based on the amount of space you are asking for and assume that's what you'll pay, because it's not. You have to pay for the common area space as well. That's our first warning.

Creeping Leases
Don't forget that your lease will probably also have an annual increase built into it right from the start. That's right. These are called escalation clauses. Your landlord has to account for inflation, increases in the market value, etc. The landlord may offer a fixed increase, or a percentage based on the consumer price index. Don't hesitate to negotiate those points.

Read the Fine Print!
Make sure you've read every word of your lease before you sign it and negotiate with the landlord to reword any sections that are going to be unrealistically hard to abide by. Remember the lease was written with the landlord's interests in mind. Watch out for things like:

  • limits on hours of use for the property
  • requirements that state you have to leave the property exactly as you found it without accounting for typical wear and tear
  • limitations on alterations to the property
  • subletting restrictions (Remember that you may not need all of the space you have leased, or you may be acquired by or merged with another company changing your legal ownership.)
  • restrictions on lease renewals. Make sure there is a provision that will allow you to renew the lease if you so choose, so the building is released to someone else out from under you.
  • common area maintenance. Negotiate, negotiate, negotiate.
  • landlord administrative charges. You may be able to get the landlord to drop this.

Watch your Bills!
According to an article entitled "Commercial Real Estate," by Ed Eriksen published at the Online Women's Business Center, your landlord may charge you for after-hours increases in utility costs like heating and air conditioning. If you find this is the case, make sure you review the bill closely and make sure the electric rate you are charged is truly the rate for that period of time. Typically, the after-hours rates are lower. Check with the local utility company to verify the charges before you pay.

If you are entering a building that houses some much larger businesses than yours, also make sure you're not paying for some of their expenses. Landlords will often have special deals arranged with large tenants that provide them with longer operating hours, which will in turn mean higher utility bills, higher security bills, etc. Make sure you're not paying for those services. Check the bills you receive from your landlord and make sure all of the expenses are yours.

Location, Location, Location

­ ­Deciding where you lay your brief case is a tough decision to make. Where can your business find the best opportunities? If you're foot loose and fancy free you may be able to pick up and go wherever you expect to find that pot of gold. If so, do your homework. Check out the market data available on many commercial real estate web sites. Go to the U.S. Census Bureau and see which areas have the most growth and the highest numbers of your target audience.

If you're staying right where you are, you still need to do your homework when it comes to locating your business. Where are your customers? That is probably your biggest challenge. If they come to you then you've got to be in a convenient location. If you go to them then consider what is convenient to you and your employees. A lot of the decision is made by the type of business you are in. Here are some other location issues to consider:

  • Where is your competition? Does it matter? Maybe, maybe not.
  • Will you be able to find good employees nearby? Convenience of location is important to them too.
  • Is the building you are considering in an area that is growing?
  • Are the surrounding buildings in good shape and attractive?
  • Is it a safe area?
  • Is there sufficient free parking or will you have to pay to rent spaces for your employees?
  • Are there zoning restrictions that might have an affect on what you can do with your business?
  • Is the building you are considering renting at the going rate?
  • Will you have convenient access to the suppliers and other vendors your business will need?
  • Is it the area accessible by public transportation?
  • Are there restaurants and other services nearby for you and your staff?

Finding and Inspecting Your Space

­ Fin­ding the right property in residential real estate is a little easier than in commercial real estate. For one thing, many commercial properties are not listed in the multiple listing service. This makes it difficult to actually see everything out there without talking with a lot of realtors. It makes sense for most to enlist the services of a buyer's agent to help you find everything that is available. Agent commissions in commercial real estate are much more negotiable than in residential real estate. They'll also be able to help you determine the properties that are zoned for the type of business you're in, parking space requirements, advertising regulations, etc.

Classes of Office Space
Office space is divided into three classes -- Class A, Class B, and Class C. The classes are just what they imply, that is higher quality at the A end and lower quality at the C end. The classes are based on the age of the building, the type of construction, the location, the amount of renovation, and the amenities that the building provides. You may also run across what is now being referred to as Class E Office Space in some cities. These are old buildings class B buildings that are being considerably renovated to become spaces with a totally different look. They usually have very high ceilings, lots of large windows, and lots of wood. They seem to appeal to the high tech and dot-com groups. (Hence the "E" designation.)

The dollars per square foot will vary quite a bit from one class to the next, so consider the amenities, location, as well as the "look" you need before starting your search.

See as many spaces as you can, and pull out the list you created earlier in the planning process. Make sure you have prioritized the features that are most important to you and your business, and give them the most consideration when looking over the properties. Don't let yourself be blinded by one spectacular feature in a property when some of the other equally important features are less spectacular than what you need. You can even create a scoring system to help you compare each property equally. Regardless, of the system you use, take notes about the plusses and minuses of each site, and take photos to help keep them straight in your head. Visit the sites on your short list often and at different times of the day to observe the changes in traffic, noise, and other potential problems. Don't let your emotions rule your decision!

Don't forget to also investigate "build-to-lease" options also called "build-to-suit leases". If you find the right developer you can tailor the space to your needs and then lease it. This option will require a lot of work on your part to make sure you're getting the quality and structure that will suit your needs. Keep in mind too, that the developer you work with will probably not own the building for the length of your lease.

Cool Features and Extras
Besides the typical amenities that most office spaces will have, there are also many new cool features that can help make your office function both more energy efficiently and securely. Here are a few of the latest:
  • Sound proofing/tinting/or reflection coating for windows
  • Programmable and high speed elevators
  • Motion/sensor activated lighting
  • Programmable energy controls
  • Smart card entry systems for secure entry by employees
  • Palm scan entry systems for even more secure entry by employees

Inspect the Property
So you've found a good spot -- you think. You like the location. It's passed all of the tests so far. So what else do you have to look at before you sign on the dotted line? Here are some things to make sure are on your list of questions.

  • First of all, how old is the building? With age can come problems and difficulties in incorporating new technologies.
  • Are there structural problems? Talk with other tenants and see if they've had any problems either with the building itself, or even with the landlord.
  • Does the roof leak?
  • How old are the HVAC systems? Will you be dealing with periods of no air in the summer and no heat in the winter?
  • Is it wired for computer networks, Internet access, or other electronic items? If not, will you have difficulty wiring it because of the types of wall materials or ceiling?

Is there adequate security? Security features can include:

  • steel security doors
  • security gates that fold out of the way during office hours
  • alarm systems that can be monitored by a security firm or the local police department
  • video cameras to watch entrances and exits
  • bullet-proof glass
  • fenced parking
  • external lighting all around the building
  • security guards

If you're buying the property you need to dig even deeper. Sometimes literally! For instance, you may need to do a Phase 1, 2, or 3 site assessment to make sure there is no environmental contamination that you will be dealing with. Sometimes the lending institute you are getting your loan from will require it.

So what do these assessments entail? A Phase 1 assessment involves reviewing the past uses of the land, and government environment records concerning the property, and a simple observation of the property. If this first assessment shows up any potential contamination or problems then a Phase 2 assessment is needed. Phase 2 involves air, water, and soil samples. The third type of assessment, sometimes referred to as a Transaction Assessment, only takes into account the use you are proposing for the site. It does not take into account any past uses or problems. This is the assessment you would need if the site has previously passed a Phase 1 assessment and had no problems.

It is also recommended by most in the real estate profession that any property, whether it is being leased or purchased, be inspected by a professional inspection firm.

Negotiating the Deal

­­Th­e most important thing to remember when signing a lease for commercial property is that the lease was written with your soon-to-be landlord in mind -- not you. Read it well and have your attorney and insurance broker read it as well. They can help you spot things that are not in your best interest. Remember that much of the success of your negotiating will depend on the current real estate market. Here are a few things to consider before signing:

  • The longer the lease the more likely your landlord will be to negotiate on other items. (Just make sure you know the length that is best for your business and your realistic expectations.)
  • Always ask for an option to sublet, so if your business does go belly up you have a way to get out of your lease payment.
  • Always ask for a rent cap so your lease payment won't escalate too quickly.
  • Always make sure you agree to everything that is included in the rent. Sometimes you come out better if those items (utilities, repairs, etc.) are separate.

Incentives
Work credit, cash allowances, or free rent can be used in the negotiating process too. If there are significant improvements that need to be made to the property before you can use it then these are all issues you should discuss as part of the negotiation process. The current market will probably play a part in which side of the fence you're on. If it's a tight market with low vacancy rates and high rents, you'll probably have a tougher time getting the landlord to pay very much for improvements. If there are a lot of empty buildings and the property needs a lot of work, the landlord may offer these allowances as incentives for you to sign the lease.

Cash allowances can be negotiated for things as simple as paint and carpeting. The points you need to cover when negotiating about improvements include who will be doing the work, who is responsible for damage, and what percentage of the total cost the landlord is willing to pay.

The landlord of the property may also offer additional incentives if the market is currently shaky, but always read the fine print and make sure you're protected. Read and review everything with the landlord to ensure total understanding and agreement of the terms, and bring in a real estate attorney to work out the details if there is any questionable issue.

­

Glossary

Class A Office Space
Newer properties (built since 1980) of 100,000 square feet or larger in prime business districts. These buildings usually have at least five floors and are constructed of steel and concrete. They offer many business amenities and good access.

Class B Office Space
These properties are typically smaller, older and of wooden framed construction. They have usually been renovated and are in good locations. If the buildings are newer then they are typically smaller and not in a prime location.

Class C Office Space
Class C properties are older and have not been renovated. Their condition is typically fair but not considered good.

Escalation Clause
A clause that allows for increases in rent over time usually determined by an outside source such as the consumer price index.

Fixed Lease
A lease that does not include increases, but rather has a flat fixed rate over the term of the lease.

Gross Lease
A lease that includes utilities, repairs, taxes or insurance in the monthly payment.

Lease Term
The length of your lease.

Net Lease
A lease that does not include utilities, repairs, taxes and insurance in the monthly payment.

Step Lease
A lease that includes scheduled increases in rent over a specified period of time.

Percentage Lease
A lease that has a set rent amount with an additional amount that is determined by your business's sales.

Purchase Option
The right or requirement to purchase the property at the end of the lease.

Rentable Space (aka Leasable Space)
The total square footage rented. This includes all common areas so the number will be most likely be higher than what you requested to rent.

Usable Space
The space that your business physically occupies. This does not include common areas such as corridors, elevators, lobbies and rest rooms.

Links to help you Find Office Space

Real Estate Glossaries

Location Research Links
Links for Building

Office Furniture and Supply Links