How to lease office space: Nine Steps

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Business owners have a wide array of options these days when it comes to finding a commercial building to operate their business out of.  Leasing office space for business operations has its benefits as you can pick and choose what type of office you want to lease and get a good rate on the monthly rent.  Before signing the lease for office space, the following will provide a helpful guide on the ten steps to lease office space.

Step 1:  Evaluate Your Office Space Needs

Before you even consider heading out the door to look at possible office space locations, you need to evaluate your office space needs.  This consists of looking at your business industry type and determining what type of office space will suit your business needs best.  For example, a law firm will need a different type of office space than a call center.  Think about what areas your business will do best within and think about what type of office space in general you need to lease.

Step 2:  Determine Your Desired Office Building Location

Location is the next step in the office leasing process.  Decide whether you want to be in a city setting or a suburban location.  Also, think about whether you want to be relative to major expressways or in an industrial park.  Knowing what type of location you desire will help you to narrow down options and make the leasing journey much easier.

Step 3:  Figure Out Your Leasing Budget

You also must zone in on a leasing budget.  This will ensure that you can pay for your rent and will help you to lease within your means.  It also will make the office space search much more successful.

Step 4:  Contemplate the Size and Layout of Office Space Needed

Contemplating the size of the desired office space is the next step.  You must lease an office which will accommodate all of your employees comfortably and take into consideration any possible new employees which may need office space in the future.  The interior layout of the leased office space is another important consideration.  Whether you will be using private interior offices or cubicle areas, you have to figure out if there will be enough of either one to fit all of your staff in addition to your own working space within the office.

Step 5:  Determine Your Parking Needs

Parking is another factor which many business owners must consider.  Most employees like to have access to parking so this should be a consideration when seeking out office space possibilities.  Also, think about the cost factor if the office building landlord requires parking fees of all who park on the property.  Finding an office space where parking will be free for all is ideal.

Step 6:  Consult With an Office Tenant Representative

Before you contact a realtor or start looking at properties, it is a wise idea to consult with an office tenant representative.  These individuals look out for the best interest of the business owner tenant and will guide you through the leasing process from start to finish.

Step 7:  Review Properties

Now that you have done the initial steps, it is now time to review the available office properties.  Your office tenant representative will schedule a tour to look at commercial office  leasing properties which fall within your criteria.

Step 8:  Narrow Down the Options

Once you have reviewed your options, the next step is to narrow down the potential properties to the best ones.  Considering location, cost, size and overall aesthetic qualities of the office space will help you to choose the right office space to lease. 

Step 9:  Sign the Lease

When you have found the ideal office space which you want to lease, it is then time to put pen to paper and make it happen.  Have your office tenant representative review the lease with you and speak with the landlord about any issues you may have concerning the lease prior to signing it.  Once everything looks good, you can sign the lease and tell your employees when it will be time to move in to your new office location.

Office Space Tenant Representation

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Office leasing is a popular rental option these days.  It allows business owners to have a place to engage in all of their office dealings yet not have to worry about the hassles which often go along with owning commercial office property.  An office tenant representative will protect the interest of you, the business owner, and help to make sure that your leasing experience is a success.  There are many different benefits associated When looking for a rental office, it is best to have office tenant representation along the way.  with office tenant representation and some of the more pertinent ones will be discussed below.

An Office Tenant Representative Will Help You to Choose the Best Rental Property

Frequently, when a business owner is shopping for a rental office, they may not know exactly what type of property they need in order to properly fulfill their needs.  When you have an office tenant representative on your side, the tenant rep will be able to look at the different office buildings with you and help you to choose the best one for your business needs.  The office tenant representative will take into consideration your line of work, need for space and number of employees which you will have in-office at any given time.  With a reputable office tenant representative on your side, choosing an efficient and proper commercial rental property will be as achievable.

Office Tenant Representatives Help Commercial Tenants Understand and Negotiate Leases

Another extremely important aspect of having an office tenant representative is that this individual will help you to understand the lease and negotiate the lease terms so that they benefit you the most.  Oftentimes leases, especially commercial leases, are so full of legal lingo that the commercial tenant will find it difficult to understand what it really states.  With office tenant representation, you will have an advisor to help you understand the terms, leasing process and current market terms, you as the future office tenant will have fewer? as your office tenant representative is well-versed in this area and highly capable of explaining it all to you easily and quickly.  This will help you to negotiate the terms of the lease so that it is fair to you and will benefit you best in the end.

With Office Tenant Representation You Are Safeguarded Throughout the Lease Term

Once you sign the office lease, the relationship between you and the office tenant representative should not end there.  When you have experienced and qualified office tenant representation, you should have that rep by your side the entire term of the lease.  This is helpful should any issues arise during the lease term, as your attorney and office tenant rep can speak with the commercial landlord on your behalf.  The office tenant representative can help be the mediator and ensure that your rental relationship with your landlord is as amicable as possible.

Office Tenant Representation Is a Wise Move

When you review all of the benefits associated with office tenant representation, it is easy to see why this type of safeguard is simply a wise move to make.  With an office tenant representative by your side, you can make the best rental decisions and ensure that your office rental situation is as good as it can be.  Again, your office tenant representative will protect you and your business by helping you to choose the right office setting and negotiate the best office space terms.  When you have a qualified office tenant representative at your service, you can focus on other business-related duties while the office tenant rep deals with office rental issues for you.  All in all, office tenant representation is the way to go when embarking on renting commercial property.

Chicago Office Space: The Benefits of Owning vs. Leasing

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Most business owners will, at some point, realize the need to search for office space. Some have started their businesses in their homes and will be looking for office space for the first time. Others will need to search for office space due to growth or to find a more suitable location.

Whatever the reason, one of the first considerations will be whether it is better to purchase or lease office space. For some, the first thing that comes to mind is the upfront cost. Obviously, those costs will be greater if seeking to purchase rather than lease office space. Still, the benefits of owning vs. leasing office space can be attractive. In fact, for those business owners who have the capital to invest, owning is often a better decision.

Income Potential

Many business owners have realized that they can produce an income stream by owning office space. Consider purchasing an office building that is larger than the current needs of the business. After deciding how much of the space is needed for your own business, set up the rest of the space as offices that can be leased to other small business owners.  This allows small business owners to generate revenue in the form of rental income.  As the business grows, more of the space can be kept for its use and less of the space rented out. This allows the business room to grow without having to buy a larger office building.

Fixed Costs

When a business owner leases office space, there is no guarantee of what the costs will be once the current lease expires.  On the other hand, when a business owner purchases office space, the amount of the monthly mortgage will be set. That means that as the business grows, the profit can grow more easily as well. It maybe easier to determine long term budgetary needs as one of the major costs of doing business will be steady.

Tax Benefits

The tax benefits involved with a business owning office space should not be overlooked. Yes, there are some tax benefits when leasing, such as writing off the amount paid in rent, but there are greater benefits available to those business owners who own their office space.

Some such benefits include deducting mortgage interest, property taxes and depreciation. Also, if the building includes rental suites there may be a host of other tax deductions as well.

Of course, tax laws vary depending on location, type of business and other factors, so it would be wise to consult with an expert so it would be clear exactly what types of deductions to expect.

Equity Builder

Owning office space, allows the business owner to build equity in the business. This is valuable not only for the obvious reasons, but owning office space may also help grow the business in the future.

The greater the worth of the business, the better the chance that business has of securing funding for future growth. Having an office building in their portfolio, and the equity that comes with it, could potentially be the difference between a “yes” and a “no” when it comes to securing a business loan in the future.

The benefits of owning vs. leasing office space may make it a wise choice for many business owners. While the initial cost is much greater than leasing, the longer term may outweigh those costs.

Office Space: Lease Negotiation Tips

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1. Be Ready, Willing and Able to Walk Away

The biggest mistake many tenants make is not developing legitimate alternatives to their first choice, whether a new space or a lease renewal.  If a landlord believes you’re not willing to switch to a different property, you lose your negotiating leverage.

2. Start the Process Early

Time should be your ally, not your enemy during negotiations.  Landlords know that the managers of other buildings can take six to eight months to create a space plan, get construction pricing, agree on a rental rate, prepare a lease document and ready the space for occupancy.  If you wait too long before asking for a renewal proposal, you’re telling the landlord that you’re not considering any other options.

3. Know the Whole Picture Before You Start Negotiations

Is the office building being sold?  Is the largest tenant moving out?  How much free rent did the last tenant get?  Does the building have HVAC or parking problems?  What is the landlord’s financial situation?  Candid, complete answers may not be forthcoming from the landlord or his broker.  Expert research can make sure that what you don’t know won’t hurt you.

4. Make Landlords Compete For Your Business

The key to a successful negotiation is creating competition between your current landlord and other landlords in the area.  You should have an experienced advisor providing the proper market research, lease comparables and the negotiating skill to use that information to create leverage for you.

5. It’s In Your Best Interest To Have A Tenant Representative Negotiate For You

Unless you’re a real estate professional, it’s not a good idea to negotiate a lease deal directly with the landlord’s broker.  An experienced tenant representative will help ensure that you receive the best possible rates, terms, incentives and lease clause protections.  Remember, the landlord’s representative negotiates leases every day; you may do it once every 3 to 4 years!

6. Hiring A Tenant’s Representative Doesn’t Cost You More Money, But It Can Save You Money

Occasionally a landlord will “try to save you some money” by discouraging you from engaging a tenant representative.  Don’t be fooled.  He’s not doing this out of the goodness of his heart.  He knows that without a tenant representative you’re more likely to be in the dark about market rates and terms, and less likely to shop the market, or consider other alternatives.  That means more money in the landlords pocket.

7. Make Sure You Are Comparing Apples To Apples

Business owners who are not experienced with commercial real estate often find it difficult to perform a true “apples to apples” comparison of different facility choices.  Lease terms such as full service gross, modified gross, triple net, tenant improvement allowances, rental abatement, escalations, base years, operating expense stops and loss and load factors can obscure the true amount you’re paying and make legitimate comparisons difficult.  A good tenant representative will sort through all this for you.

Rosemont Office Space

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The Rosemont office space market includes the communities of Rosemont, Des Plaines, Park Ridge, Mount Prospect, Schiller Park and the northwest tip of the City of Chicago.  The Rosemont office market is the smallest of the four Chicago Illinois suburban markets (the others being North, Northwest, and East-West Corridor) at 18 million square feet.

Commercial office space users are drawn to the area for a number of reasons:

  • Proximity to O’Hare Airport.
  • Location at the confluence of the Chicago expressway system.
  • Availability of public transportation (CTA train stops at Cumberland Avenue and River Road, as well as O’Hare Airport).
  • Proximity to most densely populated areas of Chicago provides access to an excellent labor pool.

As a result of these and other benefits, the Rosemont market is the home of several corporate headquarters, sales operations, and associations.

ACCESS/AMENITIES

Access to the highway system has been further enhanced by the addition of a southbound entrance ramp at Balmoral Road and the Tri-State Tollway (I-294).  Additionally, Balmoral has been extended to Mannheim Road and will eventually extend directly into O’Hare Airport. Also, a two-way interchange (northbound ingress and southbound egress) will be added on the Tri-State Tollway at Devon Avenue, subject to Illinois Tollway Authority Funding.  This will greatly enhance accessibility to and from the northern suburbs.

Access is further enhanced by excellent public transportation in the area.  The elevated passenger train has two stops in the Rosemont market (Cumberland Avenue and River Road) before continuing on to the airport.

Bus routes fan out through the Rosemont market from both train stations.  This greatly enhances access to labor.

All of the major hotel chains are represented in the Rosemont market, as well as a number of first-class restaurants. Also, the Rosemont market boasts the ninth largest convention center in the country a casino hotel complex will open in Des Plaines in 2012.

DEVELOPMENT

With the turbulence in the economy, Rosemont office building development plans have been put on hold.  Developers who are interested in starting projects are finding it difficult to secure financing.

TAXES & OPERATING EXPENSES

The Rosemont office space market is located in Cook County.  A portion of the market is within the city limits of Chicago.  Real Estate Taxes in the Rosemont market are approximately $5.00 to $7.00 per square foot.  Operating expenses are similar to other buildings located in the Metropolitan Chicago area of $5.50 to $7.50 per square foot.

RENTAL RATES

Rosemont office building asking rental rates for Class “A” range from $27.00 to $31.00 per square foot gross, including current taxes and operating expenses.  Electricity for lights and outlets will be separately metered in most cases.  Building standard construction allowances of $5.00 to $40.00 per square foot are also included in these rental rates.  Fully negotiated rates range from $24.00 gross to $30.00 gross.  Typically landlords will provide additional concessions beyond these rental reductions.  The range in rental rates is determined primarily by the cost of tenant construction, lease term, and the landlord’s motivation.

Rosemont Class “B” buildings ask between $18.00 and $24.00 per square foot, including taxes, operating expenses and construction allowances.  Negotiated rates range between $17.00 and $21.00 gross, again with additional concessions in most cases.

Class “C” properties advertise rates in the $13.00 to $20.00 per square foot range.  Negotiated rates range from $12.00 to $17.00 per square foot.  Several Class “C” properties offer below grade space.  This category represents the low end of the range outlined above.

VACANCY & MARKET CONCESSIONS

As of the 4th Quarter 2009 the vacancy rate is 23.9% with a base of approximately 18 million square feet; this amounts to approximately 4,409,968 square feet of direct office space available.  This rate does not include sublease space, which adds another 332,275 square feet to the suburban Rosemont/O’Hare market.

ABSORPTION

There has been very little absorption over the past several years.  We expect this trend to continue as the economy continues to struggle.

OFFICE SPACE AVAILABILITY

With many available office space options to consider, and little demand, the Rosemont market shall remain a “tenant’s” market for the foreseeable future.  So called “shadow vacancy” i.e. space still under lease to a tenant but not being utilized is increasing dramatically.  When these leases expire, this space will go back to the landlord as vacant space.

ROSEMONT OFFICE SPACE FOR SUBLEASE

As the economy continues to struggle, we anticipate more companies to attempt to sublease space and will need to offer discounts of 40-50% in most cases.  Currently there are over 332,275 square feet on the market for sublease in the Rosemont office market.