Advice for finding the perfect space for an expanding business
Your first office space represents a remarkable milestone on your journey as a business owner. In getting this far, you’ve shown commitment to your ideas, dedication to your employees and a strong work ethic, all culminating in a single question — where should I move my growing startup?
Whether you plan to share, lease, or buy your office space, you have to proceed with a little caution. Signing a contract is a significant decision, and you should feel confident you’re making the right choice before you continue.
So, what can you expect as you begin to browse available properties, and what’s best for your unique business? We’ll walk you through everything you need to know on the subject, exploring the advantages and disadvantages of three office space solutions.
1. Share an Office Space
Coworking is an increasingly popular trend that has spread throughout the U.S. at an incredible rate. Expansion from the sector claimed an astounding 29.4 percent of the country’s total office absorption in just two years, with no other segment of the market demonstrating more overall growth. The reasons are clear.
For both individuals and small groups, coworking provides the most affordable space option, free from the limitations and costs involved in signing a lease. These spaces are also an excellent environment for networking, where you and your employees meet other like-minded professionals who can share info and insights.
At the same time, coworking provides the most affordable space option on a short-term basis. Gradually, the per-square-foot occupancy costs can exceed a traditional lease model. You’re also vulnerable to certain cyber-security risks, as the open design of the space could expose your intellectual property.
2. Lease an Office Space
Many entrepreneurs choose to lease their first office space, whether it’s due to budgetary restraints or other, no less logical reasons. You might find you like the flexibility it entails, or the diverse range of buildings available, with sizes, features and locations to meet any needs.
When looking at the reasons to lease commercial real estate, many business owners who are just starting their operation are attracted to the financial advantages. Where a standard mortgage usually provides between 70 to 75 percent financing, leasing provides virtually 100 percent financing, freeing up your working capital.
Then again, you might experience higher costs over time with annual rent increases. You won’t build equity either, which is valuable collateral down the line when planning for future expansion. Though this isn’t common, in a worst-case scenario, forced relocation might also disrupt your business and stunt growth.
3. Buy an Office Space
If your finances are in order and you have adequate resources, you might see the appeal in buying an office space. You’ll enjoy a sense of freedom knowing you’re the property owner, that you don’t have to abide by anyone’s rules or regulations but your own. The advantages don’t end there, of course.
While buying is admittedly a long-term commitment, when you make the final payment, you now own a commercial property. You’re also building equity as you benefit from tax deductions associated with property taxes and mortgage interest. More than that, you can rent out portions of the space for additional income.
Still, you’ll have to consider the costs involved in the purchase, as a typical down payment usually falls within the 20 to 25 percent range. Maintenance expenses can also prove expensive, and all the duties a landlord usually handles are your responsibility. You’ll also want to evaluate your long-term goals for growth and expansion.
Startups Need Space
Your first office space represents a remarkable milestone on your journey, but it’s not the easiest decision to make. It takes time and research to determine the best option for your business, and a little patience and planning will save you a lot of time later on. Just give every part of the process the attention it deserves.
When you’ve reached a decision, you can feel certain it’s the correct choice for your growing startup. Only after you’ve reviewed the benefits and challenges involved with each option can you come to a conclusion with confidence. Whether you share, lease or buy your office space, you’ll have your perfect solution.
Written by: Holley Welles, BOSS Contributor
Holly Welles is a real estate writer who covers the latest market trends in everything from residential to commercial spaces. She is the editor behind her own blog, The Estate Update, and curates more advice on Twitter.