Smallbizlady: What are the different types of office space businesses can find for lease?
Justin Lee: Broadly speaking, there are three types of office space: traditional, executive, and virtual. By far the largest percentage of offices are traditional leases. Traditional leases fill up most of the buildings you see around you everyday. Executive suites offer smaller floor plans (generally under 1000 square feet) with more flexible lease terms and communal conference rooms and kitchenettes. A virtual office at the most basic level gives the user an address where she can receive mail plus access to a conference room for a set number of hours a month.
Smallbizlady: Why shouldn’t business owners rely on online listings for available spaces?
Justin Lee: The most common problem is that the information on listings is not always up to date. Listings are sometimes left online even after the spaces are leased just to get prospects in the door and looking at other available spaces. While listings can be helpful, they are only a small part of the process which takes time and knowledge.
Smallbizlady: Why should business owners/operators avoid leasing office space without a tenant broker?
Justin Lee: The fact of the matter is that a tenant is simply not aware of the market driven standards for the countless elements of a complicated commercial lease, nor are they up to speed with all of the available space options for them. A tenant broker is a market expert that represents only the tenant and due to industry practice commissions are paid by the landlord, which means no out of pocket expense for the tenant!
Smallbizlady: What are some crucial office leasing factors besides rental rate that should be considered when looking for space?
Justin Lee: Building maintenance, exterior and landscaping maintenance, tenant and visitor parking availability, office remodeling allowance offered by the landlord as incentive to lease their building, and building entrance and exit access should all be heavily considered before choosing the best location for a business.
Smallbizlady: What is the single worst thing you can do as a prospective tenant during your search for space?
Justin Lee: Contacting a landlord or a landlord’s listing agent directly while driving around looking for space. The reasons are: the emotion of physically looking for space will effect your decision, the landlord knows you don’t have a tenant broker representing you and will take advantage of an uneducated consumer, and you are going to feel the pressure that the space you “absolutely love” is being looked at by other prospective tenants and may lease soon.
Smallbizlady: What is a letter of representation and should I sign one?
Justin Lee: Upon selecting a tenant broker to help you find space, the tenant broker will likely present you with a letter of representation detailing the exclusive relationship he/she has with you (the tenant). We recommend that you sign an exclusive agreement rather than working with several different brokers on a non-exclusive basis, as you will get the best treatment with one broker focusing on your needs.
Smallbizlady: How much free rent can you expect to receive for signing a lease?
Justin Lee: A good rule of thumb is to anticipate 1 month of free rent for every year in the lease term. So, on a 3 year lease a landlord might offer you 3 months of free rent either up front or amortized throughout the life of the lease. The amount of free rent given can change significantly from market to market and over time which is another reason it makes sense to have tenant representation.
Smallbizlady: Should you use a tenant broker when negotiating a lease renewal?
Justin Lee: YES! Renewing your lease doesn’t just mean signing an extension to the old one under the same terms. While the tenant may be staying in the same suite, it’s essentially a new lease agreement and the tenant may require T.I. concessions towards suite modification or may want some free rent at the start of the renewal. Having a tenant broker on hand to negotiate the renewal terms can only benefit the tenant.
Smallbizlady: How soon should I start looking for commercial space?
Justin Lee: We typically suggest to start the process no later than six months before their current lease expires. This gives the broker the most leverage to negotiate the best deal for you.
Smallbizlady: What’s The Difference Between A Listing Agent and a Tenant Broker?
Justin Lee: The leasing agent has the “listing” on the commercial building for lease and represents the interests of the building owner or landlord. A tenant representative or “rep” represents the interest of the tenant in a commercial real estate lease transaction.
Smallbizlady: What are the differences between a real estate attorney and a tenant broker?
Justin Lee: The real estate attorney’s role is to review the lease and make sure the clauses within the contract are fair and will not allow the landlord the ability to squeeze you later. However, unlike the tenant broker, the real estate attorney may not have a feel for the spaces available, which landlords are easy to deal with, or know market prices to rent commercial space in Houston.
Smallbizlady: What is co-working and how can that save money for a small business?
Justin Lee: Co-working is the social gathering of a group of people, who are still working independently, but who share values and who are interested in the synergy that can happen from working with talented people in the same space.
If you found this interview helpful, join us on Wednesdays 8-9pm ET follow @SmallBizChat on Twitter.
For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.
Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource bloghttp://www.succeedasyourownboss.com Melinda is also bestselling author of Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.