Car Negotiation Coach

For most of us in the small business world, deciding whether to work from home or rent an office makes a huge impact on our bottom line.  So if you decide to rent office space, it’s important to negotiate good terms to keep the expense as small as possible.

By the time you are in your late twenties or early thirties, you’ll have likely lived in at least 5 different apartments and signed as many residential leases.  However, reviewing a commercial lease may be totally foreign.  So let’s take a look at what to consider when negotiating office space.

What’s Included in Your Commerical Lease?

Do your homework and read any lease agreement carefully prior to signing.  Understand exactly what’s included with the lease:

• Are you responsible for utilities like water, electricity, and gas?  
• Telecommuncations: Are phone and high-speed Internet service included?
• Can you utilize the building’s receptionist?
• Do you have to pay for cleaning services?  How often do they clean?
• Is there a shared conference room you can use?  
• Are there any limitation to access?  (can you get into the building at 2am on Saturday if you need to?)
• Can you rennovate the space or paint?
• Can you sublet?

Type of Lease Agreement

According to MoneyMamba, when renting an office for an online business its important to understand the different types of lease agreements:

• Single net lease – The tenant is responsible for rent and property taxes.
• Double net lease – The tenant is responsible for rent, property taxes, as well as building insurance. The lessor pays for building maintenance, and upkeep.
• Triple net lease – The tenant pays for rent, property taxes, building insurance, and utilities.
• Gross lease – Everything is paid for by the lessor, and the tenant just writes a monthly check. A modified gross lease may include something like space, utilities, and Internet connection paid for by the lessor, and the tenant may just have to cover insurance for the property stored in the building.

Negotiating Office Space

If you want to be an effective office space negotiator, then you have to know the going rate per square foot in your town. It’s a good idea to hire a commercial real estate broker, but luckily, with the internet, it’s also fairly easy to do your own office space comps.  If the prospective landlord is seeking $20 per square foot per month, but you know the going rate for the downtown of your city is $15, then use that knowledge to your advantage and negotiate.  

In some instances, you can barter for a lower rate.  You could even offer to clean the entire office building for reduced rent.  When you’re just starting out and trying to keep overhead low, you can’t be too proud.  Or you could consider trading other services for a deduction in rent. 

For instance, I know lawyers who will rent a portion of their office to a younger attorney, and cut the rent in half if the tenant will take on a few labor intensive cases per month.

 

Do you have any IT folks?  Maybe you can trade some IT services to building manager.

When negotiating, you could also try to subtly show disinterest in order to lower the price.  ”I was hoping for something closer to downtown.”  ”I worry about the walk-in traffic at this location.”   “The price is just too high compared to other similar properties in the area.”  These are the types of statements that may save you thousands of dollars per year.

If you are allowed to sublet part of your office space, consider dividing up the space you do not need to save additional money each month.

Conclusion

Office space can be very expensive.  It is likely the single largest startup cost for a small business (other than salaries) and therefore it truly can be the difference between solvency and insolvency in your business.

By doing your homework, offering trade for reduced prices, and holding your ground at a fair price you should be able to find office space that is perfect in location, size, purpose, and price.

What advice do you have for negotiating office space?  What’s the most effective office space negotiation technique you’ve used?

Photo: dwonderwall

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