1. How much office space does your startup company need?
When looking for an office space for your startup, the first thing to consider is how much space you need.
To accomplish this, you first have to decide how spacious you want your office to be – in other words, how many square feet you need per person.
Which of these options is best suited to your company?
- High Density (7 to 14m2 per employee): Seating is mostly open with rows of small desks. Could include some private offices and huddle rooms. Many companies use this type of office layout if they need to house multiple teams, along with sales, technology, co-working, and customer support offices.
- Average Density (14 – 23 m2 per employee): Combination of open cube space and private offices. Layout of a traditional office.
- Spacious (23 – 46m2 per employee): Most of the space is dedicated to large private offices. Used by many professional services groups.
When you’ve decided which density suits your company best you will need to multiply your employee headcount by the number of square metres you need per employee. This will estimate the total amount of space needed.
Startups, in particular, need to keep planning for future growth in mind. Consider how rapidly your company is growing. Don’t just plan for the amount of space you need today, plan how much you are going to require for the duration of your rental contract.
Startups typically have rapid growth projections. Meaning that you need to either secure extra space to grow into and negotiate the possibility of expanding in your contract or you can arrange a short-term contract that will accommodate your business sufficiently for the time being with the intention to expand or move as the company expands.
If you need advice tenant representation brokers can assist you with understanding your company’s growth needs, as well as, what options suit your company best.
HOW TO CALCULATE HOW MUCH SPACE YOU NEED?
You can use an online Office Space Calculator. The calculator will take the number of employees, the amount of space desired per employee and the use of common spaces into account.
2. How Long Should an Office Lease be?
Getting the right lease length is another important consideration for startups. It can be difficult for startups to determine the ideal lease term due to their rapid growth.
The typical lease term is between three and 10 years. If you look for space in a competitive market, finding direct space available for less than a three-year contract is difficult.
The smart choice for a startup is to sign a shorter-term lease because of the possibility of rapid growth. This allows for flexibility and will avoid overcommitting. Establishments with clear growth projections would rather choose a long-term lease and secure their rate.
Shorter lease terms are sometimes available in spaces that have been vacant for a prolonged period of time, or in spec suites.
You can also consider alternative options, such as co-working space or subletting, to secure a shorter, more flexible lease.
With a co-working arrangement, you have a lot of flexibility. You can use this space until you know how much you will need in the growth phase and then move on to find a more permanent agreement. Co-working spaces usually feature modern designs and amenities such as snacks, coffee, phones, printers, and other office equipment, and they’re usually located in Class A buildings.
In the same way a tenant representative broker assists with traditional office space, he or she can assist you with co-working space.
This type of space often has terms available between 6 and 24 months and is normally leased at lower rates.
3. How Much Will It Cost to Lease Startup Office Space?
The last thing you need to consider is your budget.
It is critical to understand how to calculate your total annual rent expense before calculating your cost. To find this, multiply the full-service rental rate (the sum of the base rent and all operating expenses) by the rentable square meterage of the space.
Total Annual Rent Cost = (Base Rent + Operating Expenses) x Square Metres
There are several factors that can influence your rental rate, and this is a good place to begin, but it does not include all of them:
- Free rent (for a specified number of months at the start of the lease)
- TI Allowances
- Parking Rates
How the Class of Building Affects Rental Rates
Depending on the type of building you are interested in, your rental rate will vary.
Buildings can be classified using these three types: Class A, Class B, and Class C. They differ in age, amenities, and locations. The newest properties in prime locations fall into Class A, they feature the best and most amenities. Class C buildings are typically older and located in less desirable areas with little to no amenities. In general, Class A office buildings are the most expensive while Class C office buildings are the most affordable. Your budget and needs will determine the type of building you choose.
Startups that are concerned about recruiting may want to consider either Class A space or co-working. In addition to these features, the spaces will come with premier finishes and amenities that are traditionally helpful in attracting and retaining talent.
How does Location Affect Rental Rates?
A property’s rental rate is also highly dependent on the submarket it’s located in.
The CBD is typically the most expensive, getting cheaper as you move away from the city centre.