Guide to Finding Office Space
Office Space Search Process
Finding new office space can be hard, time-consuming, and expensive. However, following a process and hiring an office tenant representation broker can make it easier.
The first step is determining what you need out of your office space. Taking the time to understand exactly what your company needs is critical to making sure the rest of the process going smoothly.
• How many employees do you have in the office?
• What are your growth plans?
• Where do your employees live to help determine location?
• Where are your primary customers/vendors located?
• What type of brand/company culture do you want to promote?
• Creative? Traditional? Open? Private Offices?
After you have determined the basics, CRE Partners will get started on your search based on your needs and goals. Our specialists will do all the legwork: lengthy internet searches, detailed property info gathering, narrowing down the options, and set up property tours.
After the search is complete and you have narrowed down the options, we will complete a full financial analysis and detailed comparison. We will help you determine estimates for tenant improvement costs, projected layout, and overall finishes. This will help us set a baseline for negotiations.
4. RFPs, Proposals, Counter-proposals, Negotiation
We start the negotiation process by submitting RFPs to Landlords. Details will include lease term, tenant improvements, and basic lease expectations. As a negotiation tactic, we get the building owner to provide us with the first offer. This will help us to do a formal comparison and determine which items we need to negotiate.
Once an agreement has been reached, we will draft an LOI for signature. A LOI outlines the key terms and conditions of the lease to be drafted and serves as a good faith agreement between the tenant and the landlord, but is non-binding.
5. Lease, Build-out, and Delivery
Our agents will assist in the review of any lease agreement and will oftentimes make suggestions. However, we already recommend you have the lease document reviewed by an attorney. Once your lease is signed, we will have a number of suggestions. If you entering into a large transaction, we would recommend a project manager to assist in the construction and move to make sure things go smoothly. On a smaller scale, we can suggest vendors to help with all aspects of your move and setup. We also stay in touch with the Landlord periodically to monitor the process.
When Should I Start Looking?
When should you start looking for office space? It is important to start the search early enough so that you can consider all of your potential options (renewal, relocation to existing space, relocation to new construction), help create a competitive environment, and gain leverage to negotiate the best deal. You also want to make sure you have plenty of time to complete build-outs and allow for a move. The bottom line is, the earlier the better, but here are some general guidelines.
Timelines will vary depending on the size space you are looking for:
|25,000 SF +||24 Months Prior to Lease Expiration|
|10,000 – 25,000 SF||12 Months Prior to Lease Expiration|
|Less than 10,000||6 – 12 Months Prior to Lease Expiration|
Other important things to consider:
• Overall Market Conditions
• Existing space or new construction
(New construction should start considerably earlier)
• In the age of COVID and supply chain issues, what are construction timelines
Start the Process Early, Even If You Plan to Renew
Even if you’re happy with your current office and intend to stay in place or renew your lease, it’s important to follow this same timeline and process, in order for you to have the most leverage in your negotiation with your landlord.
What type of office space do you need?
There is a wide range of office space available in the market, from the Class A office towers downtown, all-encompassing suburban campuses, to more value-centric options. It’s important that you know what your company’s priorities and budget are before you begin the search process. When determining what type of office space is best for your company, you should consider:
Classifications of Office Space
Office buildings are typically divided into three main categories: Class A, Class B and Class C. While there aren’t any all-encompassing rules to these classifications, they are typically based on quality factors such as building age, amenities, and aesthetics. Each classification has different price points and advantages.
Class A Office Space: Class A office space is considered to be the nicest in the market and is also the most expensive. Class A buildings are generally either new developments or properties that have had significant improvements and renovations in recent years. Typically these buildings will feature high-quality finishes in common areas, provide ample on-site amenities, offer structured parking, and are conveniently located.
Class B Office Space: Class B office space is generally slightly lower than Class A in terms of quality and price. Often Class B office space was originally Class A, but has been downgraded because of age and deterioration. These properties typically have good amenities and management companies. They can sometimes even be brought up to Class A standards with common area renovations and amenity upgrades.
Class C Office Space: If you are a company that is looking for a functional space with below-market rates then Class C buildings may be an option. Class C properties are typically dated, with minimal amenities, and located in less desirable locations. These properties are usually occupied by tenants requiring value office space. These types of properties can be a good fit for small start-ups as it allows them to allocate the majority of their financial resources towards growth.
Flex Space: Flex space is a type of office in which a tenant occupies industrial-type buildings that are built out as office space. Also, known as single-story office buildings.
Types of Office Space
In addition to the “class” or quality of office space you’re interested in, it’s also important to identify the style and office layout that will work best for your company. The two primary types of office space are traditional and creative, with a wide range of layouts that fall in between the two.
Traditional: Traditional office space is the most conventional style of office. This kind of space will have all of the customary features that one might expect to find. In a traditional office layout, you’ll find a mix of private offices for managers and executives and open areas with cubicles for employees, as well as conference rooms, break rooms, a workroom, etc.
Creative Open Space: Creative office space is a growing trend in office space, especially for tech companies. Its key identifiers include a design that features open ceilings with exposed ductwork or exposed concrete floors, and ample collaborative spaces, including conference rooms and group work stations throughout the office. These types of office layouts often include amenities such as a large kitchen, break rooms, game rooms, and even lounge areas. These areas are meant to encourage collaboration amongst employees and spark creativity.
How much office space do you need?
Once you have an idea of the type of office space you want, the next step is to find out how much space you will need. In order to help you estimate this number, we’ve provided the following rules of thumb for you to follow.
How much space do you want per employee?
High Density (80 – 150 square feet per employee): Creative space with majority open seating and rows of small desks. May have a few private offices. Often seen in companies that house many different teams within the same space, as well as for sales, technology, coworking, or customer support offices.
Average Density (150 – 250 square feet per employee): Mix of open cube or desk space and private offices. Traditional office layout.
Spacious (250 – 500 square feet per employee): The majority of the space consisting of large private offices. Historically seen in law firms.
Company Growth & Parking
Don’t forget about planning for growth and if the office building can accommodate your growth and needed parking! Growth estimates over the lease term are important and should be added into the calculation upfront. It is important that you also have enough space for your employees to park at your new office. This can get tricky depending on if you are downtown or in a suburban environment. Parking for office space is quoted as a ratio of the number of spots per 1,000 square feet. For example, a tenant may lease a 10,000 SF space and receive a parking allowance of 4:1000. In this case, the tenant would be allowed to use 40 parking spots for employees.
How much does office space cost?
When comparing office rental rates, there are many factors that could influence the over cost. These include
• Class of the building
• Operating expenses (which include property taxes, common area maintenance fees, and property insurance)
How are rental rates calculated?
To calculate the total yearly cost to lease your office space, multiply the full-service rental rate (the sum of the base rent and all operating expenses) by the square footage of the space. Note, most office landlords quote rental rates on a square foot per year basis.
Gross Rental Rates in Minneapolis/St Paul
Gross rental rates vary a great deal depending on location and type of office building. Gross rental rates can be anywhere from $16 per square foot to $45 + per square foot.
Of course, you may find that you have additional expenses that may need to be factored in. In most cases, utilities are included, but you should verify that is the case. Here are other costs to consider:
• Security Deposit
• Legal Fees
• Moving Costs
• Build out cost not included in the Tenant Improvement package
How long of a lease do I need to sign?
Typical lease lengths vary by city and fluctuate with the market. In Minneapolis/St Paul, landlords are currently asking for lease terms between three and ten years due to the competitiveness and growth of the market. One-year leases do exist, but they are much harder to find.
Most landlords will prefer to have tenants sign a longer lease because it gives them stability within a building. The more competitive the market and the more concessions you ask for, the more leverage the landlord has to demand a longer lease. From a tenants perspective, there are numerous advantages for signing a longer lease:
• Locking in favorable rates
• Avoiding frequent relocation costs
• Ability to negotiate a better deal (more tenant improvements, free rent, and reduced rates)
Each time a tenant vacates a space, the landlord has to spend time and money to market the space, pay additional broker commissions, and generally spend more on TIs. As a result, shorter leases can cost the landlord more than longer leases. Typically, in a competitive market, it can be hard to secure a short-term lease. However, there are some factors that may make a landlord more willing to sign a shorter lease. These include:
• A space that has been sitting vacant for some time
• Smaller suites
• Spec suites or move-in-ready
• Premium rental rates
Typically, it makes sense for established, stable companies with clearly defined growth projections to sign longer-term leases, while shorter-term leases are a good fit for young companies with rapid growth plans who value flexibility.
What other upfront costs should you know about when signing a lease for office space?
There are a number of other upfront costs tenants should be aware of when they start their office space search. This include:
• Low voltage wiring for data/internet/security
• Legal costs to review the lease document
• Move expenses
• Above & beyond tenant improvements
Should you engage an office tenant rep?
It is possible to go through this entire office space search process without a tenant representation broker…but it would be a long and painful process. A few of the main issues:
• Searching for space is time-consuming and takes away from the time you could be spending on your business
• Lack of market knowledge to create leverage to get the best deal terms
• Finding the space is only the first step; commercial leases are complicated and the negotiation process requires extensive real estate knowledge in order to ensure that you achieve the best terms possible.
Interview and Hire Us!
Hire CRE Partners!
There are numerous benefits to hiring us as your tenant rep, and it may not cost as much as you think. We will save you time and make the process efficient, allowing you to make the best decision for your company. We are expert negotiators, know the market, and can prevent hidden costs and problems. We will save you time & money!