There are plenty of costs associated with your office space, which will vary depending on whether you are seeking a new office, a lease renewal, an expansion, a relocation or a sublease.
While I don’t have the space here to describe all of the important expenses, here are five common costs you should be paying attention to.
1. Tenant Improvements
You’ll often hear a term referred to as “TI,” which stands for tenant improvements. This term is associated with the construction or renovation of the space that you’ll be renting. In many cases, the building owner will provide a certain amount of money toward the TI.
For those who’ve never been involved in this process, it’s important to compare the amount of money the landlord will invest to the amount it’s actually going to cost. For instance, the landlord might only be providing $15 per square foot toward a $25-per-square-foot project. If that’s the case, then the tenant will be responsible for the extra $10 per square foot. On a 10,000-square-foot space, that’s a $100,000 obligation that you might not have been aware of.
When a tenant vacates their suite, the owner of that suite will usually pull all the wiring. In some instances they don’t but for the sake of this conversation, let’s assume the space you’re leasing is no longer wired. If that’s the case, then you’ll have to contract your local provider/vendor to rewire the space for your business. Again, at your expense.
This is a big one. In more than a few deals, I’ve seen tenants gasp at the thought of having to buy their own furniture. Unless you’re renting at a WeWork, Regus or any other shared office space that provides furniture, then you’re 100% responsible for that expense.
Thankfully, you can buy used or refurbished furniture if your budget doesn’t allow for the high-end furniture you see in the photos of new, modern spaces sweeping the internet. If you’re lucky, maybe you can find a furnished sublease or a space where the previous tenant left behind their furniture.
4. IT and Data
This is another one of those expenses that might surprise you if you don’t factor it in ahead of time. And this largely depends on the type of business you have. If you’re working on the cloud, then these costs might be minimal. If you require multiple servers, supplemental HVAC, etc., then your costs are assuredly going to be higher. I’m no expert in this particular area, but thankfully there are many in this field that you can speak to in order to get a better handle on these costs.
5. Legal Fees
In order to lease your space, you’ll have to engage a real estate attorney. I’ve seen some tenants try to save a few dollars by negotiating leases themselves, but this is never a good idea. You’re better off spending the money upfront to avoid any future pitfalls.
How high your costs go will largely depend on how long it takes to negotiate the lease. So be prepared to have a conversation with your attorney ahead of time about their costs.
And just for fun, here’s an extra. While rent might be the most obvious expense, it’s also tied to the most important decision you can make: hiring an experienced real estate broker who can properly educate you on market rents. If you don’t have this knowledge beforehand, it can throw your whole search off balance as you might not be able to find space within your budget.
Relocating or opening an office is not a cheap endeavor. However, it is a crucial component to a business and it shouldn’t be taken lightly. I hope you’re now better prepared to take the next steps toward finding that perfect space.
Based in Princeton, N.J., Vinny specializes in tenant and landlord representation for Colliers International, working directly with his clients in the acquisition and disposition of office space. For more commercial real estate insight and trends, follow Vinny on Twitter.