It all started four years ago in my kitchen. Fast forward five (five!) offices later and we occupy a 9,000 sq. ft. office in the heart of Toronto’s startup hub. And, believe it or not, we are moving into a 16,000 sq. ft. space in 3 months. What have I learned from moving offices six times? A lot. In the spirit of paying it forward, here is everything I’ve learned about business real estate.
1. Don’t fall for co-working spaces
Despite their popularity, co-working spaces are a cacophony of noise and distractions. It’s all too easy to end up chatting about irrelevant vanity crap with fellow founders rather than building and selling.
You also feel a lot bigger when you are out on your own. The cozy and safe vibe of a co-working space means that many companies never end up leaving.
Co-working spaces are not your only option. There are plenty of reasonably priced spaces -- Our first office that held 3 people was only $600 a month.
There was no bottomless coffee, but if you are trying to bootstrap, it’s really not a bad option. If you do go with a small, dedicated space, don’t fall for a lease. Push for month-to-month so you can easily shift into a larger space as you grow.
One of the reasons we moved so much in the early days was that great deals kept falling in our laps from companies who were tied to spaces they’d outgrown. They were desperate to receive any money, and there we were, lease free, ready to take the space off their hands at a hefty discount.
There are dozens of offices moving or shutting down weekly. Keep an eye on your local classifieds section and you’ll find some great options. We have bought virtually new chairs for $20 a pop, a $2000 conference table for $120, etc.
Most companies are desperate to get rid of old furniture at virtually any price. The value of resale furniture is next to zero, so they will be happy to have it taken off their hands.
4. The Internet / phone
Think twice before settling for some telecom’s business plan. They will jam a 3-year contract down your throat and a phone that you’ll never use. Go with a smaller company that can let you pay month-by-month. Even at a premium, it will be much cheaper than breaking the 3-year contract a year in. Trust me here.
Forget phones. Use VoIP. It’s the 21st century.
Theme: Bring in the Big Guns
1. Plan early
A 9-12 month head start to finding a space before you outgrow your current one is not long! Better to start looking for a place early.
2. Get a (great) real estate agent
It’s free for you, so why wouldn’t you? A real estate agent isn’t only someone that helps look for a space, she or he is there to defend your interests in negotiations. If you are curious how the negotiations extend as you grow bigger – it took us about 4 months just to negotiate the lease terms for the last office.
3. Get your financials in order
Landlords are hesitant to take risks on fast-growing companies with little financial history. You’ll have to prove to them that you will not go out of business anytime soon. Don’t be surprised if you’re invited for an interview.
4. Get a great space
The bigger the office, the longer the term the landlord will push for. It’s not uncommon to see 5-10 year deals for offices over 5,000 sq ft. So there is a very high probability that you will be leaving the space early and will need someone to take the space off of your hands. (See the point about the sublet above).
If the space is mediocre, people will low-ball you. Get a great space, and sleep well knowing that it will be in huge demand if you ever want to move, meaning you won’t be on the hook for payments.
5. Involve lawyers
Some leases are as long as 50 pages. You really need experts to make sure you are covered. Some of the things to keep an eye out for:
- What happens if you break the lease? A four-month penalty is fairly common.
- Would the landlord work with you to help find a new space in one of the buildings they manage?
- Can you sublet the space if you outgrow it? Don’t expect to make any money on it if market prices go up.
- Does the landlord require approval of the new tenant? If yes, they could block the sublet (in theory).
- How much would the landlord offer in [construction] allowance? It really depends on the condition of the space. If it’s bare bones, ask for amount that would cover the cost of getting the space to a work-able condition.
6. Hire a design firm
We only had a couple of weeks before we moved into our current office, and as a result we didn’t have any professionals thinking through how to design the office for efficiency. I literally explained the current layout on a napkin. As soon as more people joined our team, I realized how poorly those designs were thought out.
There are many things a design firm can help consider – flow of people, how to maximize efficiency of the space, acoustics, and much more
7. Hire an IT firm
Every company seems to have Internet problems. We did too. We started with some business plan from a telecom company and makeshift routers scattered around the office. At some point, we said “enough!”, upgraded to fiber optic, increased our bandwidth 20 times, and hired an IT firm who ordered industrial grade routers and made them “speak” to each other rather than shouting over each other. Problem solved and everyone is happy.
Theme: …. yet to be discovered
Disclaimer: everything you read above are just notes from my experiences and do not constitute legal advice.