How to Decide Where to Lease Office Space

Where should I lease office space?

This is one of the most common questions tenants have in the beginning stages of their office search, and can often be one of the most challenging to answer. With so many different submarkets, rental rates, amenities, and parking ratios to take into account, it can be a lot for someone outside of the commercial real estate world to take in.

To help with this decision-making process, in this article we cover four ways you can zero in on the best location for your office space, including:

• Set a budget

• Estimate space needs

• Go where your employees are

• Decide your priorities

Set A Budget

Before we begin, let’s assume you have already selected the city you’d like to locate your office. Site selection on a city-by-city basis is a more complicated process and is outside the scope of this article. Once you’ve selected a city, you’ll need to zero in on which submarkets within that city best fit your office space needs.

A good first step in this process is setting a budget. Not only will a budget allow you to quickly filter out the submarkets that fall outside of what you can afford, but it will also act as the foundation for the rest of the decision-making process.

Budgets for leasing office space can vary dramatically depending on the location, company, and current market conditions, but a budget’s components remain more or less the same. A budget should include the cost of rent, plus operating expenses, parking, build-out costs, and also account for rent escalations over the course of the lease. A space may appear to be within your budget from a rental rate perspective but may be outside of it once these other costs are factored in.

Your budget will be one of the primary deciding factors in your search for office space, so taking the time to set one you are comfortable with upfront will alleviate a lot of headaches down the road.

Estimate Space Needs

Now that you have a budget, you need to decide how much office space you actually need.

Space requirements can vary, but a good rule of thumb is to set aside 150 to 250 square feet per employee. This accounts for each employee’s workspace, as well as common areas like the kitchen and conference rooms. A denser office with an open floor plan and rows of desks could need as little as 80 square feet per employee, while a more spacious office with numerous private spaces for executives could need as much as 500 square feet per employee.

Using your space estimate in conjunction with your budget will allow you to quickly filter out the parts of town that fall outside of your requirements. For example, if you decide you need a minimum of 10,000 square feet but your budget would only allow you to lease 5,000 square feet in the most expensive submarket, it’s probably best to avoid searching for space in that submarket altogether.

The amount of space you require can also be used to help filter through the types of office buildings you should be looking for. If you anticipate needing hundreds of thousands of square feet and don’t mind waiting a few years to get it, looking at new construction or considering signing a pre-lease could be a good option. If you only need a few thousand square feet, existing buildings will probably be your best bet.

Whatever your specific situation may be, don’t forget to account for future growth in your space estimations. There’s nothing worse than signing a long-term lease for an office only to find out that it is too small for your company a couple of years later.

Go Where Your Employees Are

Locating your office near where the majority of your employees live can be a great way to narrow down your office search. This is especially true if you are relocating an existing office space since most of your employees likely choose where they live based on that location.

The simplest way to do this is to run a “center of gravity” analysis using the home addresses of your employees. This analysis will take those addresses and calculate the minimum average distance between all of them. The “center of gravity” is likely a good place to focus your search for office space.

This type of analysis can also be adjusted depending on your specific needs. If some of your employees are coming to the office more frequently than others, you can give their addresses more weight in the calculation so that the “center of gravity” is closer to them. You can also factor in drive times and traffic estimations to paint a better picture of how long it might take each employee to get to the office.

There are multiple ways to run this analysis, from GIS programs to online resources and manual calculations. Your tenant representation broker should also be able to run the analysis for you if you supply them with the addresses you would like to use.

Of course, this type of analysis won’t necessarily apply to companies looking to open an office in a new market for the first time, but for companies with an existing presence, it can be a great way to narrow the office space search.

Decide Your Priorities

At this point, you probably have a general idea of where you want to be. Maybe you’re choosing between a submarket or two, or perhaps even narrowed down to a handful of buildings. To get your decision across the finish line, it’s time to decide your priorities.

The priorities you’ll be faced with will vary, but the typical priorities most tenants find themselves faced with setting are:

• Are on-site amenities worth a higher rental rate?

• Is walkability more important than privacy?

• Is an office on the top floor necessary?

• Are parking spaces more important than access to public transportation?

Taking into account these qualitative factors during your office search is just as important as the quantitative factors. A space might meet your budget requirement, be the right size, and be a quick drive for your employees, but if the environment doesn’t satisfy your employees and encourage them to come to the office then none of those factors matter.

Conclusion

As you can see, deciding where to lease office space can be a challenging process, but is more than doable so long as the proper measures are taken. 

The good news is, you don’t have to do it on your own. An experienced tenant representation broker will be able to walk you through the process, provide insight on your decisions, and answer any questions you have from your initial search all the way to a signed lease. If you’d like to learn more about finding office space, or if you’re ready to begin your search, reach out to our team today and we’d be happy to help.