As small business owners, many of us have to figure out, at one point or another, what type of office lease is right for our business. Back when I worked in a large firm, I thought if the opportunity ever presented itself, I would like to have an office that was attached to my home. That means no commute and the convenience and flexibility of being available to my family throughout the day. Well, as it turned out, that dream did not really work out very well in reality. As it turns out, I do not have the ability to focus as well at home as I do in an office. Not only that, I need the stimulation provided by working with other professionals. So, the best bet for me is an office that is close to my home.
Now if you are like me, the question that you will probably want to know is, what kind of office lease should is the best bet for your business? If you are a relatively new business or you have not found your ideal location, then maybe a short-term lease (one to five years) is the way to go. According to Frank Chalupa these type of leases provide the following benefits to small business owners:
- “An Easy Out”: If your business fails, you will be able to move on without having to worry about being on the hook for any upaid rent for the remainder of your lease term.
- Flexibility: You can easily change location without having to worry about finding a new tenant or subletter.
When you are just starting out, sometimes even a short term lease seems daunting. So, per Chalupa other options may include, “shared office space, which allows businesses of all sizes to rent space on an annual or month-to-month basis.” If you want the benefits of a traditional office with “amenities like [of a traditional office like] conference rooms and cafeterias, as well as a full support staff to assist with back-office function” then a virtual office is the best way to go. If, your entire business is mobile (i.e. can be done via laptop and mobile phone) another option for you is a co-working space. Here you will have the option of working in a communal setting or paying extra for private space. Unfortunately, there is usually no back-office support either.
An acquaintance of mine recently told me about his new office where the panoramic view of the Hudson River from the reception area essentially seals the deal with new clients. If you have a successful business and have also found your ideal location, then it might make sense to splurge for a long term lease (i.e. greater than five years). According to Chalupa, you can expect these benefits:
- Stability – You are able to stay in your space even if your building is sold. So, no need to worry about “inconveniencing customers and employees and jeopardizing the future of their business.”
- Predictability – Much like having a mortgage, a long term lease locks in the growth rate of your lease payments from year to year. So, you are protected from unpredictability in the real estate market.
- Tenant Improvements/Concessions - Landlords are often more willing to give tenant improvement allowances and other concessions that are often not available to short-term lessees.
Now if you are in the middle, i.e. you like your location but you want the option of moving on if things change in the future, then Chalupa suggests a third option:
- “A short-term lease with several renewal options. For example, a tenant who inks a three-year lease could have an option to renew for an additional year or two -- often at a higher rate -- after the initial term expires”.
The type of lease you choose depends on a lot of different factors. Only you can know which is the right decision for you.
