Google, Apple, Disney and a couple of other multi-billion dollar companies started off their business in garages or backyards. Although the founders lacked the capital to start up in a formal business setting, they didn’t hesitate to rent an office once their products hit the market. There is no doubt, moving from garages to commercial spaces contributed to the success of these mega corporations.
Finding a commercial space is one of the most important decisions business owners must make. Although there is a growing number of entrepreneurs running profitable businesses from their homes, a commercial space lends credibility to your company. Customers are more likely to trust your business if you have a physical location where they can stop by to make enquiries, make orders and purchase goods.
But finding the commercial space isn’t always a walk in the park. You have probably heard horror stories from tenants who have experienced the nightmares of renting a commercial property. Some fell for the “too good to be true” rental scams; others hired incompetent lawyers to interpret the terms of their lease agreements, and others somehow managed to get a nice space, but in a location that wasn’t good for their businesses.
So, how do you find the ideal commercial space? Here are 10 things to consider.
1. Cost of Renting
Commercial spaces come in various sizes and designs, and they are all priced differently. You have to evaluate the cost of renting and determine whether your business will be making enough money to cover these costs. While the glamour and attraction of an all-glass workspace in a high-rise building can be too strong to withstand, you don’t want to get in trouble with the property managers because of rent arrears. If you are just starting out and aren’t very sure how much revenue the business will be generating, it is advisable to spend up to 15 percent of your estimated monthly profits on rent. Also, consider other associated costs like security deposits for new tenants, administration charges and maintenance fees that may increase the rent.
“Location is everything” is an age-old business cliché that emphasizes the value of location. Quite rightly, location can enhance the profitability and value of a business or hasten its failure. It should be easily accessible to employees and customers as well. Examine the reliability of the transportation network that links the region to your company, and talk to existing tenants in your preferred sites to gather more information on the pros and cons of an area.
3. Physical Proximity to Customers (Neighborhood)
Don’t settle for a location just because existing business in the neighborhood are doing well. Find a site that compliments the nature of your enterprise and brings you closer to potential customers. For instance, if you are starting a snacks and soda shop, a great location would be in gas stations or shopping malls, as opposed to a downtown street lined with stores selling all sorts of merchandise, from car parts to electronics. If you are planning to open a pharmacy, it helps to settle for a space location that has hospitals nearby. Similarly, entrepreneurs who are keen on starting motor repair shops should consider locations near gas stations and along highways.
4. Length of Lease
A rental or lease agreement can be your greatest ally if misunderstandings arise between you and the owner of the building or his or her representatives. It’s a legal contract that outlines, among other details, the rental cost of the space, terms of payment, tenancy restrictions and length of occupancy. Before you move into a rented or leased space, have a clear view of how long you want to stay in the location. Do you want a site for the long-term, or just a place to start up and move once the business picks up? This should help you enter into a lease agreement that enables you to pursue your plans effectively. If you have long-term prospects, go for extendable or renewable leases. Fixed-term agreements are ideal for business owners who want to rent a space for a shorter-period, like a year or two, and then move on to other locations.
5. Parking Space
With about 1.2 billion vehicles on roads around the globe, parking space is becoming a vital driver for business growth. The modern customer would rather go to purchase a single item in a shopping mall with ample parking than spend a lot of time finding parking space along a high street. As such, settle for locations with sufficient parking space for your employees and customers. If you are starting a wholesale or distribution business, you will need an even bigger area for trucks to make deliveries, too.
6. Property Size
An ideal property size should support all your current business operations. There should be enough floor space to stock products and comfortably accommodate all your employees and customers. Numerous studies, including one by the World Greet Building Council, have shown that stuffy workplaces not only lower employee productivity, but also customers’ shopping experience. If you lack the funds to rent a bigger area, you can hire office designers to make changes that can make a small space functional and productive.
7. Potential for Expansion and Purchase
As your business grows, you will need a bigger space to house new employees, store merchandise and create new facilities, like meditation or workout rooms. If your current area cannot allow for expansion, relocation is inevitable. Yet, moving into a new space presents a new set of challenges. It’s like starting out all over again, albeit not from scratch. You will begin building a new customer base and start getting familiar with new surroundings. It also costs time and money. To avoid such costs, ask the building owners whether the commercial space you are interested in can be expanded to meet your future needs, and if possible, have the option inserted in your lease agreement.
To lease or to buy? This is a question many business owners grapple with. While either of these options has its benefits and downsides, purchasing commercial space enables you to invest in an asset that will increase the value of your business. For many small businesses, however, purchasing office area in a real estate market where prices are skyrocketing is often out of the question. But with rapid growth, buying office space can become a reality. When you find a great site that you’d love to rent out for the time being and own when things look up, then be sure to discuss the potential for purchase with the owner.
8. Neighborhood and Building Security
A business cannot thrive in insecure locations, simply because many potential customers will avoid the area. While incidents of crime can happen even in the most secure neighborhoods, it is essential to settle for a location with a good record of public safety or a low crime rate. Zero in on your preferred building and ensure there is sufficient lighting and security system installations (alarms and CCTVs) are installed and functioning. If your company is going to occupy an entire stand-alone building, ask the property owner to hire a security company to secure the premises.
9. Building Image and Maintenance
Like companies, buildings have images and reputations, often depending on how well they are designed and maintained, and how quickly the property owners respond to tenant complaints. You obviously don’t want to rent an office in a building where the property manager takes a thousand years to take care of repair issues in your working space. Before moving in, inspect the structural integrity of the space and ask repairs to be done in areas that don’t satisfy you. Buildings with the ‘cool factor’ can also play a huge role in adding style to your brand. This is particularly important for businesses whose target customers lie in the 18-35 age group, because they like cool places. No one puts this better than Del Breckenfeld, author of published by Wiley, “nothing increases sales like cool does". Although spaces in such buildings are costlier, they are ideal tech startups, high fashion stores, magazine publishers, law firms and consulting houses.
10. Zoning Compliances
Zoning compliances or ordinances are a set of rules that regulate how a certain geographical area can be developed and used. These rules can limit certain business developments like the height of structures, or prohibit certain activities, such as manufacturing or alcohol sales. In Missouri, for instance, the sale of liquor near schools and churches is prohibited, so you cannot operate liquor stores within 100 meters of such facilities. Be sure to study any zoning compliances in your preferred neighborhood and identify any that can affect your business plans.
Beyond the points outlined above, you can also consider proximity to suppliers, tax rates and minimum employee wages imposed by the jurisdiction of your preferred location, registration procedures for new businesses and availability of skilled workers in the local labor market. Either way, whether you want to start a restaurant, fashion store, grocery or distribution plant, looking for a commercial space is a step you must get right.