Step One – Create a Budget
Before you rent an office space, you must first know what you can afford. Offices for rent in Los Angeles, for example, vary greatly based on the building and neighborhood. Class A buildings are generally more expensive than class B or C buildings. Depending on the type of commercial property you need and the number of employees, parking is an additional cost that must be considered in the overall budget. In Downtown Los Angeles, for example, parking rates of $200 or more per space are not uncommon. In suburbs like Pasadena or Glendale, parking rates tend to be closer to $75 per space. Depending on the location and the number of employees, parking can add to the overall cost quickly and substantially.
Step Two – Pick a General Location
Often times, your budget will dictate the location of your business. Office space for lease in Santa Monica costs substantially more per square foot than office space in Culver City. In fact, the rise of Culver City as a technology hub for startups resulted directly from its proximity to Santa Monica. Many startups that simply could not afford the higher prices of Santa Monica chose to make Culver City the new home of their businesses.
Of course, price cannot be the only consideration when choosing a location. The convenience of commuting to and from the location, availability of public transportation and nearby businesses and industries are other considerations when choosing a location for your business. Silicon Valley, comprised of Palo Alto, San Jose, Mountain View, Santa Clara and surrounding areas, is home to more than just Google, Apple, Nvidia and other industry leaders. Silicon Valley also boasts some of the highest commercial real estate prices in the United States.
Despite the high prices, many startups choose to rent office space in Silicon Valley. Aside from the prestige, access to talent plays a significant role in that decision. Many highly skilled engineers live in Silicon Valley because of its lucrative job market. Similarly, Silicon Beach, Los Angeles’ version of Silicon Valley located in Santa Monica, parallels many of the pros and cons of its northern namesake. Many startups tolerate the astronomically high prices of Santa Monica for the prestige, proximity to talent, and proximity to other tech companies.
Step Three – Identify Three Locations For Your Business
Once you know what general location you want to be in, its time to pick specific properties that meet your needs and your budget. Since the suite can always be changed through tenant improvements, the building and location should receive higher priority than the look and condition of any specific suite. Although you should look at as many suites as possible, its best to narrow it down to about three when submitting “Letter of Intents” (“LOIs”), which are also referred to as proposals to lease. Choosing three properties will give you negotiating power.
Step Four – Submit an LOI
An LOI establishes the main terms of the lease, including the price per square foot, rent abatement, tenant improvements and parking, among others. The LOI gives notice to the landlord that a prospective tenant is interested in leasing space from a landlord as serves as the initial tool for negotiations. When the material terms are agreed upon, the landlord provides a lease draft for review
Step Five – Review the Lease
It’s crucial have your lease reviewed by a competent attorney. The vast majority of commercial leases are provided by the landlord or the landlord’s agent. These leases tend to be unnecessarily one-sided, with most of the provisions designed to limit the rights of the tenant and the liabilities of the landlord. A good attorney will spot any potential issues and make necessary revisions to send back to the landlord. When landlord and tenant are in agreement about the lease, a final draft will be provided for signature and initial payment.