Once upon a time, owning a business meant having a bricks-and-mortar office. Nowadays, many entrepreneurs work from home. But if your paperwork is crowding out your dining room, it may be time to consider renting an office space. How do you find the right setting that fits your needs? Keep on reading.
What type of office is right for your business?
The first step is to decide if your business truly needs a separate space or if it can continue to flourish without an office. And if it does, what type of ‘office’ it requires. For example, a co-working space may be a viable option, which provides a “hot desk,” (meaning you pay for a desk space in a shared office environment), and you can look for one that offers wi-fi, printing services, meeting spaces, and community events.
If you are looking to hire employees, or you’re meeting clients throughout the day, a coffee shop may not cut it. Transitioning to an office may make more sense for growing your business. Not only does an office space project a professional image for your business, it can also help with work/life balance.
What should you look for when renting an office space?
No doubt you’ve heard the mantra “location, location, location.” It’s no different when renting an office. We’d also add another word: parking. Make sure there is ample parking for employees and customers, or that the office is accessible by public transit.
Another important consideration is how much office space you actually need. A good rule of thumb is to allow anywhere between 125 to 225 square feet per person. Plan ahead. Are you looking to hire in the next six months? Consider how much space you’ll need to grow your business and the office spaces available. Generally rectangular office spaces are more flexible for configuring desks. Other things to consider are whether you’ll require a separate conference room, storage and access to a kitchen.
How much should you budget for an office space?
Predicting cash flow is a challenge for many entrepreneurs, which is why it’s important to set a budget for renting an office.
Apart from paying rent each month, there are other costs to consider:
- A security deposit, which can vary from one to three month’s rent
- Office furniture cost
- Legal fees to cover the cost of a lawyer reviewing a lease
- Insurance – your lease may stipulate you carry Commercial General Liability Insurance or Tenant’s Legal Liability Insurance
- Utilities, such as telephone and internet
Learn more about 5 ways to fund your business.
How do you negotiate a commercial lease for office space?
Commercial leases in Canada vary largely. Every commercial lease is different, which could give you room to negotiate.
1. Tenancy Costs:
Commercial tenancy costs vary from a gross lease where the tenant pays a flat rate each month to a triple net lease that requires the tenant to pay rent, in addition to the costs of maintenance and repairs, property taxes and insurance, etc.
Our recommendation: when signing a lease, be clear about what the rent covers and who has responsibility for paying utilities (e.g. electricity, heating and air conditioning, etc.) and maintenance (e.g. cleaning and snow removal, etc.).
2. Tenancy Length:
One important thing to consider is the length of tenancy.
- Month-to-Month Tenancy: A “month-to-month” tenancy is one where either you or the landlord gives one month written notice to terminate the lease. This type of lease will give you more flexibility, especially if your business is growing or cash flow is precarious. However, you are also more vulnerable to being evicted with little notice.
- Fixed-Term Leases: A fixed-term lease will be for a specific amount of time and you must evict the property on the date specified, unless you and the landlord renew the lease. You can negotiate a shorter-term lease (e.g. two years instead of three) to suit your business needs, or negotiate the terms of breaking your lease, should you need to.
3. Other Things You May Negotiate on:
- Request an inducement to rent the space. A landlord may offer a couple of months free rent, for example, or help cover renovations.
- Depending on the type of business you have, you may request a competitor clause. If you sell handmade chocolates, you don’t want another confectioner moving in next door.
Renting an office space can be daunting, especially when it’s your first time. However, assessing your rental needs, negotiating a lease and understanding your responsibilities are key to a smooth transition.
Looking for more tips on managing or starting a business? Learn more about Ownr – the simplest, most convenient way to register or incorporate your business and build your brand.
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.