Whether you’re starting a new business or moving an existing one, choosing an office location to rent should be an exciting time. You get to find a home for your passion – the place that shows the world what you’re all about. However, researching and leasing commercial office space can feel more stressful than exciting. There’s no need to worry. Before you think about negotiations, you need to know what to look for in a new space. There are 4 basic guidelines that will make your search easier and more productive. Here are the first three.

Every business is different, so it’s important to identify exactly what you need. These first three considerations will help you narrow down exactly where you should look for available space.

1. Choose your preferred geographic location. Do you want to be near the airport? Is it beneficial to be along the bus lines? Are there city licensing requirements to consider? Do you want to be close to schools? Identify what geographical considerations are important to you.
2. Determine the zoning required for your space. Your business has to run out of an area that is zoned for its purpose. You could be looking at office, industrial, religious, or school zones, for example. If you are uncertain what the zoning is, contact the city/cities where you are considering setting up your business. Zoning restrictions will narrow down where you can look for available space.
3. Where are your people? Specifically, where are your clients, and where is your labor pool?

Depending on your business, you either want to know where your customers live or where they spend time. You may also consider mapping out median age, income, rent, and gender ratio in the cities you’re researching.

If you already have employees, you can choose a location that is central to them. If you’re still building your staff, ask yourself what kind of people you want working for you. Where do they live? What kind of transportation do they have access to?

Searching for space for your new or existing business can be overwhelming. With the right help, however, your search can be efficient and painless. First, you determined your geographical needs:

• Geographic conveniences
• Zoning requirements
• Client and labor pools

With these restrictions and preferences in mind, it’s time to look at the space itself. Answering these questions can make the difference between living a dream and a nightmare when you’re in your lease.

Step four is an involved step, so it is helpful to review the above 3.. When ready, thoroughly consider all of the following:

       4.   Determine your needs for an office. Consider what type of building and space fit your business. Think about:

• The layout. Do you need a reception area? Do you want open or closed offices?
• The space itself. What equipment are you putting in? How high should your ceilings be? What floor load capacity requirements do you have? (For example, are you a firm with libraries?) Do you have large equipment? Will you be expanding in the future? Will you be contracting (shrinking) down the road?
• Access. Do you need to be on the ground floor? What security requirements do you have? Do you need emergency power? What hours do you do business? Do you or clients need access on weekends and evenings?
• Controls. As you start comparing options, keep these questions in mind. How is the HVAC regulated on evenings and weekends? Who manages building issues when they arise? Are there current landlord or property management issues?
• Special considerations. What are the rules regarding signage? Do you have special power requirements?
• The lease itself. What is your budget? What options do you want for renewal or purchase?

This is a lot to think about, but you don’t want to be stuck in the wrong lease because you missed a step. The best way to guarantee that you’ve covered everything is to work with a commercial real estate agent. After all, this is just the beginning. Negotiating price and terms of a lease agreement is where an agent can really ensure you’re getting a fair deal. If you have any questions about finding or leasing commercial space, we would love to help you with this process. Contact us today.

In Minneapolis and Plymouth:

Arnie Seltzer
763-478-6400 (direct)
763-464-0774 (cell)
arnie@resultsrealestaetinc.com

Anna Murray
612-377-1212 (direct)
612-598-1962 (cell)(txt)
anna@resultsrealestateinc.com

In Minneapolis and Plymouth:

Narrative

In the post war era, many industrial buildings had loading docks for trucks in front of the building, forcing employees and visitors to go around these trucks to go to work. Although basic rear-loading industrial buildings were built in the 1970’s, the 1980’s saw demand for more office space and much more attractive industrial buildings. Property developers came up with industrial buildings with rear loading docks, plenty of parking in front of the space, and high ceilings. They also had more air-conditioned finished space which allowed for more office space. These features allowed businesses to use such buildings for various purposes. Thus, flex space was born.

Advantages

Businesses can use flex space for manufacturing, inventory storage, and office space. With the clean design of a flex space, businesses can alter their space configuration as their needs change without having to move. For example, they can transform the area into a showroom to display their products to prospective customers or they can also turn it into a laboratory, a partial retail store, or an assembly area. A company’s zoning classification will help determine if the business can operate in a flex building.

Flexibility

A business usually rents a flex space for three to five years. As such, a growing business can quickly move if it outgrows the flex space. Flex space sizes are available from 1,500 to over 20,000 square feet; 3,500 square foot bays are the most popular. Businesses can move from one flex space to another as their needs fluctuate. A business renting a flex space has control over various building features, such as HVAC, security and operating hours.

Value

The lease rate on a flex space is often less than that of an office space. By only renting the space it needs, companies save on costs associated with common areas, like elevators, stairways and large vestibules typically included in an office building lease. Also, the single-level design of the space costs less to build, allowing the property developer to pass on the savings to the tenant. Finally, the business pays its own utilities, rather than sharing costs with an entire building without any control of the usage.  Flex spaces are usually located in a business or industrial park rather than the central business district, which makes the rent and taxes less expensive.

Disaster recovery is usually one of the last things a business considers as part of their office relocation and leasing plan. One hopes that one never faces a disaster, but what would you do if the elevator broke and your customers could not reach your office? What if a fire on another floor prevented your employees from reaching your office, or if the ceiling collapsed because of a water leak? Or worse yet, what if your office was completely destroyed?

A well thought out disaster recovery plan can help assure that your business gets up and running with minimal downtime after a disaster strikes.   While insurance can cover costs; gaps in customer service, support or loss of critical documentation can set your business back months if not years. The following are considerations for your disaster recovery plan.

Office Space

Large corporations with many office locations can temporally transfer operation or employees to another location, but even then, the transfer process should be thought out to minimize disruption. Smaller businesses don’t have that option so devising a short term plan for your operations would be advisable. What would you do if your office was not usable?  Can your employees work out of their home?  What are your short term temporary office options if needed?  Your commercial real estate agent can help you scope out some reasonable options for temporary relocation.  Having a documented plan will assure that quick action takes place if needed.

Documentation

Loss of critical documentation can cripple a business. Machines can be replaced, but documentation unique to your business can’t.  Fire, vandalism and severe water damage can completely destroy all “onsite” documentation, primary or back up.  Strong consideration should be given to offsite storage or offsite electronic back up of documentation.  There are many services available that completely back up your server or each individual office computer at relatively low costs.  If you currently have a significant amount of paper documents, there are companies that specialize in high volume scanning that can digitize your paper at pennies per document.   There are also companies that offer secure offsite paper document storage in “near disaster proof” facilities.

Equipment

Most typical office equipment such as computers, copiers, desks etc can be replaced fairly quickly, but a good recovery plan should insure that all major software system licenses are kept and are easily accessible for software installation into new computers.  Some off site backup systems can recover your software as well.   There are a number of suppliers that can assure that your critical equipment and furniture is replaced within days.  A complete list of all your office equipment and furniture with a replacement source identified is highly recommended.

Leasing Agreements

Make sure that your lease states that your obligation to pay rent stops (the legal term is “abates”) during the time you are denied reasonable use of, or access to your space.

In addition to fire or damage, the same scenario plays out for eminent domain, forces of nature, strikes etc. Make sure your rent abates during these times.  Also, don’t let the lease allow for more than 90 days for the landlord to make the determination as to whether or not he can repair the premises or building and return to normal business function if one or more of these aforementioned events occur.

All too often, businesses put recovery planning on the back burner, hoping that disaster never happens.  Unfortunately, disaster does not consider whether you are ready or not before it strikes.

Space Productivity and Efficiency

In today’s market, the key is to clearly define your usage, budget, and location. An efficient use of space will save you money especially in light of today’s economic conditions. Apply BOMA standards to usable/ rentable space to make sure you are getting all the space you are paying for and are not paying for space you don’t get. Have your space planner verify measurements and be creative with design.

A creative design can place your productive people on the interior of a space rather than by window. Wonderful things can be done to the interior to create a great working environment even if the outside of a building may not be as appealing. A good architectural firm can convert most buildings to accomplish the environment you require, ie. an Old Victorian to an Ad Agency.

Be flexible on other issues and the transaction will fall in place. Today, Landlords are less likely to pay for lavish tenant improvements, so efficient space usage and simple, but tasteful improvements are key. For example, upgraded improvements to your reception and common areas that visitors to your firm actually see while being very basic in the individual offices and the “back” areas goes a long way in keeping the high image you need yet not costing extra improvement dollars.

Operating Expense Charges

With an operating expense cost-pass-through, more rent will have to be paid as building operating expenses increase over a base year and cost-pass-through’s take effect. You should compare previous years increases in your analysis of alternatives, thus make sure that the starting point is appropriate. It is very typical in today’s market to request and receive CAMT Breakdown’s from each landlord whose property you are considering. Try to negotiate some type of cap on annual increases, if possible, as costs (ie: energy; maintenance; materials just to name a few) are escalating at a rapid pace each year.

Be aware of categories that are typically included in CAM charges in your particular market vs. those that are not. For example, are light bulb and ballast replacement typical CAM charges in your market or not? Is a particular Landlord charging tenants for general capital improvements to the building or project vs. for only those capital improvements that are designed to reduce operating costs for the building or project?

Since CAMT charges range from $7.00 – $9.00 psf in Class B office buildings and from $10.00 – $13.50 psf in class A office buildings, it is imperative that you don’t get charged for items that should not be charged for.

Plan For Disasters

What would you do if the elevator broke and your customers could not reach your office? What if a fire on another floor prevented your employees from reaching your office, or if the ceiling collapsed because of a water leak? It would at least be difficult to operate your business and you certainly would not want to pay rent during those times. But many form leases require you to do just that. Make sure that your lease states that your obligation to pay rent stops (the legal term is “abates”) during the time you are denied reasonable use of, or access to your space.

In addition to fire or damage, the same scenario plays out for eminent domain, forces of nature, strikes etc. Make sure your rent abates during these times. Also, don’t let the lease allow for more than 90 days for the Landlord to make the determination as to whether or not he can repair the premises or building and return to normal business function if one or more of these aforementioned events occur.

Other Considerations/ Clauses

Holdover
Option to Renew
Option to Expand

Negotiations and Timing

It is always best to have three options or at least a good 2nd option when it comes to space alternatives. Use one to leverage the other to extract the best terms when negotiating. Don’t be afraid to say “no” and walk away. Not having a good 2nd option minimizes the aggressiveness of your negotiation and can cost your firm money. Had you been able to “play hardball” and use leverage to its fullest potential, more economically favorable terms and concessions would have been achieved.

Plan ahead and start searching for space early. It is best to start the search process at least 9 months in advance for you to uncover your best choices. For example, waiting, whereby you only have a three month minimum timeframe or “window” limits your choices as your best choice might not even be in play during this short timeframe. Not only does a minimal timeframe limit your choices, it minimizes your ability to conduct an effective negotiation. Potential landlords and their brokers will sense or “read” your urgency with a short window and negotiate accordingly to achieve their best terms. When you have a longer time frame you can utilize time by effectively stringing out the negotiation and extracting additional concessions as you are in no rush to make a decision and the landlord’s situation may be that he needs your firm’s tenancy right away. Time is your ally when you have it and your enemy when you are racing against it.

Also note that your current landlord will try to “string you along” should you be negotiating with him for a renewal and on other sites. He will try to have you run out of time so that you will have to renew because there now isn’t enough time to build out what would have been your new space in time as your current lease expires.

Harness Your Emotions

A lease or a sale is unfortunately, an emotional thing. Once a user or buyer gets emotionally attached, they are at a disadvantage. Do not let that happen when dealing with commercial real estate, especially in today’s changing market. Pay more attention to utilitarian issues such as space layout, future growth, general location and economics. Either complete the transaction based on the merits of the economics and the real estate verses letting your emotions detract from quality decision making.

Minnesota appears to be leading the nation in the 2012 economic recovery.   This is not an accident as Minneapolis has the ideal combination of factors that make it a great area for high technology businesses such as Data Centers.

Minneapolis is centrally located in the US and is accessible by any means of transportation.  There is a major international airport located just a few minutes from downtown Minneapolis and there is an emerging light rail system that will provide convenient transportation anywhere.   The airport is rated the 15^th busiest airport in the nation yet convenient as it has plenty of flights, but not the overcrowding issues that the larger airports have.  In general, airline costs to fly in and out of Minneapolis are well below the national average.

Data Centers locating in the Minneapolis and St. Paul general area will find a wealth of resources and support for Information technology needs.  Minneapolis –St. Paul ranked 13^th in high tech jobs across the nation with 98,600 jobs (based on 2009 numbers).  Additionally Minneapolis-St. Paul ranks 1^st in electro medical equipment manufacturing employment, 3^rd in control instrumentation manufacturing employment  and 4^th in computer and peripheral equipment manufacturing employment.

Wages for Information Technology Professional tend to be slightly lower in Minneapolis when compared to other IT hot beds such as Detroit, Jacksonville and Seattle.  But the cost of living is lower in Minneapolis when compared with most of the other areas.  In short, a Minneapolis business should have no problem filling IT positions at every level.

Minneapolis has access to some of the best technical schools in America, so any company in Minneapolis can count on a good supply of new talent entering the workforce every year.  Many of these schools work with local companies on intern and research programs.

Minneapolis was ranked as America’s safest city by Forbes.com.  This ranking was not only based on a low crime rate, but also factors such as traffic fatalities, workplace accidents and natural disaster risk.  Minneapolis-St. Paul was also rated #3 for best place to live cheaply.   Minnesota has an abundance of lakes, rivers and resorts and offers some of the most scenic drives n the country.

Minneapolis and St. Paul commercial real estate prices are among the lowest for cities of similar size. Office rental rates are typically very attractive and there are many parcels of land available for commercial building. Additionally, there are plenty of existing modern commercial buildings available for lease or purchase.

The Minneapolis area is consistently ranked high for business support with access to leading edge research and workforce productivity. Minneapolis is also renowned for its highly stable and affordable utilities. In summary, Minneapolis should be the first location choice for a Data Center.

Minnesota appears to be leading the nation in the 2012 economic recovery. This is not an accident as Minneapolis has the ideal combination of factors that make it a great area for high technology businesses such as Data Centers.