You’ve been running your business out of a briefcase and a laptop, meeting clients in coffee shops.
The business is starting to take off, and it’s time to grow into a real office. How do you find a space that’s right for you?
The first thing you need to know is what you need now. The second thing is what you might need later – room to expand.
If your business and industry tends to a flexible, one-person setup, a desk in a business centre could be the place to start.
Mark Kolke, associate vice-president at Colliers International in Calgary, says you can start by phoning the number on a commercial agent’s sign on a building, or seeking out an agent first as a professional adviser.
Tod Hughes, managing partner in the Calgary office of Avison Young Commercial Real Estate (Alberta), says his office uses a checklist of items for tenants.
Major companies often have a person on staff who handles office moving and similar concerns, he notes. A real estate agent representing the tenant can make sure they get the best deal.
“Landlords negotiate leases all day long,” Kolke says. Real estate agents also understand the market and the competitive deal, so can help you in the negotiations.
“That’s what we do.”
Kolke says clients are usually smart people who are very good at what they do – a point also made by Hughes – but they are not in the real estate market.
Many clients assume financial conditions matter most, but the non-financial terms of a lease can be more important. These include operating costs, neighbouring tenants’ rights, the right to expand and the right to renew leases. Then there are negative conditions, such as insurance clauses.
Hughes says that tenants must understand several issues:
* How quickly can the new company’s technical systems be up and running?
* What uses are allowed in the building and what hours are allowed? (A tenant with a 24/7 operation may run into a rule that bans parking from midnight to 6 a.m.)
* Is the building security right for their type of business? Hughes points out that a tenant’s share of building operating costs may be above rent. It naturally differs from building to building, but most leases are on the net rent system.
Kolke says the real estate agent has to understand the needs and aspirations of the client.
“We get to know the client and understand what they need now and what they need in six months or five years for their business plan,” he says. “There are no pat answers.”
Kolke says that for a new business, a landlord might want a corporate or personal guarantee if there are leasehold improvements, especially in new space that isn’t fitted out yet.
It is a substantial investment the landlord is making on behalf of the tenant.
Some businesses grow in stages, he notes. They start in the owner’s home office or garage. A single-person business might move to a desk in a business centre, an option which provides space and an address in a quality building.
A third stage could be a sublease or head lease of business premises.
Does the tenant need to be in the northeast for shipping quickly to the airport, or dealing with industrial customers or suppliers? Does the tenant need to be downtown? Economic factors may also dictate downtown space choices ranging from Class C buildings up to the top level.
A new business may start small at 500 to 3,000 sq. ft., but has the potential to grow. The real estate agent is interested in helping the tenant through the decisions, building a relationship as client adviser and understanding the client’s business, says Kolke.
A real character building in Calgary’s Beltline district is for sale by the owners with an asking price of $2.5 million.
The “Engine Block” at 514 11th Ave. S.W. houses the Idea Machine, an advertising agency specializing in digital media work, as well as other tenants.
Steve McDonough, Idea Machine vice-president, says the building is owned separately from the agency, and Idea Machine would be willing to stay as a tenant or leave, depending on the purchaser’s needs.
The 1912 building was put up as a warehouse in 1912 with 11-ft. ceilings above ground. Floor layouts vary, with open plan offices prevailing.
The area is 21,564 sq. ft. on four floors of 5,391 sq. ft. each, including the basement.
