To follow up on last weeks’ post- -we have expanded more on determining a budget for the new space.
Sometimes the first step business owners want to take if they are first time leasers of commercial office space is to begin searching. The problem with beginning your search before you determine your budget is that you will get to see amazing spaces with great amenities that are way out of your budget, and you will never be satisfied with office spaces within your budget. If someone suggests you see a space that is “a little outside your budget, but you’ll really like it”- JUST SAY NO!
There is no hard and fast rule for how much your rental payments should be as a percentage of revenue, but there are some good tools to help determine what you can afford. Below is a list of items to consider when putting together a budget:
- Utilities- If gas and electric are NOT included in your lease rate; make sure you have an estimated cost for any space you are considering. Ask for previous billing statements, most landlords will have cost estimates on a per square foot bases. For example, we tell our customers to budget around $1.50 per square foot per year for gas and electric. In older buildings you can expect your utility bills to be higher than in newer spaces, mostly because they lack the energy efficient fixtures and HVAC systems that come with new spaces.
- Internet/ Phone- Sometimes business owners get fixated on the monthly rental payments to the landlord and forget about some of the incidentals. Know what your monthly payments are for phone and internet and if you plan on adding some new lines at your new office make sure you get quotes from that provider; add this figure to your monthly payment.
- 3. Insurance- This expense is often over looked; most landlords will have a minimum requirement for their tenant, which is often outlined in the lease. Ask any potential landlords what insurance policy they require, and make sure you include it in your budget.
- Common Area Maintenance (CAM)- We will talk more about CAM charges in future articles about different lease rates. For preliminary searches make sure you know if they are included in the lease rate, and if NOT what the charges are and what services your payments cover (i.e. some landlords will charge for new roofs, sidewalks etc. or some stick with the regular landscaping, snow removal…).
- Janitorial- If you’re not a DIY-kind-of-office, add this expense in to!
This topic was not meant to scare people away from looking for new space or moving out of a home office (although it may seem that way), think of it as “preventative medicine for reducing risk”. Getting the right space and location for your business is an investment in your business- but you just don’t want to bite off more than you can chew.