How to Find the Right Office for Your Startup: a Case Study
Finding an office for your startup can be a difficult process. It’s imperative to select a space of the correct size, in the right neighborhood, and at a manageable price.
A technology startup headquartered in San Francisco recently contacted us at TheSquareFoot about finding an office space for its growing New York City team. Before coming to us, the team was operating out of a co-working space. We guided them through the leasing process and helped them overcome the common hurdles that go along with it.
I’ll share the story here, because it serves as a great illustration of what the process can be like for startups:
Surpassing the Startup Stigma
The “startup stigma” is a pressing issue that any startup or young company faces when searching for office space. Young companies with high growth (particularly in technology) have very different financial outlooks from typical tenants. A technology company with more than $150 million dollars in funding is a great start, but landlords need to feel financially comfortable for the long term. It can be difficult to negotiate lease terms on behalf of companies with rapid expansion because boutique landlords don’t typically know much about these kinds of companies and have been burned before (think of the financial crisis in the early 2000s).
In this case, you need to prove to building owners that your company is viable as an occupant and that you have the growth potential to sustain a long-term lease.
After reviewing your company’s financial profile, it’s important to get all of your numbers straight. Determine the budget, size of the company, and growth trajectory to help get the amount of space you’ll need. Then provide easy-to-understand evidence to support your growth.
The company we worked with calculated funding sources, sales numbers, budgets, and expenses to prove that it had the means to grow and be a great tenant. The company had a handful of people working in NYC, with a growth trajectory pointing toward 15-20 employees within 18 months.
It can vary, but typically speaking, each employee needs between 100 and 225 square feet of workspace, so we decided to look for spaces at 1,600-2,500 square feet. The company’s budget was $45-65 per square foot per year, which is in line with many Manhattan neighborhoods.
Being in the Wrong Place
We started looking in the Garment District, which hit all the right notes from a budgeting standpoint. As it turned out, however, this district didn’t have the right vibe and feel for the company. This problem was particularly unnerving because “look” and “feel” are difficult to qualify. We went to the Flatiron District next, and then ultimately to Soho, where the culture more closely matched the company’s needs.
Having the right vibe and feel was more important than pursuing overly elaborate lobbies or marble bathrooms. In Soho, we were able to strike a balance between neighborhood vibe, employee commute, and price. Remember to look for spaces around other creative and tech companies – if that’s where you want to be.
A Custom Space Without a Custom Budget
We viewed and visited 10 spaces, keeping in mind that the company wanted a very specific layout with an open aesthetic and two additional private rooms, but didn’t want to come out of pocket to have a space modified. Finding a space that checks every box is always a challenge – even more so when looking for a space that doesn’t require too much refitting.
Companies should try to find matches with the basic desired look and feel and landlords willing to contribute to modifications. If you can, make offers to more than one location to build some leverage in negotiations. Doing this can make the next step – striking a deal – much easier.
Negotiating a Lease
This company ultimately decided on an approximately 2,500-square-foot space in Soho. It took some creative problem solving to come up with a deal that the landlord could agree to, especially given all the extras the company wanted. Ultimately, the landlord agreed to knock down two walls, put new polish on the restored wood floor, and paint the entire space. Remember that, in order for the landlord to do this kind of work, they’ll need a reasonable security deposit to protect their assets.
Beating the Time Crunch
When starting a new lease, your company should also take time into account. Keep in mind that too much of an overlap with a current lease could be costly. Companies can help manage this time crunch by coordinating with the landlord to get most of the physical work done before getting to the new office and by setting up additional services beforehand to keep things running smoothly.
Securing a Seamless Setup
A lot of young companies have difficulty finding and planning for security, cleaning, and office management, especially when moving to a new space. Startups are heavily focused on their products and often overlook many details to get their offices set up for business.
When startups come to us for new office space, however, it’s never just about the four walls. Most companies need help finding all the other services required to get their businesses up and running. We connected this company with several services and providers for post-lease items, like Managed by Q, a smart office-cleaning and management company. We also helped the company get customized keycard locks for the front door and IT/telecom service.
In the end, the move was seamless.
A version of this article originally appeared on BusinessCollective.
Currently the cofounder and CFO of TheSquareFoot, Aron Susman began his career in the international mergers and acquisitions group at Deloitte in Houston. As a vice president with MDTech, a health care technology company, Aron oversaw the company’s financial, accounting, and business development efforts. He graduated cum laude from the University of Texas at Austin, where he earned a master’s degree in accounting, and he holds a CPA license.