How much should I spend on office space?

with one comment

A very common question with a simple answer: between $500 and $1000 per person.

I know it doesn’t sound very scientific but this is based on renting spaces for Rofo for the last 5 years, 5 years as an office leasing broker, and reviewing thousands of lease comps over the years. I know too much about office space rents.

As with any expense in life, some will pay a little more and some will pay a little less. Some rents will include everything and some rents won’t include a thing besides the space.

And I realize office rents in New York City are not the same as Pittsburgh. That said, all markets offer a choice to tenants in terms of quality and price.

The more important question to ask is what you do in your space? We’re all doing some kind of work. The type of work will influence your choices and rent.

Here are some basic questions to ask (you and your colleagues):

Do you meet with customers?

If yes, then you want to be in a presentable space with easy access.

Do you drive to work or take public transit? Or both?

Typically, spaces near public transit mean higher parking costs.

Do you work normal business hours or round the clock?

If you’re a night owl you may want to consider a more secure space. That often means building security which means a fully serviced building with slightly higher rents.

Are you a sales team or are you an engineering team? Or both?

This dictates whether you need your own space, if you can share space, and whether or not you can get along in a open space or need private offices. The more a space is built out the more the rent (usually).

Does your business have a history?

If you’ve leased space before there’s a good chance this means you have some future visibility. It also means you have a little financial credit. Credit will influence the kind of deal you can negotiate and how much money you must sink into a deposit. The deposit is also a function of how much, if any, a landlord has to spend to get you into a space. The more it costs the higher the deposit. One month of rent or less is great. Anyone who asks for 3 or more months is being unreasonable (unless they are spending a bunch on improvements and commissions to get you in).

How do you know what is right for you and your business?

At the end of the day, your rent shouldn’t exceed 10% of your overall business expenses (that includes payroll). If it does, you may want to think about finding cheaper space.

Share your thoughts with us.

Written by The Rofo Team

January 21st, 2013 at 6:50 pm

Posted in General

One Response to 'How much should I spend on office space?'

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  1. I have had a successful commercial brokerage firm now for 25 years in Southern California. I would have to say, notwithstanding the expense pass throughs you alluded to, as well as probable parking expenses, that is a pretty good rule of thumb.

    Jeff Tabor
    22 Jan 13 at 11:17 am

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