Do you work independently or freelance, but occasionally reminisce about the cubicle neighbors you left behind, even though they sometimes annoyed the hell out of you? Does freelancing get a little lonely, or do you wish you had someone to bounce ideas off of and collaborate with? Then Coworking might be for you. Brad Neuberg, a computer programmer in San Francisco, started the Coworking movement in 2005 as a middle of the road solution between working for a soul crushing corporation and working independently. Instead of clicking away at the keyboard on the couch in your undies, Coworking spaces bring likeminded freelancers and independent contractors together into communal offices.

Coworking provides the camaraderie, structure and social interaction usually missing from the freelance lifestyle. The offices usually implement an open floor plan with desks and a few cubicles. Most usually include a communal meeting room and some kind of kitchen area. The prices range from $10 per day to around $400 or $500 per month for your own personal desk space, with many options in between.

It’s a great solution for people who don’t want to commit to an extended office lease since most Coworking spaces operate on a month to month agreement. If you are a freelancer, contractor or consultant, a Coworking space offers an alternative to the sometimes stodgy office suites.

The movement has been catching on, fueled by an increase in freelancers, a prevalence of vacant office space and the grassroots nature of the movement. The whole movement is very connected and the Coworking wiki and blog help foster development of new Coworking spaces. Although the movement began in San Francisco, Coworking offices continue to spring up around the world and exist in most large cities. The basic model is very altruistic and flexible with some spaces allowing people to hang out for a few days before making a commitment. The main idea is to build a tight knit community, where people work and interact, through the shared space.

View Coworking in a larger map

New York isn’t exactly known as a hot bed of start-up company activity, but as the economic down turn drags on the city is trying to change that by helping out their small business and start-up community by funding affordable incubator office space. With a plethora of office space available and some businesses in need of a helping hand (i.e. one business using 175 sf for 6 people), it seems like the perfect time to offer a city funded startup incubator. New York plans to launch similar incubator spaces in all four boroughs.

As entrepreneurship becomes a function of necessity rather than opportunity and credit remains crunched, this is a great solution to help businesses get off the ground.

I’ve read a lot about how to navigate the confusing terms and conditions in the legal contracts startup founders must sign. But what about rent? It’s probably one of your biggest operating costs, and in the current spirit of cost-cutting, there are several ways to squeeze cash out of your commercial real estate agreement, too. I started Rofo to help entrepreneurs do this, but I’ve shared my top “lease agreement hacks” here. They will save you plenty of headaches and money — and possibly even help you generate new revenue streams for your startup.

1. Don’t pay for space you can’t use. All square feet are not created equal. Have the landlord pay for a “space plan” to determine your “load factor.” (Also sometimes referred to as a “loss factor.”) This is the ratio between the non-usable and usable square feet that your rent will cover. Examples of non-usable square feet would be building common areas, such as corridors, or a lobby. Typically, office space load factors are in the range of 20 percent to 30 percent, meaning for 1,000 square feet of usable office space, you might pay for 1,200 square feet. Landlords like high load factors because they pad the bottom line. In a market like this, however, they need to secure tenants, so you have more leverage than normal. Negotiate the load factor down to at least 15 percent.

2. Beware of free rent. Structure the rent so that you phase into the space. Pay for half the space during the first six months of the lease, the full space at seven months. If you get “three months free,” be sure the landlord has not extended your lease term on the back end, to 39 months from 36, a common tactic.

3. Avoid standard improvement allowances. If the rental rate being offered includes a standard improvement allowance and you do not want or need to make improvements, then amortize this allowance out of your rent.

4. Cap operating expenses. In most office buildings, operating expenses are included in your rent. They increase yearly, but you can put a cap on operating expense increases. A 5 percent cap is reasonable. It protects you from spikes in utility costs or increased property taxes if the building is reassessed. Also, retain the right to audit operating expenses.

5. Negotiate your renewal option in advance. Landlords like to include a commitment to renew up to one year before your lease is up. This forces you to address your real estate needs long before you’re ready. Negotiate the renewal down to six months by agreeing to a renewal rate equal to fair market value. Renewal rates are re-negotiated at re-signing anyway. The important thing is to move back the option deadline.

6. Negotiate holdover rent penalty in advance. Holdover rent occurs after your lease term has expired and, for whatever reason, you’re unable to vacate the space on time (usually when your pending move is delayed). Landlords will want double rent as a holdover. Negotiate this down to 125 percent of current rent.

7. Consider a buildout. If a landlord offers an allowance to build out a space to your specs, take the time to get a construction bid. Make the landlord pay for the estimate. Be sure the allowance can be used for architects, construction management, your moving expenses and data wiring. Most landlords draw the line at furniture and fixtures, but ask for it.

8. Demand right to sublease. Get it in the term sheet that you can sublease your space to anyone you wish for any amount of rent, subject to an approved use. Also, be certain that the landlord cannot impose any fees to your sublease. A common fee to avoid is a “document review fee” to cover the landlord’s attorney bill. Also, insist that the landlord turnaround sublease approvals quickly, within three to five business days. The last thing you want is to lose a subtenant to administrative delays.

Office suites, also known as executive suites, provide a very unique office space experience. Sometimes they are classified as shared office space or a sublease office, but really aren’t either of those. Office suites are set up and managed by a company whose sole business is to lease and mange that space. They are a great solution if your business needs a flexible lease term since office suites provide hourly, month to month, or longer term offices. It’s also great if you want a smaller office in a prestigious location, with office suite locations in swanky zip codes around the world. Suites include many built in amenities out of the box, such as conference rooms, phone, internet, answering services and printing, but these are usually accompanied by additional fees for their use. Office suites are very flexible, but that flexibility usually doesn’t come cheap. You will usually pay a slight premium for your office suite space over a more informal shared space. Usually that premium is worth the flexibility and the professional image provided to for your business. If you are a consultant or salesperson, or travel extensively and need a place to work on the road, office suites are a great solution since they offer memberships that provide access to work spaces in many different cities. However, this is usually limited to the bigger providers, such as Regus.

Although business suites are great for smaller companies, keep in mind that they do not scale very well when your business starts growing. Once you begin to occupy more executive suite space, you will tend to get better economies of scale from a traditionally leased space. Plus, if you want flexibility with the interior of your office space then office and executive suites might not be right for you since most of the interior is pre-packaged decor and furniture.

Who is office or executive suite space for:

• Small to medium sized business looking for a straighforward short term solution
• Consultants or sales people who need a work space option while travelling
• Business looking to for a virtual office, or an office only a few times per week
• Businesses who want to portray a professional image, but don’t want the restrictions of a long term lease

Pros of Office/Executive Suite Space:

• Get into the space quickly
• No up front capital expenditure (All services packaged together)
• Flexible lease terms
• Professionally managed space
• Fully equipped to handle all office needs out of the gate
• Usually 24/7 access

Cons of Office/Executive Suite Space:

• Usually must pay for use of amenities
• Space usually “As Is”, limited customization
• Amenities are shared, you don’t choose who you share with
• Limited expansion options
• Location are limited

A traditional sublease is when your business takes over a space and lease from another business.  Companies sublease space for many reasons including: relocation, downsizing, moving, failure, expansion, and restructuring.  When subleasing, it is typical to get discounted rental rates, especially if the overall commercial market is suffering.

If your company wants to be located in a certain area, but a direct lease isn’t in the budget or you want a flexible lease term then search for a sublease instead.  It usually requires a little more homework and searching, but the extra work pays off with a more affordable and flexible lease.  Another reason a sublease is great for younger businesses is that it lowers the initial cost of occupying an office.  A sublease allows you to get into a space quickly and with minimal expense, because a subleases are usually built out (furnished, wired, etc.) and tend to be available immediately.

Particularly for small firms, sublets are often better than direct leases because the shorter term lengths are ideal for companies just getting started, taking on new projects, or scaling back. However, keep in mind that relocating and moving offices can be disruptive and costly, so you should always keep in mind how a short lease will fit into your long-term business plans.

Who is sublease office space for:

• Small to medium sized business
• Companies with uncertain future
• Business looking for flexible lease
• Business looking to keep overhead costs low

Pros and Cons of Sublease Office Space

Examples of Sublease Space on Rofo

A direct commercial lease is an agreement between your business and a landlord for you to occupy a space for a specified amount of time. It is beneficial to have an experienced broker assist you with the leasing process if you go this route.  A direct lease is preferred if you are a stable well funded business whose future looks bright. A long term direct lease also gives you negotiating leverage with the landlord.  If you are looking for a lengthy term lease (3-5 years) you should be able to get some concessions, especially in the currently depressed market.

Here are some important things to think about before signing a direct lease agreement:

Length of Term: A long-term lease is a large burden for any business, especially if you are a small or medium sized business in today’s unstable market. Don’t let anyone talk you into a lease term you are not comfortable with.  If you are a small business try and negotiate a lease term that is 1-2 year range and then discuss the renewal clause. Long term commitments usually benefit the landlord and severely limit your options if you outgrow the space, downsize or need to change locations. Landlords do not have incentive to find a subtenant if you break the lease because you are liable to pay for the entire term. Try and think about your lease as a total obligation instead just a monthly obligation.

Renewal Clause: Make sure you take a close look at the renewal clause. An unfortunate renewal clause could force you to move or sign a renewal for a term longer than you might need. Also determine what you want your options to be at the end of the lease. If you are planning to vacate the space the renewal clause is not as important, but if you are planning to stay make sure the renewal clause clealy states length of the renewal term and any rent increases.

Get it in Writing!: Never rely on an oral transaction, all terms should be in writing. Important things to be clearly written into the lease agreement:

• What is the landlord responsible for fixing
• Renewal option
• Common area maintenance fees (CAM), or any other costs that get passed along in a Triple Net (NNN) lease
• Tenant improvement allowance
• Security deposit terms
• Specifis of your personal guarantee of the lease
• Late charges on rent
• Insurance requirements, almost all leases require this, meet with a commercial insurance agent

Who is a direct lease for:

• Medium to large companies
• Well capitalized companies
• Companies with good cash flow
• Companies with a stable business not subject to volatile markets
• Companies wanting to occupy an office for an extended period of time (over 1 year)

Current Market Conditions: Current market conditions favor the tenant since there is copious amounts of space available. Do your homework on what the market has to offer and consult a commercial broker for additional help. When negotiating do not let the landlord push you into something you are not comfortable with since there is probably a similar space right down the street, but still remember to be reasonable!

When it comes to leasing an office there are a few options to choose from. It’s helpful to know the pros and cons of each before making a decision for your business. The four main options are shared office space, direct lease, office suite, and sublease space. In this series of blog posts we’ll discuss each one. First up is the shared office.

Examples of Great Shared Office Space on Rofo:

The Shared Office:
This occurs when a company has extra office space and leases it to one or multiple businesses. It’s possible to rent anything from single cubicle space to multiple offices depending on how much space the company doing the sharing has. A shared office is usually “Plug and Play”, so everything you need to start working is already there (furniture, internet, etc.), you just have to show up and plug in.

Each shared office is slightly different because the sharing companies usually have a different idea of how they want to structure the rental agreement. Make sure you ask about access to amenities and what is included in the rent. Sometimes companies can be very generous about sharing their amenities like conference rooms and Monday morning bagels, other times not so much.

It’s also beneficial to share with a company in a similar or related field. Just like with roommates in real life it may help your compatibility while working in the same space if you work in similar fields. For instance, if you are financial consultant and wear a suit and tie to work everyday you may not want to share an office with a laid back non-profit full of hipsters.

Finding a suitable shared office is challenging, but Rofo is here to help. New shared office spaces show up on Rofo periodically, so search around. The Rofo team is very conscious of the office space listing churn on the site, so feel free to contact us and we can send you some ideas. It’s also beneficial to reach out to your social networks via things like Linkedin, Facebook and Twitter because many companies may not immediately list space they are willing to lease. In today’s uncertain economic conditions this unused space is becoming more common, it’s a phenomenon referred to as “shadow space” in commercial real estate. You can also post a space need for shared space on Rofo and see if anyone sends you an idea.

Video continues to be a great way to get the feel for an office space without leaving your desk. Check out some of the videos recently posted to listings on Rofo.

Take a look at the corresponding office space listings on Rofo:

4th Floor Mission Street Window Lined Office Space 959-965 Mission St San Francisco, CA 94103

Rent: $3682 NNN | $1.67 / sqft
Size: 2,205 sqft
Lease type: Direct

160 Pine St. 160 Pine St. San Francisco, CA 94111

Rent: Negotiable
Size: 5,367 sqft
Lease type: Direct

Enjoy View of Berkeley/Oakland Hills, Saul Zaentz Building 2600 10th St. Berkeley, CA 94710

Rent: Negotiable
Size: Various Sizes
Lease type: Direct

60 Pierce Ave. San Jose, Great Affordable Shared Office! 60 Pierce Ave. San Jose, CA 95110

Rent: $1,736 FS | $1.50 / sqft
Size: 1,157 sqft
Lease type: Sublease

Start Up Special! 2150 Trade Zone, Great Building! 2150 Trade Zone Blvd. San Jose, CA 95131

Rent: $0.75 / sqft
Size: Various
Lease type: Direct

We’ll be introducing some great new features and an even simpler design in the coming weeks. The number of entrepreneurs and small businesses using Rofo to search for office space continues to grow. We’re listening to your feedback and incorporating into the site.

A run down of the top 5 most viewed listings on Rofo for the month of June. The small and affordable listings are definitely getting the most love. I think it definitely reflects the difficult current market conditions. . Comment and let us know what you think!

1. Suite 1723G, 10% Office, Warehouse, 1 Grade Level Door 1721-1725 Rogers Avenue San Jose, CA 95112

   Rent: $660 NNN | $0.50 / sqft
   Size: 1,320 sqft
   Lease type: Direct

2. Workstations in beautiful Union Square area top floor! 222 Sutter St San Francisco, CA 94108

   Rent: $500 FS | $7.69 / sqft
   Size: 65 sqft
   Lease type: Sublease

3. Warehouse Space For Rent!!! 30872 Huntwood Ave Hayward, CA 94544

   Rent: $875 NNN | $0.70 / sqft
   Size: 1,250 sqft
   Lease type: Direct

4. Cubicles, free T1, near BART/Transbay Terminal 182 Second Street San Francisco, CA 94105

   Rent: $270 FS | $1.35 / sqft
   Size: 200 sqft
   Lease type: Sublease

5. Creative Office/Loft 1209 College Ave. Santa Rosa, CA 95404

   Rent: $394 FS | $2.00 / sqft
   Size: 197 sqft
   Lease type: Direct