Before delving into the process of finding a space, one of the most important things is to have your requirements list made. This is your opportunity to think about what you want in your workspace, so take some time and brainstorm your priorities and criteria. This list will then be given to your broker who will help you find a space.
1. Defining Your Budget
Setting a budget is a crucial step in this process. Before you consider anything else, you have to think about what you can do for your coworking space that’s within your budget.
By this stage, your budget should already be defined in your business plan. It’s hard to come up with a specific number, as there are costs that you might not be able to foresee. While it’s good to have a certain number in mind, try to go with a ballpark figure that can be more or less altered as you get closer to finding your perfect location.
Tip: Check the BOMA website for their standards for more understanding on what to consider when making your budget.
Usable vs. Rentable Square Feet:
Understanding how prices work for commercial buildings is crucial when it comes to making your budget. There are many differences between commercial and residential real estate, but one of the biggest ones is that commercial real estate rentals go by square footage as opposed to renting out the whole space for a set price. One important aspect to remember is the difference between usable and rentable square feet.
- Usable Square Footage is the space that will only be used by your company. This includes your office rooms, desks, conference rooms, private offices, furniture, bathrooms, storage space, and anything else that is exclusively rented by you and your business.
- Rentable Square Footage refers to all the usable square footage and some percent of the other common areas in the building that are not rented out by your business specifically. This includes hallways, lobbies, bathrooms that are open to all, and so on. The rentable square footage is the amount that your total rent will be based on.
Location Matters
We’ve all heard the saying “location, location, location” before, and it’s true, that location can either make or break your coworking space business. You want your business to thrive and the best way to do that is to have a well-situated space.
Things to consider about the location:
Choose an optimal location that is not too far away:
- What you want to consider here is the perfect location for your target market. Do your research and think about the best areas where people want to commute to. A study found that most people are late to work because of heavy traffic and having to commute. Consider finding a building that is situated in a highly desired neighbourhood, perhaps close to residential areas where freelancers may be working from.
- It might be tempting to go for a cheaper location in a more remote area, but renting a space that is in a convenient location will save you more money since there will be a higher demand and less need for marketing which makes this option a great investment.
Tip: You can check out Facebook’s Location Targeting feature which can help you find your target demographic, which should be within at least a five-mile radius.
Consider the transit and walk score:
- You want to make sure your space is located conveniently in terms of transportation. If it’s hard for people to get to your building, they most likely won’t come.
- Think about car accessibility and parking. Will your building location have a parking lot?
- For those who don’t own cars, make sure your coworking space is located close to a subway or bus line, which is easily accessible.
- Don’t forget the walking score. People who work at a desk may want to go out and grab lunch or coffee on their breaks. Does the neighbourhood you picked have good amenities close by?
Figure out what the competition is like:
Before you choose your location for your work space, research other spaces nearby and see how they’re doing. By looking at their successes or failures you can get more insight into whether the location is good or bad.
For more information on finding a space and why location is important, check out Jamie Russo’s Podcast, episodes 51, 52, and 53.
Fixer-upper or Completed Space?
Whether you decide to go for a space that needs a lot of work and remodelling or a space that only needs minor renovations done is up to you. There are benefits and drawbacks to each, but it’s really up to you to decide what suits your needs best.
Fixer-upper space Pros vs Cons
Pros:
- You can redesign the whole space according to your vision. If you choose to rebuild the whole space, you’ll be able to optimize it to get as much out of it as you possibly can. If you can design it to have the maximum amount of people then you will be able to have the maximum amount of revenue.
- Spaces like this are also a lot easier to find.
Reminder: If you go for this option, make sure you check that the base building is in good shape and that it can handle remodelling. Investigate the HVAC system, the electrical panel and wall wiring, the flooring, and so on.
Cons:
- The obvious drawback of this option is the cost. Choosing to redo a whole building or floor of a building will undoubtedly be a lot more costly than going for a completed space. Depending on your budget and your vision, rebuilding may be worth it.
Completed space Pros vs. Cons
If you’re looking to minimize your costs on the building you choose for your coworking space, this will be a great option for you. You will want to look for a work space that is almost ready to go but may need a few finishing touches like painting the walls.
Pros:
- The greatest pro about finding a place like this is that the cost of a ready-to-go building will be much cheaper than remodelling. The more money you put into the space, the more you will have to charge per desk.
Cons:
- These spaces are much harder to find.
- If you do find one, the chances that it will be optimized to its full potential and that it will have a good design appeal are slim. Whatever you decide on depends on your budget, and exactly what you are looking for. You have the freedom to choose and figure out what would work best for you and your situation.
2. Time to Include a Broker
Once you have a list of everything you want and have scoped out potential locations, it’s time to find a broker. You have two options when it comes to this. You can either choose to get a broker or do everything yourself with the help of the internet.
Why DIY isn't the best idea in this case:
Even if you are confident in your negotiating abilities, there are bound to be certain things that you have overlooked that a broker would not. Brokers know about things that you may not, like the best spots and deals, and will help you as much as they can.
The greatest benefit of having a broker is that they are basically free. They get paid by the landlord once the space is rented out, and in the odd case that they would charge some fees the benefits would outweigh the cost, and you would save money in the long run.
What can brokers do for you and your coworking space?
A broker will be able to sit down with you, consider your requirement list, and suggest spaces that would fit into the categories you have outlined.
Brokers usually know many spots in areas that you don’t. They know good locations, landlords, and buildings, which will be a great way to find a space.
Brokers will usually get about 3.5% of the leasing contract, so it’s in their best benefit to work hard to satisfy your needs and requirements and find you a great place. Brokers are also very reliable and they will help you with any issues you may face down the road because they want to stay in your good graces and keep you as a client.
Tip: Although the above firms are good options, depending on where you’re looking to open up a coworking space, it might be best to look into your local regional brokers that have a large presence in your area.
3. Find a Space that Matches your Criteria
In this step, your broker will help you find locations based on the criteria you have provided them in Step 1.
A lot of brokers are able to find off-market properties that you have never seen because they use a special software that allows them to see all the listings.
In this step, you may find a few potential spots that may catch your eye, but it is important to visit them and see them for yourself, which brings us into the next step, which is touring the spaces you have found with your broker.
4. Tour the Spaces with Your Broker
In this step, it is important to bring in another checklist that you have made that has more specific requirements for you to do. Small things such as how low the ceiling is might not seem like a big deal, but they may cause bigger problems once the space starts getting foot traffic, which is why it’s important to keep these things in mind.
Here's what you should keep in mind:
Noise level: Something not a lot of people may consider is the level of noise in or around the building. Think about your clients, if they want to come to space away from their homes and do their work it’s because they want to be able to focus. How will they be able to do that if there’s a dance school right above them?
Check out this article to see how a negative experience with sound can impact the customer’s decision to continue using the coworking space.
Building insolation: You have to analyze the building’s ability to keep heat in. If there are problems that you didn’t pick up on before you signed the lease, they may cost you a lot of money to resolve.
Reminder: If it wasn’t already provided to you, ask for the past three years of data related to the heating of the building.
Space features:
- Entrance: Is the entrance to the space good? Will customers be able to find it easily?
- Ceiling: If the ceiling is too low the space will feel smaller and less pleasant for the customer.
- Windows and light: People desire to be in natural light, so look for locations with lots of windows and sunlight to make the space more pleasant.
- Signage: Are there signs that point to the entrance, the bathroom, the kitchen? If so, how many are there? Try to negotiate signage with your landlord and see if they are willing to pay for it.
Will the space still look nice in a decade? If you’re not sure, ask your landlord if they have a plan.
Look for all the criteria in the location you’re visiting and then narrow it down to a few locations that match them best
5. Essential Lease Agreement Terms Your Broker Must Negotiate with the Landlord
When looking into renting a place, you must consider what the landlord is like. They could make the whole process a lot easier or much harder than it needs to be. It’s important to give your broker a list of all the requirements you have for your lease and space.
Key Considerations for Defining Your Lease Objectives:
Try to find out about your potential landlord’s reputation.
- Are they communicative?
- Do they take care of the needs of the building?
- Do they meet the health and safety codes?
Will they provide funding for tenant improvements?
- As mentioned before, some landlords may provide you with tenant improvement funding. If this is the case, it would make your plan a lot less costly.
Will they give you free rent during the buildout phase?
- Some landlords will give you free rent for a couple of months as you build the space to your liking. This is because they may not be able to find someone to rent out their space sooner than you can take to remodel it.
Consider how much the price will increase upon renewal.
- Ask if there will be a price increase if you choose to renew your lease. This will spare you any unwanted surprises.
What is the likelihood of tax increasing on the building?
- Make sure you speak to your landlord about this. If the building gets renovated, it may be reassessed which could lead to a tax increase.
Do they allow you to incorporate a separate legal entity in your contract?
- Having a separate legal entity in your contract could spare you a lot of trouble if your business goes under. It would mean that the landlord won’t go after your personal assets. The entity would have its own legal rights and obligations that are separate from you. An example of one is a company.
Competition clause
- Ask your landlord if they are willing to include a competition clause on your location, which would prohibit them from renting out to any competition inside the building or within a radius of your space.
Length of the lease
- How long do you want the lease for and how long can you have it for. Think about renewal too.
Price of the space
- Have a price in mind that you would like to offer to pay for the space, according to what the landlord is asking as well.
After looking through this list, decide what are the absolute must-haves and the things you are willing to negotiate on. Give your list to your broker and they will bring it to the landlord and negotiate on your behalf.
6. Further negotiate the lease
After your broker has negotiated a lease on your behalf, you may have narrowed it down to one specific place or even a few.
Now is the time to take it in your own hands and see what else you can do to negotiate the lease even further. For further information on how to negotiate your lease with your landlord check out the next section of this course.
Conclusion
After following the steps above, hopefully, you will have ended up with a great location for your coworking space.
Finding the right space can be a huge challenge, but it all starts with research. Remember to follow the step-by-step guide and to make lists of everything you want in a space before visiting a potential coworking location. Do what is best for your situation and consider all the aspects before making a decision.
