Office Space for Startups: What to Look For

Founders searching for office space for startups often begin with listings. It is more useful to begin with a short written answer to one question: what will this space do for the company that a kitchen table, a laptop and a video call cannot?

The honest answers tend to fall into a few groups. Some teams need a place to work together several days a week. Some need to recruit in a particular city and show candidates that the company is real. Some need to keep customer data or unreleased work away from other people. Some need to host investors or customers. Others have equipment that needs a home.

Each answer points to a different space. A team that only meets twice a week may not need a private suite at all. A team with sensitive data may need one much sooner than its headcount suggests. Write the answer down before touring, because a well-presented space is persuasive and it is easy to forget what you came for.

Funding stage is a rough guide. The more reliable guide is how confidently you can forecast headcount and cash for the length of the commitment. These are the usual options, from the shortest horizon to the longest.

• Coworking or a private office in a flexible workspace. You buy a membership rather than a lease. It suits very early teams, or any team whose size could change sharply within months. Convenience is built into the price.
• Sublease. You take space from a company that has more than it needs. It can be fast and already furnished, but your rights depend on the tenant above you and on that tenant's lease with the landlord.
• Spec suite. A landlord builds a finished suite before finding a tenant. You get a move-in-ready space with your own lease, though usually with a commitment longer than a membership and limited say in the layout.
• Direct lease with a custom build-out. You negotiate with the landlord and design the space. It gives you the most control and the most to negotiate, and it asks for the longest commitment and the most lead time.

Moving down that list generally means more control and less flexibility. The guide to subleases, coworking, spec suites and direct leases goes further into that trade-off. The point for now is that no option is the grown-up one. A company that signs a long lease to look established can be worse off than one still happily in a flexible workspace.

Finishes photograph well, but they are rarely what makes a first office work or fail. These are the questions that tend to decide it after move-in.

• ✓Can most of the team reach it without a commute that makes them resent coming in?
• ✓How many people will be there on the busiest regular day, and do they all have somewhere to sit?
• ✓Are there enough rooms for calls and private conversations, given how much of your work is on video?
• ✓Which internet providers serve the building, and how would you get a backup connection?
• ✓Can staff enter at the hours they really work, and is heating and cooling available then?
• ✓Who else has keys or badges to the space, and can you control who walks in?
• ✓Does anything you plan to bring, such as servers, test rigs or inventory, need more power, cooling or floor strength than an ordinary suite provides?
• ✓Does the space suit the candidates you are trying to hire?

Also ask whether your use is allowed there at all. The US Small Business Administration advises confirming that a property conforms to local zoning before you buy, rent or build, and notes that zoning ordinances can restrict or ban certain kinds of business in an area. Zoning is usually a local matter, so check with the city. For most software teams in an office building this is a quick check. For anyone doing light assembly, lab work or testing, it can decide the search.

Accessibility is another early question. The Justice Department's ADA primer explains that office buildings and other commercial facilities that do not serve the public are subject to the ADA's new construction and alteration requirements, while businesses serving the public have broader duties. If you plan to alter a space, ask your architect and attorney what applies and how the lease divides the responsibility.

A young company's bargaining position depends on the building, the market and its own credit, so none of these is guaranteed. They are, however, commonly raised in lease negotiations, and asking costs little.

• A shorter term, or a termination option at a set point, usually with a fee.
• The right to sublease or assign if the company outgrows the space or shrinks, and clear treatment of a sale of the company.
• An expansion right or a right of first offer on nearby space.
• Free rent or a landlord contribution to build-out costs.
• A security deposit or letter of credit that reduces over time if you pay on schedule, in place of a personal guarantee where possible.
• A cap or clear definition of the operating costs passed through to you, and of after-hours heating and cooling charges.
• A clear statement of what you must remove or restore when you leave.

Landlords look hard at new companies because they are taking credit risk, so expect questions about your funding and runway. Preparing that story ahead of time can matter as much as any one clause. The same kinds of asks come up at renewal, as this client describes.

Most of the costly errors come from timing and sizing, not from choosing the wrong neighborhood.

• Sizing for the most optimistic hiring plan and paying for empty desks if the plan slips.
• Sizing for today, then facing a move before the lease is half over.
• Starting late. A direct lease with a build-out takes far longer than touring suggests, and a deadline weakens your position.
• Comparing quoted rents without comparing what is included, such as electricity, operating costs and furniture.
• Signing a landlord's first draft without an attorney's review, because the rent looks fair.
• Treating a coworking agreement as if it were a lease, when the rights are quite different.

We represent occupiers only, so when a startup engages TAG our job is to lay these options side by side, including the option of staying where it is, and to negotiate whichever one the company picks.

1. Write down what the office has to do, in a few sentences.
2. Build a headcount plan with a low case and a high case, and estimate attendance on the busiest regular day.
3. Set the longest commitment your runway can honestly support.
4. List anything physical you need: equipment, power, deliveries, security.
5. Pick the type of space that fits, then tour only that type, plus one alternative for comparison.
6. Compare total cost across the full commitment, not the headline rent, and include moving and setup costs.
7. Have an attorney review the agreement, and your CPA look at how it affects your financials, before you sign.