What Does Office Space Really Cost?

When a founder asks what an office will cost, the first answer they usually get is a rental rate. That number is real, but it describes one line of a longer budget. A space with a low rate can be expensive once you add what it takes to make it usable, and a space with a higher rate can turn out to be the better value because the landlord is funding the build-out or the suite is ready to occupy.

Total occupancy cost is the sum of everything you spend because you have the space. It helps to sort it into four groups: what you pay every month, what you pay once to get in, cash you post as security, and what you pay on the way out. Each group behaves differently, and each can be negotiated or planned for in a different way.

These are the costs that show up for the whole term.

• Base rent. The price of the space, which typically rises on a schedule during the term.
• Operating expenses and real estate taxes. Your share of the cost of running and owning the building. Depending on the lease structure, these are billed in full on top of rent or only to the extent they rise above a starting year. They are estimates that are trued up after year end.
• Electricity and other utilities. Sometimes included in rent, sometimes submetered to your suite, sometimes billed by formula. Teams with dense workstations or a network room should pay particular attention to how power is billed.
• After-hours heating and cooling. Many office buildings run air conditioning only during set hours. Running it at night or on weekends is usually charged separately.
• Janitorial service. Included in many multi-tenant office buildings, but not all, and not always inside the suite.
• Parking. Often a separate monthly charge per space, and sometimes a significant one for suburban or commuter-heavy teams.
• Internet and telecom. Circuits, redundancy and any building riser fees are your cost.
• Insurance. The lease will require liability and property coverage with stated limits.
• Amenity and conference facility fees, where the building charges for use.

The practical lesson is that base rent and the monthly check are different numbers. Ask each landlord for current estimates of everything billed on top of rent, and ask how those figures have moved in recent years.

Up-front costs are where first-time tenants are most often surprised, because few of them appear in a listing.

• Build-out. Construction to turn the space into your layout. A landlord's tenant improvement allowance may cover some or all of it. Anything above the allowance is paid by you.
• Design and engineering. Architect, engineers and permit fees, which may or may not be payable from the allowance.
• Project management. Someone has to run the schedule and budget. Landlords often charge a supervision fee when they manage the work.
• Furniture. Desks, chairs, conference tables, phone booths and storage. Furniture is commonly outside the allowance.
• IT and audiovisual. Cabling, network equipment, wireless access points, conference room systems, access control and cameras.
• Specialty items. Supplemental cooling for a server room, dedicated electrical circuits, lab benches or sound treatment.
• Moving. Movers, equipment transport, disposal of old furniture and the internal time the move consumes.
• Legal fees. Attorney review of the lease and related documents.
• Overlap. Rent on the old space and the new space at the same time while the build-out finishes, plus any holdover charges if the old lease expires first.
• Signage, branding and stocking the space.

The condition of the space drives most of this group. Raw space needs everything. Second-generation space that another tenant built out, or a landlord's move-in-ready suite, can remove much of the construction and sometimes the furniture. That trade-off belongs in the comparison from the start.

Ask what the allowance can be spent on. An allowance limited to hard construction leaves you funding design fees, cabling and furniture yourself.

A security deposit is not an expense in the usual sense, because you expect it back, but it is cash you cannot use for payroll or compute while the landlord holds it. Landlords often ask venture-backed and early-stage companies for larger deposits because they have short operating histories. A letter of credit can stand in for cash, though banks usually require collateral and charge a fee for it.

Deposit terms are negotiable. The amount, whether it steps down over time as you perform under the lease, and the conditions for its return all belong in the business discussion, not as an afterthought in the lease draft.

The last group is the one that gets the least attention, because it is years away when you sign.

• Restoration. Many leases require you to remove certain improvements, cabling or specialty installations and repair the resulting damage. The scope depends on the lease and on what the landlord agreed to when your plans were approved.
• Repairs and cleaning to return the space in the required condition.
• Final reconciliation of operating expenses and taxes, which can be billed after you have moved out.
• Holdover rent, charged at a premium if you stay past expiration because the next space is not ready.
• Unrecovered costs if you leave early. A termination option usually carries a fee, and a sublease may not cover your full rent.

Most of these are easier to limit before the lease is signed than after. Ask your attorney to review the surrender and holdover provisions with the same care as the rent.

You do not need precise numbers to start. You need a consistent list, so that every space you look at is measured the same way.

1. List the recurring items above and ask each landlord for a current figure or estimate for each.
2. Describe the condition of each space and get a rough build-out estimate from an architect or contractor, net of any allowance offered.
3. Add furniture, IT, moving and legal costs. Use the same assumptions for every option.
4. Note the deposit or letter of credit each landlord is asking for, and how long it is held.
5. Record what each lease would require at the end of the term.
6. Total the cost over the full term, then divide by expected headcount to see cost per person as you grow.

Building this comparison is a core part of our work for tenants. We collect the same information from every landlord and put the options side by side, so the decision reflects what each office will actually cost and not what the listing says.