Office space is the 2nd highest cost a business faces after head count. This is especially true in New York City, where space is in high demand and prime locations are at a premium. According to the Wall Street Journal, NYC office space rents have increased an average of 6% over the last 12 months. With rents increasing by a shocking 30% in tech epicenter, Union Square, alone.
So what’s a growing business to do?
The good news is, you have options. From coworking to commercial leasing, the best choice for your company will depend mostly on your budget, stage in business and future growth plans.
There are 5 main types of office space available in New York City, and since office space is our thing, we’ll give you the lowdown.
#1: Executive Suite
→What is it: Executive suites (or business centers) provide basic business services such as a professional address, private mailbox, receptionist, and support services like faxing and photocopying. Some also offer conference rooms and workstations for an additional fee. Executive suites make it super easy to control overhead costs since suites can be rented weekly, monthly, yearly or as needed. They also come completely furnished with amenities, making move-in and move-out simple.
→Who is it for: Executive suites give the illusion of professional office space without the overhead. They are excellent for solopreneurs and freelancers, home-based business, startups, and frequent travelers who are focused on having a professional place in which to conduct business. For some, they serve primarily as a virtual office. Executive suites also provide some opportunity for networking and collaboration, though that is not the main focus for executive suite users.
→When to make a change: As time goes on, you may find that the add-on fees charged for using printers, meeting spaces and phones start to add up. Additionally, executive suites can create conflicts between users and become distracting especially when sharing office space with companies from different industries. If you feel like shared office space is right for your business, but prefer to mix and mingle with like-minded people, you may want to move to a coworking space or an office sharing location, such as the ones posted on PivotDesk.
#2: Coworking Space
→What is it: Coworking space is a shared work environment in which many individuals from different types of businesses and professions share office space. Different from executive suites, which are wholly focused on the facility, the goal of coworking is to foster networking and collaboration in addition to providing a productive place to work and meet. This community-based culture builds synergy amongst the tenants and attracts companies and individuals who find value in the constant ebb and flow present in coworking locations. Similar to executive suites, you can rent desks on a daily, weekly or monthly basis and gain full or as-needed access to the amenities and facilities, making this an economical solution for budding businesses.
→Who is it for: Coworking office space is best for independent contractors and freelancers, startups and SMBs, and even frequent travelers and telecommuters that want to move from their kitchen tables and scattered home based locations, to a professional and collaborative workspace. Essentially, it’s for growing businesses that want more social interaction and networking opportunities to catalyze their businesses without long term commitments, maintenance costs and high rents.
→When to make a change: As your company grows, the constant bustle of coworking can become more of a distraction than a benefit. If you’re increasing your staff size, securing funding or in the throws of taking your product or service to the next level, coworking may no longer be right for you. If you’re becoming more focused on your company’s culture and brand, and are less enamored by community-based networking, you may be ready for your own office space. Office sharing with PivotDesk is a natural next step for many businesses.
#3: Office Sharing with PivotDesk
→What is it: Office sharing provides entrepreneurs with affordable spaces that enable them to grow their company and foster culture in a work environment that they can call their own. Businesses with excess office space (host companies) offset their costs by partnering with another, often like-minded company (guest company) to share space. These are typically month-to-month agreements that provide full access to the host company’s amenities and facilities. With flexible shared office space, you can grow your teams simply by adding more seats. However, the primary benefit of flexible shared office space is the ability to build your own culture in a work environment that is bolstered by your vision and brand, rather than the community-based mission of coworking location. In short—it’s a an office to call your own, without all the risk.
→Who is it for: Office sharing is for any business that needs a space to call their own, but doesn’t want to deal with the long-term commitment and cost associated with signing a lease or sublease. A company may choose office sharing if they have increased the number of employees working at a single location, or need to create more collaborative and synergistic environments within their own cultural framework. Many businesses share space while they are between leases or waiting for their buildout to be complete. By sharing space with top brands in NYC such as Tough Mudder, companies are better able to attract customers and investors, as well as top employees.
→When to make a change: Office sharing is extremely popular in New York City and is an excellent choice if you don’t want to invest a huge chunk of your capital into rent. A month-to-month arrangement provides you with enough flexibility to figure out where you may eventually want to land without having to make huge financial commitments. However, if you are ready to plant your feet more firmly in the ground and willing to invest in a permanent address for a couple years, you may be ready for a commercial sublease or lease.
#4: Commercial Sublease
→What is it: Similar to flexible office space, a commercial sublease is an agreement to lease excess office space from a commercial property tenant that wants to defray costs. Often as part of the sublease, you can leverage the existing resources of the sublessor such as the common areas, and amenities. Typically, subleases are short term ranging from 12-24 months, which means you’ll have to renegotiate when it’s time to renew, or find a new office space.
→Who is it for: A commercial sublease is for companies who are downsizing or for those that want a more permanent “shop” for their business. However, they either can’t afford to or don’t want to commit to multi-year leases and ancillary costs like maintenances, repairs and utilities. Instead you pay one flat monthly rental fee which is usually much cheaper than renting office space directly from the landlord, and you’re responsible only for any damages you cause.
→When to make a change: With a commercial sublease, you are renting excess space so if your business grows beyond their capacity, you will have to move. Here, you are subject to the lease terms of the landlord, but dependent upon the sublessor to resolve any landlord/tenant issues. As a result, you may encounter slower response times to your requests, and if the lease is terminated, you will have to move. Lastly, commercial subleases are short term solutions that can save you money for a couple years, but may leave you unprepared to pay full market rent. When you are ready to be in full control of your own office space, your next step will be to move on to a standard commercial lease.
#5: Standard Commercial Lease
→ What is it: A commercial lease is a contract between a landlord and a business for the rental of office space. In addition to paying monthly rent, you will also be responsible for all maintenance and repair as well as the utilities and the facilities. Offices spaces under a commercial lease are fully customizable to suit your business needs as long as you pay for it—and negotiating these terms can be tricky.
→Who is it for: Standard commercial leases are for well-established businesses with a predictable growth plan that require their own office space, and have the capital to support the expense. Aside from the many tax benefits that come with leasing, commercial leases still provide flexibility in that you can plan your next move based on your lease termination date, sublease to another company or offer flexible shared office space using services like PivotDesk to defray costs. Moreover, you can enjoy fixed rental costs over the term of the lease. This allows you to manage your cash flow and overall capital expenditures.
→When to make a change: Many businesses stay in a long term commercial lease for years, only changing when they need to downsize, relocate to larger spaces or go out of business. Others end up purchasing commercial property to house their large enterprises. At this point, your next move should be determined by your level of growth.
When leasing commercial space either directly or as a sublessee, it’s best to work with both a broker and a lawyer to ensure you’re negotiating the best deal. When evaluating shared office space options like executive suites and coworking spaces, be sure to visit and see if the vibe is right for your business. And if you’re into flexible office sharing, PivotDesk is your go-to source in New York City.
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