Commercial Leasing vs. Flexible Office Space

You figured it out long ago: the kitchen table and coffee shops are not an office. This thing you’ve created is successful enough now you know you must move into more appropriate space. A place where you can meet in private. Without the dogs or kids moving about. (Or, at the coffeeshop, someone else’s kids.) You spoke to a small business owner you know. She said the only option where she was at was a lease for seven years. But is that the right move for your business? Is her experience even true of most commercial leasing?

Tracking down the best space for your business is not as simple as heading to the store and buying some groceries. It can be complicated. Frustratingly so. As you explore flexible office space and traditional commercial leasing, knowing some terminology can be very helpful in making the best decision for your organization.

Generally, commercial real estate (CRE) leases on office space fall into three different types: gross office; modified gross office; and net office.

A gross office lease is also known as a full-service lease and it includes everything your office is going to need from the perspective of the building. The janitorial is included, the utilities are included, the maintenance and upkeep on the building is included. It’s one, predictable (and likely high) rent payment. That’s great for pro formas, budgeting and predictability. Not always great on the bottom line of a small business, though.

A modified gross office lease includes some things but not others. Each will be different based upon negotiations with the ownership (landlord) and their expectations for their own company and you as a tenant. Perhaps the water bill for a unit is included in your monthly rent payment, but the electricity is not. And in almost no cases would connectivity (access to the internet) be included.

Finally, a net office (commonly called NNN or triple-net) lease is the exact opposite of a gross lease. It includes nothing in your rent. You will be responsible for all extras. For long-established organizations with predictable cash flow, these can be great.

You signed the lease, now come all other costs.

The rent is due each month no matter what. As are all the other utilities associated with your own space (dependent on the type of lease you signed). But on your monthly bill from the landlord there are also occasional other items associated with CAM or common area maintenance. It’s easy to not think about CAM when negotiating a lease, but CAM can be substantial, depending on the types of projects the building has to undertake. Some landlords will even take the undesirable approach of treating CAM as a profit center. If it costs the property $500 to haul away trash and recycling for the month, that $500 could become $600 when split among the tenants. CAM has the capability to be unpredictable and can even feel unfair. But, the underlying nature of CAM is it does cover tasks and projects that must be completed and that’s why it’s tacked onto your bill. Understanding how CAM is calculated and treated from your potential landlord is vital for proper budgeting.

And even more costs.

The lease is signed, the space is yours. Now you get to populate an office. With furniture, a centralized printer for you and your partner. Probably a coffee maker. (Definitely a coffee maker.) Maybe some kitchen appliances. At least a microwave, right?

And you’ll need to modify the space just a little. The previous tenant wanted big, open expanses, But, you and your partner need private, quiet spaces for concentration and meetings with clients. Enter what are known as tenant improvements, or TIs. The landlord might actually pay for those walls, but they will naturally want something in exchange, such as an additional 18 months added to the term of the agreement. If predictability is important to your small business, TIs can be frustrating, complicated and will probably always seem like they’re taking too long. (Even if they’re not. The emotion of anxiousness can certainly be a powerful force in one’s mind.)

So what’s the best choice for your business? 

Knowing what will be the best route for your business will be challenging. But, if you’re reading this blog you’re likely a small business owner and therefore a natural problem solver. You’re also likely adept at focusing on what you should when you should. If your team is large enough that you have someone who focuses on real estate transactions and someone who handles ongoing facilities issues than traditional commercial leasing might be a great path for you. However, many small businesses find that flexible office space is the right move for their small or young business. The operators of flexible office space provide the management of the facilities, they’ve already addressed the TIs to create the best space for working in an office day-to-day, and most provide some sort of mix of amenities included with your monthly payment. Office Evolution Fishers offers all of that and more. Included with a private office membership at Office Evolution Fishers are the aspects below:

  • Predictable monthly payment – no hidden fees, one payment, that’s it
  • Unlimited coffee, tea and filtered water for you and your guests
  • A community kitchen offering all that you need to store, warm up and clean up your lunch
  • Mail room tools such as a color networked printer/copier/scanner, paper cutter, three-hole punch, super stapler, etc.
  • Quiet offices, many with large windows with idyllic suburban views
  • Daily, weekly and monthly janitorial included at no additional fees
  • Reception presence at front desk to welcome your guests
  • Ample conference room and training space
  • Free parking in an oversized lot
  • A prestigious address in the heart of the Nickel Plate District in Fishers
  • Fully furnished offices
  • All utilities included at no additional cost
  • Blazing-fast WiFi and Ethernet connectivity at no additional cost
  • Nationwide access to approximately 70 other in-network locations
  • 24/7 Access
  • And genuinely much, much more

It may not be as common, but even some larger, established businesses use flexible office space for small teams in some markets. Why? Because the agreements operate in a predictable fashion, similar to a gross lease, but with less physical space. Landlords do not want to lease 150sf of class-A office space. Commercial landlords work in the thousands, not hundreds. Flexible office space providers such as Office Evolution Fishers provide just the solution larger businesses need when they find that they need to office small teams in a market. Additionally, the flexible space operator is managing the day-to-day needs and demands of a facility removing the burden from a company.  

Are you ready to initiate your organization’s next big move? Contact Office Evolution Fishers today to learn more.

Written by: Office Evolution Fishers

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Office Evolution has more than 70 locations open, 140 units sold in markets across the country and is poised for further growth as the demand for affordable and safe, workspace close-to-home continues to rise.

357 S McCaslin Blvd, Louisville CO 80027 | +1-877-475-6300