My Company Has Outgrown Its Startup Office - Now What?

My Company Has Outgrown Its Startup Office - Now What?

One of the biggest issues facing start-ups in Chicago is how to grow into their own office space after outgrowing shared, startup space. Most often, this is due to an expanding workforce resulting from increased sales and equity funding. In order to overcome this hurdle, leaders of young companies must determine where to conduct business and at what cost. They must consider options that will create the best environment for further growth, while also, maintaining flexibility and ensuring protection of precious capital to grow a business versus spending it on office space.

Given fast rates of growth, moving into your own office space from a shared suite/incubator scenario can prove difficult. Utilizing valuable time and resources many want to make sure they find the right space to facilitate the core mission and compliment the culture of the company that will ultimately result in increased sales. For several years, I have been advising startup companies manage this exact issue and have discovered certain common themes. Therefore, recommendations to find office space that facilitates growth and ensures flexibility as companies think about this critical next step are as follows:

1. Where? - Make sure you analyze benefits and drawbacks of all lease options (sublease vs. direct lease), geographical location (River North vs. West Loop, etc.) and asset types (building type that supports the company’s culture and employee requirements). Ultimately, your workforce is critical and minimal disruption is key.
2. How? - Ensure flexibility through any lease document – make sure to negotiate flexibility through expansion options, contraction options, termination options, etc. as any future growth may happen unexpectedly and you do not want your lease document to prohibit your growth plans. Examples – Can I grow into the space adjacent to the space we’re considering? Where are there potential expansion opportunities in 2, 3, 4 years, if needed? How can I get out of my lease early if needed?
3. What? - Make sure to weigh all capital costs associated with opening an office – moving expense, furniture cost, Security Deposit requirements, etc. Opening an office is never rent only and there are solutions to mitigate these costs when negotiating your lease. This will help protect precious capital that you need to focus more so on your growing operations.
4. Who? - Hire an Advisor (“Broker”) that can be seen as a long-term partner and is an extension of the company. The valuable insight and solutions that comes along with any Advisor will present you options that line up with the company’s short term and long term goals.

After advising clients on lease negotiations resulting from growth, one theme remains constant: maintain lease flexibility, preserve capital and do not allow a lease to prohibit the core business objectives. 

Adam McCostlin is a Vice President at DTZ, a global real estate services provider headquarted in Chicago, Illinois. www.dtz.com. Adam exclusively represents tenants. Email: [email protected]