Last Updated on Oct 16, 2020 by James W
Many national and international companies began with two simple things: an idea and a small corner office in a basement, living room, or garage.
Apple, Disney, Hewlett Packard, Intel, Microsoft, and others are today responsible for providing thousands of people with jobs. None of those global companies were in existence a mere eight decades ago, and all represent the positives of American ingenuity.
Perhaps you are reading this article from your home office while taking a breather from your home-based business. Maybe your business has now completely taken over your living room (IT department), dining room (accounting and bookkeeping), upstairs bedroom (sales and procurement), and garage (distribution center). Your neighbors are beginning to think UPS and FedEx are your family members since their trucks are visiting your home on a daily basis.
Ultimately, you’re thinking about whether moving your home-based business out of your home would be a smart decision.
The scale tipper for many small-scale, home-based business centers around one of two situations: the owners starts hiring employees or customers need to communicate with the owner in a physical location. Both circumstances can be difficult to manage in a family home.
Countless small businesses find themselves facing such situations, and I’ve always advised home-business owners to operate from their homes for as long as is feasible. You want to avoid unnecessary overheads. Wait until you get to the point where the practicalities of the circumstance are causing issues for yourself, family members, and possibly pets before you think about leasing office space or storage space in an industrial building.
If your business has no employees and all contact with customers is conducted virtually, such a move can often be postponed indefinitely. If you need to move, this article will offer some advice on factors to take into account as you get ready to move your business operations into a commercial property.
Here’s what you should consider:
1. The Cost
If you own your own house and have no mortgage, the overheads associated with your home-based business are minimal. As soon as you take the business outside of your home, you’ll need to pay commercial landlord rent, as well as extra utility bills (phone, electricity, internet, water, gas, etc.). Oh, and let’s not forget additional business services such as hiring a janitorial company for all your cleaning requirements. You’ll want someone in to clean at least once a week to start.
Most commercial landlords have contents and public liability insurance requirements that far exceed the insurance coverage needs of a home-based business. The majority of commercial landlords require tenants to sign lease terms of at least 12 months, other much longer. Consequently, your business will be committed to a set amount of rent to avoid costly penalties. Depending on the financial status and age of your business, you might be required to guarantee the lease obligations as an individual citizen.
Different cities in the US have different occupancy permit requirements. The chances are you already hold a business license but going forward you’ll need to obtain a permit for permission to operate your business from a commercial property. If your business operations involve any manufacturing processes, assume the time taken to get a permit will be extensive.
3. Location Concerns
No matter what area of real estate you consider, “Location, location, location!” is a true mantra. However, I’d like to present an additional one – the boss’s (your) private location. If you relocate your home-based business to a commercial premise, working until two-thirty in the morning suddenly becomes less feasible since you will need to arrange travel home.
Furthermore, you can’t just crawl out of bed in your pajamas and start working in the upstairs attic anymore. You need to make yourself presentable, drive to work, and possibly interact with your employees face to face. Ideally, you want to look for a location as near to your private home as possible, so you can save money and time on your commute.
4. Buy or Lease
I typically advise my clients to lease rather than buy and to agree to the shortest lease terms possible. You never want to commit yourself to a building and location that you might outgrow in four months, or worse, discover that the commercial lease was a big mistake and long to return to your home basement.
At some point, buying a commercial premise for your business will make sense, but not straight away. Lease a spot, work on getting business stable, bank your takings, hire employees, and keep expanding your operations with a vision to buy further down the road.
5. Commercial Space Types
Commercial property can refer to land, buildings, or facilities that are exclusively designated for business purposes.
There are four main types of commercial property:
- Industrial parks – includes buildings that are divided into units, various large unfinished spaces, and warehouse sections.
- Business parks – groups of buildings that are designed for light-industrial business purposes.
- Commercial office buildings – typically high-rise buildings zoned off for commercial use, often located in urban areas.
- Commercial retail – this includes strip malls, indoor shopping centers, and additional facilities suited for walk-in and storefront businesses.
The kind of business operations involved with your company will determine which type of commercial space is the right choice. But, let’s consider some of the benefits and drawbacks of each type of commercial property:
Such parks are typically located in designated zones that are specially created based on local regulations and ordinances. In general, they are situated on the outskirts of densely populated urban areas and can often be found close to interstate highways. Due to the additional traffic and noise industrial buildings attract and produce, these zoned areas tend to be isolated by buffer spaces to separate them from residential neighborhoods. Company operations found in industrial parks include warehouses, ports, oil refineries, manufacturing factories, and distribution centers.
While industrial parks are typically set up to facilitate industrial development and high-intensity manufacturing processes, they are becoming increasingly popular locations for office space as well. Despite the semi-upscale nature of the spaces, they still tend to have lower lease prices than various other commercial properties, which makes them appealing for those looking for affordability and flexibility. You can usually construct offices within a warehouse, or even use the entire warehouse itself as an office space – the high ceilings sure do make for an open-space airy ambiance.
You do, however, need to understand that opting for unfinished infrastructure can increase your initial investment costs, especially if there’s no heating, electrical wiring or plumbing at the site. There might be service and contractor limitations, so be sure to check whether the industrial park places strict regulations on the contractors or vendors you can hire for lighting, signs, build-outs, renovations and other services, like alarm installation, cable hookups, etc. Keep in mind that industrial parks are often not located in desirable areas. They might have excellent transportation access but can be a long commute from residential areas and urban hubs.
Businesses that can benefit most from such commercial spaces include construction, manufacturing, product and research, heavy industrial, small retail and warehousing operations.
Business parks tend to be situated in suburban areas, as land in those areas costs considerably less than land in urban areas, but it’s easily accessible by highways and main roads. There tends to be no factories or residential properties within the local vicinity.
Businesses that will benefit most from business park commercial spaces are services professionals like dentists, lawyers, private investigators, insurance agents, doctors, therapists, etc. In the majority of cases, business parks are essentially fully furnished, and those moving in need only to make a few minor tweaks to layouts.
Commercial Office Building
A commercial office building lease provides business with access to a corporate space, which enables them to provide workstations for employees as well as meeting rooms for walk-in clients. Such spaces have high capital and operational costs, with the option of extended leases.
Businesses that will benefit most from commercial office building space are those that need a professional physical environment to engage with clients, customers, supplies, and investors.
Commercial Retail Space
Retail buildings are home to all types of restaurants and retail sales shops. Such commercial properties present many complexities, with multiple local zoning regulations, as well as state laws to pay attention to. Market-rate rents depend largely on building size, type, layout, and tenant profile. Retail properties can, for example, be single-occupancy buildings or extra-large multi-tenant buildings, like malls. Retail space is generally the costliest, but it is possible to obtain longer-term leases in the sector.
The main business types that will benefit from commercial retail space include supermarkets, grocery stores, retail stores, and restaurant chains. If your business’s profits are linked to foot traffic, retail space is likely to be the best option.