Startups, Get Your Finances in Order Before Leasing Office Space

This post was authored by Nathan Smith, a commercial real estate consultant and owner of Austin Tenant Advisors

As a startup or new business owner it’s important to be financially prepared before starting the process of looking for and leasing office space. Gathering your financial information and making your startup look financially strong in the eyes of a Landlord takes longer than you think so you want to do this well in advance. By preparing in advance you better your chances of gaining the Landlord’s confidence in your tenancy and increase your chances of negotiating better office lease concessions such as tenant improvements, rental abatements, etc.

Similar to how banks preapprove you for a loan, Landlords want to make sure you are financially qualified before they lease you office space, especially in hot markets like Austin, TX.   They will be investing time, resources, tenant improvements and other lease concessions in your tenancy so it’s imperative that you prove your financial ability & stability to pay any upfront costs and rent for the duration of the lease term.

Proving that your startup company is financially qualified takes more than a great business idea, having a large 401k, or a big expensive house.

  • If you are a startup company that has been around for a few years Landlords want to see current profit & loss statements, cash flows, balance sheets, and/or other sources of financing and funding. Depending on the landlord’s perception of your financials you may need to securitize the lease with a security deposit, letter of credit (LOC), personal guaranty or a combination of the latter. Your financial strength, lease term length, total lease amount, tenant improvement costs, & lease commissions will determine the amount needed to securitize the lease.
  • If you are a brand new startup with no track record or you’re an existing one with weak financials Landlord’s will probably want the person signing the lease to provide 2-3 years of personal tax returns and/or a personal financial statement. Depending on the Landlord’s perception of those personal financial statements they may require that the lease be personally guaranteed, need a larger security deposit, or need a letter of credit (LOC) that will cover the landlords up front costs to do the deal (e.g. tenant improvements, lease commissions, etc.).

Before you begin the search for office space, make sure you have your financials in order and have them ready to show Landlords. You might also consider having your business plan and pro-forma available to show your current and future financial projections.

Do all that you can to put your best foot forward, however because you are a startup Landlord’s still may require you to sign a personal guarantee, pay a larger security deposit, or have a letter of credit (LOC). You only get one shot at making a good impression! The more prepared you are and the better your finances look the better chance you have at proving to the Landlord that you can pay rent AND in receiving office lease concessions.

Nathan-K-Smith-Austin-commercial-realty-services-200x300

 

Nathan Smith specializes in helping startups companies find, lease and/or purchase office space in Austin, TX. He has advised over 300 companies in finding the best office locations, negotiate new leases and lease renewals, facilitate relocations and expansions. Outside the office Nathan enjoys hanging out with his wife and two children in Bee Cave, TX and is an avid runner and cyclist that participates in many local triathlons and running events.

Lookin’ for Tenants in All the Wrong Places

The Destination

It has been 18 months since we launched our pilot program for Tenant Rep Brokers and I’m thrilled to say that it has been an overwhelming success!  In fact, since we launched, others have tried to copy our model which is further validation of the market opportunity.  However, their captive audience isn’t necessarily tenants that are searching for space and is reflected in the quality of those leads.

2012 and 2013 were record years for us over multiple metrics and 2014 seems to be on the same overall trajectory, if not better:OfficeSpaceUserGrowthOfficeSpace.com continues to be the premier destination for tenants that are actively looking for space.

The Program

Tenant Connect is our broker marketing program specifically designed for tenant representation brokers from the ground up.  Our platform allows prospective tenants to reach out to our Tenant Connect Brokers directly as they are searching for available spaces while on OfficeSpace.com.  These inquiries or contacts can happen via email or phone and are tracked in our system and relayed directly to the broker.  It is truly a platform that works for both the Tenant and the Tenant Reps.  Best of all, as a tenant rep, you don’t have to do anything to source the clients, you just have to qualify and respond to the inquiries…something you all do currently.

Overall results for the past 18 months:

  • Approximately $500,000 in commission revenue generated for the broker
  • Over 6,500 contacts directly delivered to the broker
  • Over 115 closings with a large pipeline
  • Our broker churn rate is flat at 0%, everyone is seeing the value

The Journey

All our current tenant connect brokers are reaping the benefits of adopting early as they are all generating commissions and have secured their spot in their respective markets.  All our pilot cities are currently full but we are always building out wait lists.  Additionally, we make proactive changes to our tenant connect broker pools based on performance and user reviews, which helps us improve our tenant experience.

What some of our Tenant Connect Brokers have to say:

Overall – the use of OfficeSpace.com has enhanced my ability as a broker tenfold – I truly cannot imagine getting going without a tool like this.  My interest in inbound leads and how to qualify, nurture and then cultivate them has proven a great asset to Colliers –and an invaluable learning experience with your tool.  I look forward to many more years of successful partnership – and would encourage any and all feedback you have for me in the future. — Sam Devorris (Colliers, Denver)


(in 4 months) Have received over $30,000 in commissions my efforts have generated from the leads so obviously it has worked for me! — Scott Driver (Scott Driver & Company, Seattle)


The main reason for enjoying the TC Broker Program over the last two years is the ease of quality inbound leads and income, not just the immediate 5 figure deals but the future 5/6 figure deals when leases roll/renew/relocate.  I have never done a six-figure lease with Office Space yet, but in 2013 and 2014 so many deals were in the five-figure range. I also have a 62 month deal in the highest priced building in all of San Diego County today from an Office Space lead – anyone can call me about it, and I will note how easy it was to get.

In our competitive commercial real estate environment to have so many office leads come in that are coming from areas that you would otherwise have to be LinkedIn, be introduced, or network to meet the President or CEO, OfficeSpace.com is able to cut right to the front of the line.  

I recommend OfficeSpace.com to all tenant reps, the only problem is not all tenant reps can become a member, so I tell them in minutes to sign up or get back to LinkedIn, be introduced, or network. — Michael Mazzotta (XREIT, San Diego)

The Opportunity

We’ve learned over the past few years how to attract and keep prospective users on the site and we will continue to listen, learn, and refine our services.  The team at OfficeSpace.com is aggressively expanding our listing base throughout the nation and this will allow us to bring this platform to many more markets in the near future.

If you are interested in being a leader with entrepreneurial foresight, contact us for more information and reserve your spot as we offer this platform in your market:

Don’t miss out like so many brokers in our pilot markets did, by letting the herd mentality take over.  Many of those that missed out was simply due to waiting to see who would join the program.

After all, where else can you tap into a steady profitable stream of prospective tenants actively looking for your help?

Where are you looking to find tenants?

Calling All Tenant Reps!

So many inquiries, so little time

We’ve had a great 2012 and 2013 looks to be off to a fast start.  So much so that we are looking to expand our pool of Tenant Rep Brokers!

OfficeSpace.com has been extremely busy with our Portland, Denver, and San Diego launches and here is a brief summary of 2012:

  • Launched Portland, OR (Jan 2012), Denver, CO (June 2012), San Diego, CA (Dec 2012) AND
  • 243,000 visitors
  • 2,200,000 building views
  • 1,900 leads directly to listing brokers
  • Approx. 10,000 calls to listing brokers

We’re very proud of these results, however, we’re just getting started.

Destination for Tenants

OfficeSpace.com is where many tenants who are just starting to look for space first enter the market. We’re talking to these potential tenants, sometimes they simply request some marketing and listing contact information. Other times, these are tenants who are ready and willing to work with a Broker and this is when we send them to you. We are filling a void for tenants and they are finding us online.

Little Secret

As some of you may know, the OfficeSpace.com platform is open to nationwide listings even though we are focused on our home markets of Seattle, Portland, Denver, & San Diego.  In fact, we continually add new listings outside of our home markets and they are getting indexed.  In the last 30 days, much to our surprise, our non-home market web stats and lead activity has in some cases, surpassed our home market metrics:

  • 52% of visitor traffic was outside our home markets
  • 60% of our building views were attributable to our non-home markets
  • 30% of our leads & inquiries were generated from outside our home markets

The Opportunity

This is where you come in!

If you are an experienced Tenant Rep and would like to be part of our Tenant Rep Broker Pool, please email me at howard@officespace.com with a brief bio and I’ll be sure to contact you.  Oh, by the way, our Tenant Rep Broker Pool is free to join but spots are limited, so secure your first mover advantage and get in early!

If you have listings, get them onto OfficeSpace.com, you will get indexed, you will get exposure, and you will generate leads.

With your help, we’re making finding and leasing space a smoother and easier process!

Commercial Real Estate Start-Up Reinvents the Way Business Owners Search for Space

Contact:

Ninette Cheng

Marketing Coordinator, OfficeSpace.com

office: 206.686.4545 | Ninette@officespace.com

June 13, 2012

OfficeSpace.com knows a change in commercial real estate technology is coming— in fact, they’ve known and are readying to launch their free broker and landlord-to-tenant service in its second market.

After its successful beta launch reaching 24,000 tenants, connecting 350 tenants to brokers and landlords and covering 186 million square feet of space in Portland, Ore. OfficeSpace.com officially launches its new service, starting with Denver, Colo. on June 13.

“As an entrepreneur, finding the right space was always more difficult that I anticipated,” CEO and Founder Susie Algard said.  “The system of waiting for someone to call you back just to give you the space details or rate information is highly inefficient.  All of the tools were focused on people who were familiar with commercial real estate, not for people who only need to find space once every few years.”

In Denver, OfficeSpace.com currently covers over 172 million square feet of space and over 3,000 buildings available for tenants to search.

The days of expensive broker-to-broker subscription services are behind.

“By providing open access to details on an office space, we are helping all business owners during their research phase,” Algard said. “In particular, we are serving an audience whose needs are currently not sufficiently met – small business owners.  It’s difficult for brokers to make small requirements profitable, but we have created tools to help them directly with that.  We connect qualified tenants to brokers for free.”

OfficeSpace.com’s website offers free viewings and listings and social media tools for sharing. The company most recently launched a free Broker Tools suite for brokers to create flyers, surveys and communicate with tenants.  It also features photo-friendly interface and information on the confusing aspects of a lease for tenants.

About OfficeSpace.com

OfficeSpace.com is a start up with the goal of creating an efficient marketplace connecting tenants with landlords and brokers.  The company, purchased by Internet entrepreneurs Susie and Alex Algard, launched it’s new beta service launched in Portland in January 2012 and to date, has serviced over 350 tenants looking for space.  OfficeSpace.com also operates one of the leading commercial real estate marketing and analytics services in Seattle, Spokane, Denver, Minneapolis, Cincinnati and Columbus and can be found at www.officespace.com.

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‘Little Showcase of Horrors’ – More Historic Portland

A few weeks ago we posted a blog post with a few of our favorite buildings in Portland. We thought it was fun so here are some more beautiful buildings that our photographers have taken shots of.

New Market Theater Block

 

Built in 1872, this Old Town building’s name comes from the fact that it originally housed a market on the first floor and Portland’s first theater on the second floor.

 

The first floor arcade was highlighted by a total of 28 marble produce stalls.  For much of the 20th century the building was used to store car parts until 1980 when it was renovated into a retail and office building.

Also of note, The Portland Symphony Orchestra was officially founded in 1882 and started in the New Market Theater block.

The Brewery Blocks

I’m sure The Brewery Blocks need little introduction to any Portlanders. To those reading from elsewhere, The Brewery Blocks were the location of the City Brewery and later the (and more famously) Blitz-Weinhard Brewery from the mid 1800’s to 1999. The oldest buildings remaining were built in 1908, including the Brewhouse Tower.

In 1999 the Weinhard brand was sold to Miller Brewing Co. and brewing was subsequently sent to the Olympia brewery in Tumwater, WA. The Brewery Blocks, which by this point had increased to 5 blocks, were put up for sale and in 2000 were redeveloped into a mixed-use project with office, retail residential spaces.

The Brewery Blocks’ most famous tenant is Henry’s 12th Street Tavern, which features 100 beers on tap, almost entirely from Oregon. Powell’s Books, while not in the Brewery Blocks, borders block number 2.

Smith’s Block

Originally built in 1872, Smith’s block was just one of nine Portland buildings featuring one of the more popular Portland cast iron patterns. Now, it is the only survivor amongst those buildings.

During the 1950’s, the quarter of the building on 1st and Ash was torn down and turned into a parking lot. Despite this loss, the rest of the block remains and has been restored as recently as 2008.

Stay tuned! More to come and as always, send us your suggestions PDX!

A Successful Start-Up Story – Founder’s Instinct, Go Direct.

As I discussed on my last article, The #1 Mistake Many Start-Ups Make When Managing Growth-Remember the Garage?, I wanted to share with you an anecdote from a well established web company in Seattle, that will remain anonymous, let’s call them Dot.com.

Looking Good, Billy Ray! Feeling Good, Louis!

The year is 2010, and Dot.com has done extremely well for themselves. The founder’s acquired the domain name and other assets for under $5,000 and proceeded to build it into a top 100 most visited websites in the US, over a span of 7 years.

They have gone through a couple of office moves. Each move they upgraded and eventually ended up in some Class A space in the heart of Seattle, which  has a fairly competitive office market.

Shortly after they move into their space, they are already needing additional space. They had a couple hockey sticks in their growth chart! The founder heard that the neighboring tenant was looking to sublease some space, exactly what Dot.com was looking for.

Let’s Make a Deal

The founder calls his trusted commercial broker who found them their current digs and instructs them to place an offer of $15/sf on a short-term lease on the neighbor’s space. The broker informs him that they didn’t even get as much as a response to our offer from the landlord’s brokers. The founder assumes that maybe the offer was insultingly low.

The next week, the founder just happens to run into the neighbor and decided to ask about the space, nothing to lose since they already rejected the offer.  It was clear at this point that the neighbor never even saw the offer. Much to the founder’s surprise, the neighboring tenant seemed remarkably eager for Dot.com to pick up their space. They shook hands and came to an agreement for $3.60/sf on the spot.

This is just one example where the broker channel was ineffective and this isn’t necessarily a knock on brokers but more a reflection of the commission based compensation model that brokers live in, a you get what you pay for mantra.

Bravo to the founder for going direct and cutting out the middleman; probably another reason why Dot.com is still so successful.

Our First Portland OfficeSpace Showcase…Distinctly Portland!

Over the past few months, with the help of some wonderful photographers, we have been hard at work capturing the architecture and beauty of downtown Portland, the Pearl, the Central Eastside and many of the other Portland neighborhoods. Some of this could only be done with the cooperation of our friends in the Portland brokerage community, the rest we did by simply walking the streets and shooting buildings.

Most of the pictures can be found on the site, but here are a few of our favorites.

The Blagen Block:

The Blagen Building, located in Old Town, was built in 1889 and is a gorgeous example of Italianate architecture, which was at the height of its popularity in the second half of the 19th century.

Its location on NW 1st is absolutely picturesque. Pure Portland.

Blagen Block

The Spalding Building:

These pieces are located in the Spalding Building’s lobby. Made out of old vaults, their contrast to the clean and beautiful lobby is quite striking.

Spalding Building

A closer view.

Spalding Building

The Spalding Building was built in 1911 and was added to the National Registry of Historic Places in 1982, one of over 500 in Portland.

The Postal Building:

Pardon the photography on this one; this was before we realized it was best to take the camera out of my hands.  The Postal Building, built in 1901, was added to the National Registry of Historic Places in 1978. I found the highlight of this building to be the beautiful atrium. (Wish my picture did it justice)

Postal Building

The Barber Block:

Most people familiar with Portland will recognize the historic Barber Block. Built in 1890, this building is another example of Italianate architecture but with a unique flair of Richardsonian Romanesque architecture as well.  Known as an east Portland landmark, it was added to the Registry of Historic Places in 1977.

Barber Block

Barber Block

Barber Block

That’s all for now but there are countless incredibly beautiful buildings in Portland, we’ll be back with more soon. Let us know if you have some buildings that you would like to see in our showcase!

The #1 mistake many startups make when managing growth. Remember the garage?


In a galaxy far, far away…

In the beginning, most start-ups follow a certain pattern:

  • Inspiration leads to the “killer” idea
  • Bootstrapping
  • Sourcing Capital
  • Recruiting an A-Team
  • Product Development
  • Building an Infrastructure
  • Iteration
  • Managing increasing Costs
  • Growth

There are many versions of the story but in my own career and listening to the anecdotes of many other entrepreneurs, most folks like you and I have sang and are singing the same song.

Boot Strappin’ 

In the early stages, everyone including founding members are wearing many hats.

  • You may be starting your empire from the confines of your garage.
  •  You may be able to delegate certain tasks to your founding team of two.
  • You may want to hire or outsource but the cost benefit may not make sense at this time.
  • This may not be most efficient but it’s cost effective.

Everyone is burning the midnight oil to get to market as quick as possible and the Agile Development model is adopted. Your development team is furiously taking feedback and the products and business models evolve. You and your team have proof of concept now and the future looks bright.

Your first two revenue models don’t produce as you hoped they would, so you scrap them and finally find a revenue model that works for you.  Soon, the revenue grows from a trickle to a stream and it looks like it will be a steady stream. Life is good and all the blood, sweat, and tears seem to be paying off. Team morale is high and even the instant noodles taste infinitely better!

You Did What with My Money???

Depending on your cash situation, this may be the time you seek additional funding. You’ve proved your concept, generated revenue, and now you’re looking to scale that model. I won’t go into valuation models, capital structures, or optimal equity distribution, but another major attribute that most investors want to see is fiscal responsibility.

When I talk about fiscal responsibility, I don’t mean extreme conservatism, as say an accountant would, but more of a prudent balance of risk, reward, and stewardship. There will be a certain amount of cash burn related to the Agile Development process as some features will be pushed to the side or scrapped all together, but cash burn that locks you into long term contracts that increase your fixed cost structure that may not contribute to the business are things to look out for. This may be one of the most overlooked aspects of the start-up life.

Pre-Y2K Hysteria

In the early go-go internet days, many companies got to this stage and proceeded to secure prime Class A office space with room to spare for their burgeoning venture only to find out that they over estimated the growth that they would experience. This left many start-ups in a precarious position, after all, most start-ups aren’t experts in commercial real estate.

There are many more practical options for office space nowadays. We will always have the garage to start out in, move to a shared or co-working space, perhaps graduate to an executive suite space, or look for a screaming deal on a sublease space offered by perhaps some of the less fiscally prudent start-ups out there.

Your Space Says A Lot 

Many successful entrepreneurs look fondly on their days of bootstrapping:

  • Remember when we had to float all our credit card balances to pay for the gear?
  • I miss those days all 5 of us were huddled on top of each other in the basement working 14 hour days.
  • It’s lunch time, 7-Eleven or the Gas Station?

Another common thread among many successful entrepreneurs is balancing image from reality. From the type of marketing spend to the type of office they lease. Don’t be fashionable, be fundamental. If you just raised money, it can be difficult to justify contracting for prime office space when you’d rather hire more people to get you to your goal.  Not only will your investors appreciate this, so will all other equity stakeholders.

For all you start-ups out there, the sublease space may provide you with the most flexibility and lowest cost to leasing office space. Unfortunately, this market is underserved and is sometimes difficult to find. Many brokers also aren’t very helpful in this type of space search as they have to put in the same amount of time as a normal search but only get paid a fraction of their commission rate, on a sublease.

Craigslist is the most common place to find the smaller sublease spaces out there and they do a great job of aggregating those spaces. However, as many of you are familiar with, the craigslist experience is not for everyone, especially those that don’t have much time to spend on sifting through endless ads. Let alone setting up tours and other logistical tasks.

As you can guess, I work for a start-up called OfficeSpace.com and we focus not only on larger spaces, but smaller spaces and sublease spaces as well. We are looking to solve the small and sublease space problem and we’ve launched our Beta in Portland.

Stay tuned for my next article, where I will share an example of another start-ups’ experience. All the best to the brash, brave, and entrepreneurial companies out there. All comments are welcome!

Image credit: http://creativehomeoffices.com/wp-content/uploads/2012/02/Basement-Before-e1328914683809.jpg

Image credit: http://www.lifeknowledgefm.com/what-is-bootstrapping/

#CRE a Little Spam Sandwich For Everyone?

Social Media is all you hear about these days and Commercial Real Estate is catching this wave.

But I have to ask, why does it seem that the twitter #CRE is a regurgitation of other’s breaking news retweeted to insure that the headline has been reinforced subliminally?  Is anyone really responding to the new “hot” listing via twitter? Is this just the nature of twitter? or are we taking the proverbial ‘first steps on the moon’? Am I just missing the point?

I especially love some of the well respected tweeps start talking about the spamminess of #CRE yet they too are contributing their share of 150 or so retweets/day.  I guess we are all guilty of this and the sense of lost opportunities by not getting on the social media express is tough to ignore.

I certainly don’t have the answers but would love to hear from you!