Friday, November 12, 2010

Executive Office Space - is it right for me?

“Should I consider space in one of Atlanta’s executive office spaces, or do I need my own space?” This question is presented to me fairly often in some form or fashion, and there are clear-cut circumstances in which an executive center is the best answer.

Executive Office Space Defined
First, what IS an executive suite space? It’s a way for small or young enterprises to lease commercial office space and enjoy its benefits – professional image, nice reception area, conference room, break room, etc – without the enterprise having to carry the costs of these benefits all on their own.

Here’s how executive office space works: An executive suite provider leases a fairly large space – say an entire floor of a building – directly from a landlord. The suite provider then builds this space out with a large break room and common areas, a nice reception area and shared conference rooms, and a bunch of small to medium-sized rooms with locking doors. They then sublet the rooms for short duration leases. On a dollar per square foot basis, the executive office space is more expensive than one sees in a direct lease. BUT the rate includes the shared spaces and many of the operating expenses one pays directly to vendors in a standard lease (more to come on this topic), making for a good business case.

In regards to the operating expenses included in executive office space rent, consider the list below. These are all items you will/might need to have for your office to function, and they are all made available for you in an executive office space.
      • Areas that add to your square footage requirement in a direct lease
        - Reception Area
        - Conference Room
        - Break Area
     • Products and Services you’ll need in a direct lease
        - Voice Service
        - Data Communications Service (internet, metro Ethernet, etc)
        - Phone System
        - Utilities (may be included in direct rent)
        - Furniture
        - Voice and Data cabling
        - Refrigerator and Beverage Service

When does Executive Office Space make sense?
Executive office suites primarily warrant consideration for companies needing generic office space who are in one of the three situations listed below.
  • Early stage high-growth companies. The small spaces work because there won’t be many employees at first and the short term is key because nobody can say for sure when things will take off and you’ll outgrow the space. When the company does take off, small isolated rooms will no longer suffice and the dollar-per-square-foot equation will no longer make sense, so you should expect to transition out of the executive space eventually.
  • Businesses with low HQ headcount. One example is companies whose workforce reports to onsite client assignments – they’ll benefit because they can rotate a small number of people in and out of their own space as dictated by project requirements. Another example is an outsourced CFO or COO, or a remote salesperson. These people need a base of operations, a place for their assistant to work, and professional meeting space.
  • Companies who can’t make a long-term commitment. Sometimes the owner’s personal circumstances or business model require flexibility. Other times the business financials are such that a direct landlord wouldn’t consider the company to be credit-worthy.
Conversely, executive office suites will generally not make sense if you have specialized space needs or you need more than 3 rooms. Specialized space needs may include a lab space, warehouse space, or infrastucture to support high-end computing systems. And 3 rooms is a decent rule of thumb maximum because there is a crossover point at which it does make economic and operational sense to absorb the cost of your own reception, conference, and break areas.

How to Proceed?
To determine what’s right for you, discuss your specific situation with a professional tenant representative. Your interests and theirs will be aligned, as the tenant rep would represent your interests (not those of the execuite center) and economics of the tenant rep's world will cause them to direct you towards the best product for your needs.

If executive office space makes sense for you, then that tenant rep can help you identify your best options, contact the area representative (you’ll be better off dealing with the area representative versus the onsite contact), and assist you in pricing and contract negotiations. At the end of the day you'll know that you evaluated all the options, worked in the most efficient manner through the best possible channels, and got the best possible rate and terms.

Here’s to your success!

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