Thinking about moving into your first – or next – office?
This piece is presented by the Zeal Center for Entrepreneurship.
When you’re ready to make the leap from a home office, co-working space or incubator such as the Zeal Center for Entrepreneurship, how do you know which office space is right for you?
A team of brokers from NAI Sioux Falls will address common commercial real estate questions at I.N. After Hours on Dec. 14 at Prairie Berry East Bank.
The hourlong program starts at 4 p.m., with a mixer following.
NAI Sioux Falls’ Gregg Brown, Marcus Mahlen and Michael Martin preview some of the questions they will be tackling.
What are some of the most common questions you receive about commercial real estate from growing small-business owners?
Small-business owners have a lot on their plate and usually handle everything in their business on a day-to-day basis. So often we get several questions, but it typically comes down to the three big ones: pricing, location and lease term. The reality for most small businesses is that they are looking at a longer-term lease than just one year, so it’s a bigger commitment for them in forecasting out their business three to five years or longer. When we are brought into the fold in the preliminary stages, it’s very beneficial for these business owners because we are able to explain, outline and quantify all of the occupancy costs associated with your own space or building, such as taxes, insurance, common area maintenance, utilities, cleaning and IT.
Why should business owners consider working with a broker on their real estate needs?
Sometimes, the perception is that anyone can go drive around on a Saturday or spend a few hours searching the internet to find their next location — which is totally true, they can! But finding that perfect space is just the starting point of the entire process of actually getting into the space. As real estate brokers who are in the market every day working with clients, where most business owners only dip into the market every three to five years, it’s really about being an expert on where the deals are trading, what lease terms and concessions to push for in a letter of intent, negotiating key lease terms that have a financial impact and providing resources such as architects, general contractors, insurance agents, IT providers, etc. Knowing the market allows us to help find the right space or property for our clients because the right property might not be on the market and we can put things in motion to get our clients into their perfect space.
What are some trends you’re seeing as far as what small businesses are choosing for office space?
It seems that there are more buyers out there than tenants. Most tenants after leasing office space for a period of time always want to own a building they can occupy and maybe also have a tenant or two to help pay the mortgage. The trend in Sioux Falls seems to be that most office users want to be located either downtown or in the central-southern half of Sioux Falls along the 57th Street, 69th Street and 85th Street corridors. One trend we are seeing right now is the construction of small office condos ranging in size from 2,500 to 5,000 square feet. The southern part of Sioux Falls is seeing a lot of in-fill construction of office space as well. Another trend for small businesses is flexibility to help manage their future growth. This might come in the form of an expansion option or by simply occupying a larger block of space than they need today and paying the landlord for the space that they occupy but as they grow they pay more in rent.
How is the vacancy rate for small office space? Are there options, or might businesses end up looking or waiting awhile?
Vacancy rates continue to remain steady for small office space, and there are plenty of options out there for small businesses looking to expand or relocate. We are a growing community, but our small businesses take awhile to grow exponentially, so they do not move around or expand at a very rapid pace. On the other hand, we simply don’t have that many office users that can occupy 4,000 or more square feet, so vacancies in the 1,000- to 3,000-square-feet range usually move a lot faster than the larger vacancies. As office-leasing demand lags, other market segments like retail and industrial seem to continue to shine and make news here in Sioux Falls.
What’s the most common mistake small-business owners make in their real estate decision-making?
They don’t hire a commercial real estate broker! Just kidding. No, seriously, often small businesses fail to budget out an accurate or even somewhat accurate number in how much it will cost them to lease or buy space. There’s a lot of factors that go into it, and we are there to help them check every box before jumping into a lease or purchase that they will be tied to for multiple years. Accessibility, flexibility, protecting against rising hidden costs and other roadblocks small businesses face every day are what we are here to help with.
