How to Look for Good Work Space

For five years, Sylvia Fogelman commuted halfway across Los Angeles to an office in Pasadena. Last year, she and her partner, Kit Kurisaki, decided to move their Shur Corp. offices to a more central location.

At first, Fogelman thought she could save money by finding a new office on her own. She eventually turned the job over to John Moore, a commercial real estate broker who specializes in serving small businesses.

“By working with John, we got a much better deal because he negotiated the lease for us,” Fogelman said. “We also reduced our rent when we moved, because we formerly had a lot of space we didn’t need.”

Today Shur, which builds single-family homes in Central California, is happily ensconced in 1,500 square feet of space about three miles from downtown Los Angeles.

Many small-business owners are reluctant to deal with commercial real estate brokers for several reasons, which often boil down to concerns about expense and service.

Some entrepreneurs think that they cannot afford a commercial broker. Yet it is the landlord, not the tenant, who pays the broker’s commission.

Other small-business owners expect--and receive--poor service from brokers who prefer to deal with major clients.

But even the smallest business can benefit from the services of a good commercial or industrial real estate broker if the owner has taken time to figure out exactly what is needed.

Your office space should fit your business goals, not vice versa, according to Nelson Algaze, an architect and space planner who is a vice president of P. Patrick Murray Inc. in Los Angeles.

“Once you establish your business plan, it’s a question of deciding who sits where,” he said.

Most small-business owners he deals with underestimate their growth needs, he said, and underestimating can cost money if the owner has to move to larger quarters sooner than planned.

“There is no average size office,” Algaze said. “The size depends on the functional needs of the business and ego of the people involved. Ego becomes a very important factor, because office size and location is a form of compensation for employees.”

Commercial brokers say the most dedicated broker can easily be frustrated by a small-business owner’s lack of direction. No matter how busy you are, they say, sit down with your employees or managers and figure what kind of space you need to accommodate your growing business.

“Make a list of wish, want and got-to-have items,” advised Tom Miller, a broker associate with Commercial Industrial Associates in West Los Angeles. “If your business will die if there aren’t parking spaces for customers, you’d better have them.”

The nature of your business dictates where you move when it’s time to leave the garage or back bedroom. If you are planning to open a retail store, being on the first floor in a high-traffic area is essential to your success.

But if it is possible to rent office space on the second floor or above, you can substantially reduce your rent.

Once you figure out how many employees need a place to work and whether you need a reception area, lunchroom or storage space, pull out a map of your city or town and figure out the best location for your company.

Does your office need to be centrally located? Does your business depend on walk-in traffic? Do you need to be near the post office or train station? Do you need freeway or highway access?

Next, begin driving around the neighborhood in which you want to be, noting for-lease signs on buildings that look appealing.

When you find an interesting building, note the address and phone number on the sign so you can follow up with a call to the listing broker.

“Ninety percent of the time,” Miller said, “the person who calls me is not suitable for the building they called about, but I usually have 15 other buildings with space available.”

Miller said a small-business owner should be prepared to put down two months’ rent as a security deposit, in addition to providing credit references and the phone numbers of former landlords.

“Leasing to a start-up business is a very big risk for a landlord because most small businesses fail,” he said.

Miller suggested providing prospective landlords with information about your company as well as a financial statement, because landlords want to see “evidence of financial stability, if not financial strength.”

Miller, who owns several commercial buildings himself, said most landlords expect the business owner to guarantee the lease payments personally, even if the business is a corporation.

John Moore, who founded his own firm after working eight years as a partner in one of the largest commercial brokerages in Los Angeles, specializes in helping small-business owners relocate.

He suggests finding brokers in your city or town who want to deal with small-business owners.

“If you are not looking for a large space, the attitude among many brokers is that it isn’t worth providing the same level of service they provide to bigger companies,” he said.

Once you find the right broker, be sure that he or she is looking out for your interests. Moore cautioned against dealing with brokers who want to show you only listings held by their own companies.

“If you have any indication of being steered toward certain properties, drop the broker immediately,” Moore said.

He also suggested being leery of any broker who does not return your calls within a day--”a broker must be attentive to his clients”--and warned against dealing with a broker who thinks he knows what is best for your business.

“The commercial real estate broker should observe the axiom that the client makes the decision,” Moore said. “The broker should present a spectrum of alternatives to meet your requirements.”

Once you find the space you want, the final step is negotiating the lease agreement.

This can be tricky, because a commercial lease typically contains six to 10 legal-size pages of fine print.

Before you sign anything, be sure to understand exactly the lease’s terms.

Ask your broker to walk you through the details and answer your questions.

Most commercial leases include automatic rent increases, but these can be tied to various economic factors, including the Consumer Price Index.

Free Program on How to Acquire a Business

The city of Los Angeles and the Vermont-Slauson Economic Development Corp. are sponsoring a free seminar for small-business owners entitled “Financing Your Small Business.”

It is scheduled for March 29 and runs from 8:30 a.m. to noon. For reservations and information call: (213) 778-9489.

RELOCATION CHECKLIST

Complete your business plan, including goals for your business.

Discuss your space needs with your employees and managers.

Prepare a “wish, want and got-to-have” list.

Figure out your parking requirements.

Determine the best location for your business.

Drive through the neighborhoods you like and look for buildings that appeal to your tastes.

Ask colleagues or business associates to recommend a broker who likes to work with small-business owners.

Provide the broker with all the above information.

Be patient and flexible.