The high costs associated with a standard lease agreement may be the main drawback to pulling the trigger and a firm may be better suited office space rather than jumping the gun.
Leasing your own office space is a feeling unlike any other. It is a feeling of accomplishment that not only boosts your confidence, it means you have succeeded in your career to have the need to acquire such a space. Having your own space really means you are free to do whatever you want with it.
One may want to have eccentric office decorations or they may even want an office cat to roam the site. It doesn’t matter, because that is your space to have free reign.
That is, of course, if your firm is willing and able to pay for the privilege.
Standard commercial leases are a huge financial commitment. This is true for anyone looking at renting a space. If your firm is located in a major metropolitan area like Los Angeles, Boston, or New York, expect the local markets to dictate the higher costs.
Not only do firms have to worry about attaining the actual space, they have to worry about maintaining it. Adequate services like electricity, commercial grade internet, office equipment, and even the pens we use to write our checks are necessary for the office to function properly.
Regardless of how many people work in your office, the bill from the provider will be the same whether it is three or thirty people.
The smaller the firm, the more suitable an executive suite or sublet office.
In the sense of business, a firm must always keep their bottom line in mind. What option is going to be the most cost effective in the long run?
In a shared office space where costs to run the space are fixed, it is typically spread out over several tenants. This is a better option for small firms in urban areas where the market is plagued by colossally high rents that may be out of reach for a smaller firm.
At Law Firm Suites, we’ve incubated a number of law firms from one man armies to 8-person + firms. Fairly consistently, we’ve see that a firm grows to a certain point where their own lease office space may better fit their needs than in our executive suite for law firms.
Some firms end up staying over an extended period of time even as they grow because the hassles of keeping an office running are taken care of by staffers provided by Law Firm Suites. Costs to do so are also much lower than if the firm had their own space.
The real question: How do you know when the firm should lease its own office space?
Four or more lawyers at a firm and at least one administrative professional employed by the firm means it may be time to consider a standard commercial lease. The revenue coming into the firm constitutes such a move as the firm can handle the costs as business continues to grow.
With four attorneys, a firm should be financially stable to warrant the risk of acquiring a standard commercial lease. In terms of managing the office, the administrative professional can handle the most of the administrative duties necessary for running a small firm thus minimizing any lost billable time; the attorneys can stick to practicing law.
Even if the firm grows to four attorneys and one office associate, it is generally less expensive to used shared office space or an executive suite. Having said that, leasing directly from the landlord may mean the ability to get even more space.
Having that extra space may even benefit the firm as it expands rapidly. It gives liberty to hire more staff and fill the space without having to acquire more as one would in a shared office space of executive suite.
A major problem with leased office space: Full potential of utilities and equipment is not utilized.
When your firm grows it means you are doing well. Beginning stages or a small firm mean a limited number of people. Having ten employees as opposed to four in an office space is only going to be a positive because the more you have, the more value you get out of the space.
Your costs are looked at per attorney and in a small office, therefore costs must be minimized as much as possible. The lesser the costs, the easier it is on your wallet.
In addition to cost, four-lawyer/one admin firms should really consider whether or not they want to deal with with the stresses of managing an office space. Sometimes it may be a more viable option to continue renting from a shared office space because it allows the attorney to focus on what their priority should which is the practice of law.
The firms that typically stay in shared office space, even at four or more attorneys.
At Law Firm Suites, we see both situations. Newer firms that are still growing tend to move on as soon as their financials stabilize a bit. While on the other hand, older, stable multi-lawyer firms that, at one time had their own leased office space, tend to truly understand the value of renting an office in shared office space.
From our perspective, this seems to be the natural evolution of law firm office rentals.
An additional caveat about firm size.
When one thinks about the location of their firm, it may not be feasible to even lease the space with just four attorneys. There may not be availability of spaces with adequate space for you at that time or in your price range. Downtown Manhattan typically has more spaces but if you take a train further up into Manhattan to an area like Penn Station, Grand Central, or even Union Square, smaller spaces that are adequate in size for a small firm are typically not in as high abundance as in an area below Canal Street. This means a move to Midtown needs at least twice as many attorneys to justify such a decision.