Avoid These 7 Costly Mistakes When Leasing Space for Your Startup
Bryan Richardson | February, 2025
Leasing space is a significant milestone for any startup. It signals growth, ambition, and readiness to establish a physical presence. However, as exciting as this step is, it’s not without its challenges. As a commercial real estate team, we’ve seen startups make avoidable mistakes during the leasing process that can hinder their success. Let’s explore the most common pitfalls and how to avoid them.
1. Underestimating Future Growth
One of the most frequent mistakes startups make is leasing space that meets only their current needs without considering future growth. Startups are dynamic by nature, and what works today may not suffice tomorrow. It’s crucial to forecast growth realistically and consider flexible lease terms or spaces that allow for expansion. Looking for a building with diverse square footage options that allow for seamless expansion can also be an excellent strategy.
2. Ignoring Hidden Costs
Many startups focus solely on the base rent without accounting for additional costs like utilities, maintenance, property taxes, insurance, and common area expenses. It’s also crucial to understand who is responsible for maintaining the space and covering tenant buildout costs. Some leases require tenants to handle repairs and improvements, while others place the burden on the landlord. These hidden costs can quickly inflate your monthly expenses. Before signing a lease, request a breakdown of all costs to avoid unpleasant surprises. A triple net lease, for instance, includes these extra expenses, so understanding the lease structure is essential.
3. Under-Committing to Long Leases
While committing to a longer lease can seem daunting for startups, it often provides stability and cost predictability that are essential for growth. Securing a five- or ten-year lease allows businesses to lock in favorable rates and avoid frequent relocations, which can disrupt operations and increase costs. That said, it’s important to carefully evaluate your future needs and work with a broker to negotiate terms that include expansion options or flexibility clauses to accommodate growth.
4. Neglecting Location
Location is one of the most critical factors when leasing space. Startups often choose a location based on price rather than its suitability for employees, clients, or brand image. A poorly chosen location can lead to low employee morale, difficulty attracting talent, or reduced accessibility for clients. Consider proximity to public transportation, amenities, and the overall vibe of the neighborhood.
5. Skipping Professional Guidance
Navigating the commercial leasing process without professional assistance is a common and costly mistake. Startups often try to handle negotiations themselves, missing key details that could save them money or provide better terms. A commercial real estate broker can guide you through market analysis, lease negotiations, and even tenant improvement considerations, ensuring you get the best deal possible.
6. Overlooking Space Functionality
Startups sometimes fall in love with the aesthetics of a space and overlook its practicality. Does the layout support your workflow? Are there enough meeting rooms, collaborative areas, or private offices? It’s essential to evaluate whether the space meets your operational needs and aligns with your company culture.
7. Rushing the Process
Finally, startups often underestimate the time it takes to find and lease the right space. The process involves site visits, negotiations, legal reviews, and potential buildouts. Rushing can lead to poor decisions or settling for a suboptimal space. Start planning well in advance to ensure a smooth transition.
Avoiding these common pitfalls can save your startup time, money, and frustration. Leasing space should empower your growth, not hinder it. If you’re ready to find the perfect space for your business, let’s connect. With our expertise in Central Florida Commercial Real Estate, we’ll help you navigate the process, negotiate the best terms, and secure a space that sets your startup up for success. Contact FCPG today to get started!