Part Two in a Three-Part Series
In May, the first installment of our series on designing your first office covered elements of the “planning phase.” We discussed steps such as finding the right location, determining space requirements, and choosing a layout. In this installment, we encounter the “construction phase,” which includes shopping for office space, signing a lease agreement, developing a floor plan, and choosing a contractor.
Shopping for Office Space
In Part One, we presented a few tips on finding the right type of location for your first office. After you’ve determined what type of location you need, you can begin shopping for office space. There are essentially two ways to go about finding office space. The first method involves traveling around and locating “space for lease” signs. This method works well in most circumstances, but it can be time-consuming and somewhat frustrating because it involves a lot of driving, calling, and setting up appointments.
The second method involves getting help from a commercial real-estate agent. An agent can perform a database search of all available space according to size, location, price, and type of building. After qualified sites are obtained from the search, the agent can schedule a tour of each one. You and the agent will then be able to visit each site. This service is offered to you at no cost, because the agent obtains his or her commission from the listing agent or company.
Whichever method you choose, consider these recommendations. First, you’ll need to understand how commercial office space is quoted in terms of price. Commercial office space rent is typically quoted as “price per square foot,” as in “$10 per square foot.” To figure out what your base monthly payment will be, simply multiply the total number of square feet by the quoted dollar amount per square foot, and then divide that number by 12. The result is the monthly amount of base rent.
In addition to base rent, you will probably be responsible for other charges, usually referred to as “CAM” charges. CAM stands for “common area maintenance,” which indicates that you’ll be paying for upkeep (including trash removal, lawn care, parking lot repairs, building maintenance, janitorial services, etc.) of the building or strip mall complex. Like rent, CAM charges are also quoted by the amount per square foot.
Some landlords will offer a build-out and/or signage allowance, which simply means they will pay up to a certain amount for those items. These allowances may or may not be included in the base amount quoted. As you begin the shopping process, allow plenty of time to search for and tour each potential location.
It’s a good idea to take detailed notes and photographs of each site you visit. They will come in handy when attempting to recall details of the many different potential locations. Also, ask neighboring businesses questions about the area. Inquire about any parking or traffic problems. Try to gather information about the previous tenant of the space you’re considering. If possible, contact the previous tenant and ask him or her about any problems or concerns with the location.
After careful shopping, you should be able to narrow your options to a single choice. Once you’ve made that selection, you’ll be ready to sign a lease agreement.
A lease agreement is a legal contract between you and the property owner or manager that details the terms of your occupancy. The agreement should explain the rights and responsibilities of each party, fees and payments to be paid, corresponding initiation and expiration dates, construction and signage allowances, and any special considerations.
Since lease agreements are legally binding, never allow an issue or term to be determined or defined at a later date. In other words, don’t allow the landlord to say something like, “We’ll figure that out later.” The unspoken rule, “If it’s not in writing, it doesn’t exist,” is certainly applicable when it comes to these types of agreements.
The key point to realize about lease agreements is that there is no such thing as a “standard” lease agreement. Most of them are unique, legal documents written specifically for a particular piece of property and usually heavily biased in favor of the landlord. The best way to make sure you’re signing a fair and reasonable agreement is to have it reviewed by an attorney who specializes in commercial real-estate law.
There are some important issues to consider before signing a lease agreement. First, determine the type of lease you’ll be signing. There are essentially five types of lease agreements: a gross lease, a graduated gross lease, an adjusted gross lease, a net lease, and a percentage lease.
A gross lease is one in which rent, utilities, common area maintenance, groundskeeping, taxes, and sometimes janitorial services, are combined into one monthly payment. A graduated gross lease is similar to a gross lease except that payments in the beginning period of the lease are lower than at the later period. An adjusted gross lease gives control and responsibility of the utilities and the corresponding expenses to the tenant. A net lease makes the renter responsible for all utilities, maintenance, taxes, and janitorial expenses. A percentage lease calculates the lease payment based on the tenant’s gross income (usually only applicable in retail situations and possibly illegal when done with healthcare providers).
Of course, each type of lease has its own advantages and disadvantages. Most chiropractic offices located in either a strip mall or professional building have some form of a gross lease in place.
Developing a Floor Plan
Creating and implementing the right floor plan for your first office is obviously very important. A good floor plan will allow your practice to thrive and grow. On the other hand, a bad floor plan can stifle and even ruin your practice.
The best way to develop an effective floor plan is to begin with a blank piece of paper. Draw a scaled top-view (floor plan) of the office space. Include walls, doors, windows, and any other permanent structures. Once the preliminary drawing has been created, indicate distances between each of these elements.
As you begin developing the floor plan, consider the elements to be incorporated. You’ll need to make decisions regarding the reception area, treatment areas, work desks, private offices, utility and storage rooms, break rooms, examination rooms, X-ray and darkroom facilities, writing stations, restrooms, and all other important components. Your ultimate goal should be to incorporate each of these elements in a way that allows for efficient work flow and future growth.
You may want to consider hiring an office design consultant who specializes in designing chiropractic offices. This type of specialist can help you develop a floor plan that is both functional and cost-effective.
Whether you create your own floor plan drawings or obtain them from a design consultant, local building codes will likely require that they be reviewed and possibly redrawn by a licensed architect. Most architects will provide this service for a reasonable fee.
Choosing a Building Contractor
After you have developed a floor plan, you will need to hire a building contractor (a.k.a. general contractor) to oversee the construction phase (a.k.a. the build-out phase) of the project. The contractor will be responsible for making sure that all work is done on time, on budget, and to your specifications.
Given the enormous amount of responsibility that the contractor will have, it will be important for you to choose one who is competent and trustworthy. You can begin the search process by talking to your landlord. He or she should be able to recommend at least one or two reputable contractors. You can also contact your state’s builders’ association. They should be able to provide you with a list of their members. Another option is to ask a few of the newer neighboring business people for a referral.
Initially, you should ask each potential contractor for references and a rough estimate of how much it will cost to complete the entire project. Don’t automatically hire the contractor with the lowest estimate. Some contractors bid an unrealistically low price (called “low-balling”), knowing they can gradually raise the price once they’ve been hired.
After you’ve chosen a specific contractor to do the work, ask for an itemized bid. The bid should specify estimated material and labor costs, in addition to a schedule of when each task will be completed. In many cases, much of the work specified in the bid will be performed by subcontractors (tradespeople who will be working for the building contractor). Ask for a list of each subcontractor to be used on the project.
Experts within the construction industry recommend that you obtain a “lien waiver” from each of the subcontractors. The reason for this is to protect you in case the general contractor has a dispute with a subcontractor and withholds the subcontractor’s payment.
Once construction begins, it is recommended that you closely monitor the progress of each contractor. Make sure that everything is being done to your specifications. Taking periodic detailed photographs of the project is a great way to document the work in case there is a dispute later.
Paying for a construction project is usually a three-step process, which typically goes like this: one-third of the total construction bill is due before any work begins; another one-third is due when the work is halfway completed; and the final one-third is due once all work is complete.
Don’t rush to make the final payment just because the building contractor says the “job is done.” Wait until after you’ve thoroughly inspected all aspects of the project.
In the next installment of this series, we’ll cover the post-construction phase, including how to create a pleasant and healing environment.