Thanks to OCSC Bronze Sponsor Savills for this valuable information about Commercial Real Estate:
Securing Real Estate For Orange County Start-Ups Requires Careful Planning And Good Timing | Part 1 of 3
The influx of start-ups into Orange County makes it increasingly challenging for these businesses to acquire space in one of the most vibrant commercial real estate markets in the nation. This challenge is exacerbated by the responsibility of managing need vs. want. Companies need to preserve the capital that is critical for the growth of the business, while securing the facilities and top talent that support forward momentum.
So, how can OC start-ups effectively address their real estate requirements as they develop and expand?
Real Estate Strategies for the Stages of a Start-Up’s Growth
When venture capitalists fund a new venture, they provide private equity capital to see a start-up through seed, early stage, growth, and mezzanine in exchange for equity. Every stage generates different, unique real estate needs for a company.
1. Seed and Development
Typically, this stage starts in a living room or a garage—a space with no infrastructure costs.
This is a risky stage where a company will need to conserve resources and not spend investors’ money unnecessarily. For a company of two to 10 employees, a month-to-month lease in a co-working space is a low-cost solution. Companies that want to protect proprietary information may prefer not to share space and systems. The rule of thumb is to spend as little money as possible on space. Your office should be basic, functional and shared.
Companies in their initial stages may believe that a “cool,” standalone office is a key to success in attracting tech talent. Don’t overpay for the cool factor in your space. At this stage containing costs is the wiser course.
3. Establishment and Growth
When the company begins to generate consistent income and is expanding its customer base, improved cash flow will be available to cover expenses. It’s time for a first move. For a company of 11-20 employees, a good solution is a 12-month lease on a customizable, fully furnished “spec suite,” a pre-built office suite, usually about 1,500-4,000 square feet in size. A sublease can be another way to obtain a furnished space at minimal out-of-pocket cost,
With rising revenue levels and an expanding workforce of 21-49 employees, a company should look at its growth forecast, assess its needs for the next three to five years, and lease a space where it has an opportunity to build out and create its own, unique workspace culture that is congenial to employees and optimized for future growth.
The expanded company is now experiencing stable profits, 50 or more employees, still growing at a fairly fast clip. It’s time to lease a generously sized space the company can “build-to-suit” for further expansion, or even build its own facility based on careful analysis and forecasting.
Savills is a leader in analyzing space needs for businesses to help set goals and expectations, create solutions, and smartly manage and deploy resources in securing office, R&D, and industrial spaces. Jeff Manley based in OC can be reached at [email protected] or 949-706-6617.
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