CRE Brokerage for Startups: Six First-Lease Mistakes and the Fix for Each

The roles a seed or Series A team meets on a first lease

The landlord owns the building and employs a listing agent to lease it, so the listing agent's client is the landlord. A tenant's broker is hired by the company looking for space, and in most transactions the landlord pays the broker fee for that side too. Your attorney reviews the lease itself. From a startup's side, brokerage is the tenant's broker at work: finding the space, comparing the options and negotiating the business terms. The brokerage page walks through each stage.

Three mistakes startups make before the first tour

• Telling the building's agent the budget. A founder touring alone often says what the company can spend and when it has to move. Both go straight to the owner. The fix: keep those numbers with your own broker, who decides when and whether the other side hears them.
• Signing a long exclusive with no way out. Some brokers ask for one before showing anything. The fix: a defined term and a clear right to end it if the search stalls.
• Starting too late. A custom fit-out typically needs 10 to 16 weeks once the lease is signed, and the search, the offer and the lease itself all come before that. The fix: start a quarter ahead for a pre-built floor and two quarters ahead for anything that needs construction.

The central mistake: ranking floors by asking rent

Asking rent is the number a landlord prints, and it is the one that moves least in a negotiation. The money moves around it: months of free rent, an allowance toward the buildout, the rate at which rent escalates. Effective rent folds those in. It is what the space costs you over the whole term, per square foot per year.

Say one floor asks $78 with six free months and another asks $72 with one, both on a five-year term. Before any allowance is counted, the first works out to about $70.20 a year and the second to about $70.80. The higher asking rent belongs to the cheaper deal, and an allowance could widen the gap.

The block on this page shows a middle band of what we list by asking rent. Each of those rents is where a comparison begins, not where it ends. How to negotiate an office lease shows which terms move.

Two mistakes that only show up after signing

• Leaving buildout cost and timing until the lease is done. Custom construction costs roughly $50 to $150 a square foot, less when more of the existing fit-out can stay, and the landlord's allowance may cover only part of it. The fix: a test fit and a contractor's estimate on the finalists before the letter of intent, so the allowance you ask for is sized to a real number. The buildout guide has the detail.
• Sizing for today's headcount. An office that fits the team on signing day is full by the time the next hires arrive. The fix: plan on 175 square feet per person, using the headcount you forecast for 12 to 18 months from now. Companies with open roles generally lease 15 to 25 percent above today's requirement, or negotiate a right to expand.