Commercial Real Estate Advisory for Startups Watching Runway: The Budget Worksheet

Line one of the worksheet: from a yearly rate to a monthly bill

A landlord's number is a rate, not a bill. Multiply the rate by the rentable square feet, then divide by twelve. As a worked example, say a 4,000 square foot floor asks $60: that is $240,000 a year, or $20,000 a month in base rent.

The square feet in that sum are rentable, which is more than the area inside your walls, so compare floors on how many people they seat and not only on the rate. For the headcount side, plan on 175 square feet per person.

Lines two through six: what the quoted rent leaves out

• Electricity: roughly $2 to $4 per square foot per year, metered or charged at a flat rate.
• Escalations: roughly 2.5 to 3 percent a year, so the third year costs more than the first.
• Security: a deposit, or a letter of credit standing in for one. Either way it is cash a young company cannot spend while the lease runs.
• Furniture and cabling, unless the floor comes with them.
• Buildout above the landlord's allowance, where the space needs work.

A finance lead should see all six lines on one page before anyone tours. What an office really costs in New York works through each of them.

Why the advice is to price FiDi before signing anywhere else

The Financial District is Manhattan's value comparison. Its towers, some of them rebuilt prewar bank buildings and some newer glass, tend to ask less than comparable space with a Flatiron or SoHo address, and many of their floors are delivered pre-built, which takes most of the buildout line off the worksheet.

Transit is the other half. Fulton Street and Wall Street put the 4/5 and 2/3 expresses, the R/W, the 1 and the J/Z within a short walk, and PATH comes into the Oculus, so a team that lives mostly in Brooklyn is one or two stops from the office. A startup may still choose Flatiron or Chelsea. It should know what that choice costs each month, and the FiDi number is how it finds out. The block on this page shows the FiDi floors and their current range, and the FiDi guide describes the district.

Space follows the hiring plan, and the hiring plan follows cash

Size the office from the headcount in the plan the board has seen, not the hopeful one. If hiring is in that plan, the usual allowance is another 15 to 25 percent of space beyond what day one needs. If the cash does not support that margin, the answer is a smaller commitment, such as a shorter term or a furnished floor, and not a tighter squeeze.

Start about two quarters before the move date. Once the lease is signed, a furnished or pre-built floor is usually ready in two to four weeks and a custom buildout in 10 to 16, and the search and the lease come before either.