Office Space for Rent for Startups: What the Landlord Will Ask Your Company For

What a landlord reviews when the tenant is a young company

A lease is a promise of rent for years, usually made by an entity that would be easy to abandon. So the landlord underwrites the company much as a lender would. Expect to be asked for the company's financials and funding history, and for the names of the principals.

Years of financials bring the security down. A recent raise with little operating history pushes it up, because the landlord is pricing the chance that the rent stops.

The security a landlord asks of a startup: deposit or letter of credit

Security is the collateral a landlord holds against the lease. A common ask is several months of rent, and a young company should expect a higher one. No schedule is posted anywhere: the first figure quoted is the landlord's most cautious reading of your credit, and it is an opening position.

It can be cash, which sits with the landlord for the term, or a letter of credit from your bank, which leaves the cash on your side in exchange for a bank fee and collateral. Either can carry a burn-down, a schedule that hands a slice of the security back for every year the rent is paid on time. Security deposits and letters of credit explains the mechanics, and your attorney should confirm the draw and return language in the lease.

The good guy guarantee a founder is asked to sign, in one paragraph

Most New York landlords also ask a principal of a young company to sign a good guy guarantee. It is a limited personal guarantee. The signer answers personally for the rent only for as long as the company is in the space. Release comes once the company has given the required notice, moved out, returned the keys and paid up to that day. It does not end the lease, and the company itself still owes whatever rent remains. The notice period and the conditions for release are not standard, and reading them on your lease is a job for your attorney. Good guy guarantee sets out the detail.

How Nomad presents a startup to a landlord

We assemble the package before the landlord asks for it: the financials, the funding story and a plain account of the business, arranged so the person approving the lease can read it in one sitting. A well-organized package is often what brings the first security figure down.

Then we negotiate security as a business term in the letter of intent, next to rent and free rent: the amount, the form, a burn-down, and who signs the guarantee. Where a landlord wants more comfort, extra security in the form of a bigger letter of credit will sometimes be accepted in place of anyone's personal signature. That work is done for the tenant: on your search, we work for you, and in most transactions the landlord pays the broker fee.

Searching with the next round of hiring in mind

A landlord approves the lease you sign today, so ask for growth in the same breath: a right to sublet and, where the building can offer it, a first look at adjoining space. Both are easier to win before signing than after, and lease options describes them.

The block below shows the SoHo floors we list. Our SoHo page calls its cast-iron lofts the default choice for design-led and consumer brands, and a young company is asked the same questions there as in any other submarket.