Written by, Brandi McDonald
How do you know how much you should be paying for available commercial space for rent in Houston? Many business owners are looking to expand from their home-based office — or they want to add more space as their business grows — but it can be difficult to determine the precise amount to spend on your office location.
When you are looking for Houston commercial space for rent, we suggest considering a few key business metrics to determine whether the office space you are seeking matches your operational goals and objectives. Here’s how to work with the office rental rates in Houston so your business succeeds.
Consider rent-to-revenue ratios when seeking commercial space for rent in Houston
In many instances, potential renters use a simple (but inappropriate) calculation to budget for their office space needs.
Those renters use a rent-to-net income calculation, which often yields a larger budget and can be misleading for their operational decisions. Those clients end up with facilities that are too expensive, which can strain their financial resources. Instead of overestimating your financial capacity, we suggest using a rent-to-revenue calculation.
How does rent-to-revenue benefit you when calculating your rental budget?
- This calculation involves simply dividing the proposed annual rental cost by your annual gross revenue.
- This information provides you with a more realistic perspective about what you can afford. With the rent-to-revenue calculation in hand, you can better assess which of the Houston office rental rates you find will be best for your business needs.
To see the varying rental rates in the Houston office market, click here.
- Rent-to-revenue ratios tend to differ by industry. For professional services firms such as law or engineering practices, your business may benefit from a space that has a 0.15 — or 15 percent — rent-to-revenue ratio. Retail establishments tend to have better luck with smaller margins of about 5 to 10 percent. Ultimately, the commercial space you choose should be based on both your current earnings and projected need for expansion.
To see what the rent-to-revenue ratios are for your industry visit the following site. https://www.bizminer.com/
These variables can be significantly different if you operate a restaurant or a tech startup — a business consultant can be a great asset in identifying the right fit for your company.
Understanding the true cost of occupancy
A quality business location often comes with a list of additional costs that may not be included in the baseline rent payments. These often include:
- Common-area maintenance
- Utilities, such as after-hours heating and cooling costs
- Management fees
- Interior build-out
- Janitorial, security, parking and IT infrastructure costs
- Furniture, fixtures and equipment
Make sure that you are looking at the whole picture. When it comes to commercial real estate, the true mantra should be “buyer beware.”
Selecting the right office space is vital to many aspects of your business
Finding commercial space for rent in Houston can be a challenge, especially if you are at the helm of a startup and your income is unpredictable. Having a partner to assist with identifying the right options in Houston real estate can be invaluable. You need space for your team to expand, but you also need to be able to keep the lights on.
But not all real estate decisions are economically driven. Other qualitative features should be taken into consideration, such as, proximity to clients, employee and competitors and access to amenity-rich environments which can increase productivity.
With a diverse array of options available in our area, you are certain to find the right Houston commercial space for rent. Make sure that you set an appropriate budget, narrow down your options based on location and occupancy cost and set your organization up for future success in the right office space.
Visit our blog section to read more about the non-monetary factors to be considered when choosing the right location and how a broker can help navigate this decision.