It’s the perfect time to get started on your small business. With so many options for space these days, there’s no need to overspend. In fact, you can rent a small business space for as little as $5 per square foot. What do you need to know before starting your business? Here are some key points!
What is Renting a Small Business Space?
A small business is a business that has less than 500 employees. To rent a space for your small business, you will need to meet certain requirements, such as having a lease agreement in place and owning the land on which your business is located.
What are the benefits of renting a Small Business Space
Many small businesses find that rented space offers several advantages over operating in an office building or other permanent location. For one, rented space is often more affordable than buying or leasing an office property. Rented spaces also offer flexibility, allowing you to expand or limit your services as needed while still complying with zoning laws and other regulations.
What are the steps to renting a Small Business Space
In order to rent a small business space, you first need to create a lease agreement and submit it to the local licensing authority. Once the local authority has reviewed and approved your lease agreement, you will be able to begin renting the space from the landlord. You will also need to pay rent each month and make sure all required safety procedures are followed at your space.
How Much Does It Cost to Rent a Small Business Space?
It can be helpful to try to research the typical rent for a small business in your area when you’re trying to estimate how much business rent there might be.
To get a rough idea of how much this COULD cost you, start by asking around in the area where you plan to do it. Given that location, location, and location are (you guessed it) the three most crucial factors in real estate, you will undoubtedly find a wide range of rent prices depending on how desirable a location is deemed to be (and on your industry).
To get a better idea of what you might expect to pay, speak with your neighborhood real estate brokers and business owners. Make sure to ask if they are giving you an annual or monthly price per square foot.
Although some professions, like real estate, might adopt a standard monthly figure, the yearly figure is more frequently used. For our purposes, unless otherwise stated, we’ll assume that the price per square foot refers to the annual price.
In a typical suburban area, you can expect to pay significantly more—perhaps even more than twice as much—for a prime storefront with high visibility and traffic.
A less upscale location might be $10 or $11 per square foot, while the “good spot” in a busy shopping district might cost $25.
Therefore, based solely on location, the potential rent cost difference for 2,000 square feet of retail space is $30,000 per year ($2,500/month) in this example.
Monthly rent is equal to (annual price per sq ft x square feet 12 months).
A prime retail location may increase sales enough to justify the higher rent, but this is not guaranteed. You must assess your income and make that decision for yourself (see below).
Examples of the average cost per square foot for commercial rent by metro area
We can give you a general idea of the average rent per square foot for a number of US metro areas, though you’ll need to speak with a commercial realtor in your neighborhood to get precise numbers.
Look around and see if your area is listed in Inc.’s helpful interactive commercial rent infographic, which provides their data for some of the larger metro areas.
The data from Entrepreneur is a few years old, but they published average commercial rent per square foot that can give you a general idea. It ranged from the low $20s per square foot in Dallas and Atlanta to around the $30s in Boston, Miami, LA, Seattle, Chicago, and Houston, climbing to the $50s for DC, and into the $60s and $70s for San Francisco and New York.
Note: Inc. cites figures closer to $40/sq. ft. for retail space in New York City and San Francisco, which emphasizes the need to conduct your own research to obtain a more precise understanding of what business rent should be in your area.
However, you really need to figure out the “unit economics” of your small business if you’re trying to decide whether it makes sense for you to move to your first (or a larger) rented office space.
What portion of a small company’s revenue should go toward rent?
We’ll look at some common “verticals” (types of businesses) and their typical rent ranges in order to determine this price to commercial rent ratio. Although the percentages below are only rough estimates and not exact numbers, you might find them useful for benchmarking or planning.
- Restaurants: Generally speaking, the total occupancy cost of a restaurant (including rent and additional costs for property taxes, insurances, etc.) shouldn’t be more than 6–10% of gross sales.
- Hair salons: For hair and nail salons, the combined commercial rent and property taxes range from 3% in a more rural location to 10% in a well-known, long-standing mall.
- Law offices should budget 6-7% of gross revenue for rent, but this amount can increase to 15% for a prestigious address.
- Retailers should strive to spend no more than 5–10% of their annual gross sales on rent.
- Full-service auto shops: The average auto shop pays 12–13% of its annual gross revenue in rent.
Our next point of reference is your gross sales. How much revenue did your company generate last year? What were the monthly sales totals? Many small business owners are very familiar with this number, so if you aren’t one of them, you should be.
Last but not least, you need to know (or estimate, based on your local research), the square footage and rent price of your business.
Average Monthly Rent For A Small Business
The other two factors will be determined by the type of business, but it will also have an impact on the price itself. Renting a coworking office is less expensive than finding a location for a restaurant. Additionally, keep in mind that Manhattan offices are more expensive than those in Meridian, Mississippi.
For information on the typical annual cost of rent for a small business based on the type of business, refer to the table below:
Office space rent varies from $8 to $23 per square foot depending on the type of business.
$3 per square foot for a gym
Restaurant $40,000–$150,000
$10–$25 per square foot for a beauty salon
daycare facility
Per square foot, $0.60 to $2.50
$15 per square foot for tech
Bar $110,000
How Much Does It Cost To Rent A Restaurant Space
When you reserve a restaurant for the evening, you usually require three to five hours of event space. The final price typically changes depending on where you are and how much time you need. A restaurant in the heart of a sizable city will be more expensive than a restaurant in a rural area. The season has the same effect. During the holidays, restaurants are more in demand, and this will be reflected in the hourly rental rates.
For pricing examples, let’s take a closer look at the Peerspace restaurants we previously mentioned. The opulent West Village restaurant in NYC has a three-hour minimum rental period and charges around $150 per hour. The enormous Houston urban winery and restaurant has a two-hour minimum and charges $500 per hour.
The Chicago Loop restaurant charges $200 per hour with a four-hour minimum, while the quaint neighborhood winery in San Francisco charges $1,000 per hour and has a two-hour minimum. The cafe and event space in Atlanta has a two-hour minimum and charges $85 per hour.
As a result, prices are extremely variable. Being able to use a platform like Peerspace is especially useful in this situation because you can filter results based on the preferred price range.
Overall, the cost of renting a posh restaurant can range from a few hundred to several thousand dollars. You might pay even more if you rent directly from a restaurant, particularly if there are any additional costs that aren’t disclosed at the time of booking.
How to Rent a Small Business Space.
When renting a small business space, it’s important to choose the right size. The ideal space for a startup is around 25 square feet (25 square meters). However, there are plenty of spaces that fit this criteria, so don’t be afraid to ask around for recommendations.
Research the Space Before Renting
Before you Rent a Space, it’s important to research the space thoroughly. This includes checking out reviews and mapping out your business’s needs in advance. You want to make sure the space is accommodating for your needs and can comfortably handle your growing company.
Get a Quote
Once you have a ballpark idea of the dimensions of the space you want, it’s time to get quotes from different rental companies. Make sure to factor in office rent prices, monthly rentals, and any advertising or marketing costs associated with setting up shop in an unfamiliar area.
Payment Plans
Many rental companies offer payment plans that allow customers to pay on-demand or installments over time instead of having to worry about upfront payments and interest rates. This can save you significant sums of money down the line!
Renting a Small Business Space: Tips for Success.
When renting a small business space, it’s important to make the right choices for the space. Choose the wrong space and you may not be able to run your business at all. Here are some tips for making the perfect small business space:
•Choose an area that is ample and easy to access but still has privacy. This will give you room to work and store supplies without feeling crowded.
•Make sure the space is large enough so that you can seat everyone who will be using it and have enough storage capacity for your products and materials.
•Make sure the space is well lit and comfortable, with adequate ventilation in order to avoid Heatstroke or other air-quality problems.
•Check the lease agreement carefully to see if there are any restrictions on how much time or how often you can use the space. For example, some leases allow you to use the space only twice a year, while others may allow you to use it more frequently but require a higher rent price in order to keep the business running smoothly.
Conclusion
Renting a Small Business Space can be a great way to get started in the business world. However, it’s important to make sure that you choose the right space for your business and get started with the right payment plans. By following these tips, you can start up your small business in no time.
