Leasing an office involves many factors affecting cost, such as location, building class, and facilities. Businesses must sift through their options to make a wise investment and find a suitable space. Understanding leasing costs can save money and help you make this decision.
What are the factors influencing office lease costs?
Location
Los Angeles has many neighborhoods, each with its office market trends and pricing. Downtown Los Angeles, West Los Angeles, and Hollywood have the highest concentration of office locations and prices due to their proximity to entertainment centers, luxury amenities, and extensive business districts. These areas typically attract established businesses that require a prestigious location to attract clients and employees.
On the other hand, more affordable options can be found in the San Gabriel Valley, North Hollywood, and surrounding suburban neighborhoods. These regions provide good value for small businesses or startups looking to decrease costs.
Downtown LA: $4 to $6 per square foot
West LA & Hollywood: $5 to $8 per square foot
San Gabriel Valley & North Hollywood: $2 to $4 per square foot
Building Class
Another crucial component in office pricing is the classification of office buildings. Los Angeles office spaces are divided into Class A, B, and C buildings, each offering different levels of quality, amenities, and pricing.
Class A Buildings: These are high-end, modern office spaces usually in desirable areas. They have state-of-the-art facilities such as advanced security systems, on-site gyms, parking garages, and luxurious lobbies. As expected, Class A buildings come with premium rental rates, typically ranging from $5 to $8 per square foot.
Class B Buildings: Slightly older and more modest in design, Class B office spaces offer practical workspaces without the extras of Class A offices. They are often located in suburban areas or on the outskirts of the business districts. While not as luxurious, they are still functional and cost-effective. Prices vary from $3 to $5 per square foot.
Class C Buildings: These are the most economical office spaces in less prestigious locations or older structures with minimal amenities. Class C spaces offer remarkable value at $2 to $3 per square foot for businesses that don’t require elaborate features or are just starting.
Lease Length and Flexibility
Lease terms can significantly affect the cost of an office. Traditionally, commercial leases in high-demand areas require commitments of three to five years. However, with the recent shift towards more flexible work environments, many landlords now offer shorter lease terms, such as six-month leases, instead of the traditional one-year agreements.
Flexible lease options, including month-to-month leases, have become increasingly popular, especially in co-working spaces. These short-term leases often come with a slightly higher cost per square foot but offer businesses the freedom to scale up or down as needed. This flexibility allows companies to adapt quickly without being tied to a long-term contract, which could otherwise become a financial burden if their needs change.
Shared and Co-working Spaces
Co-working spaces offer flexibility with month-to-month agreements, enabling businesses to adjust their office needs efficiently. They typically provide access to meeting rooms, high-speed internet, mail services, and community events at a lower cost.
Hidden Costs of Leasing Office Space in Los Angeles
In addition to rent, businesses should be aware of other hidden costs associated with leasing. These expenses can add up quickly and should be included in the total budget before signing a lease agreement.
Utilities and Maintenance
In most commercial leases, tenants are responsible for covering the cost of utilities such as electricity, water, heating, and air conditioning. Some of these costs may be included in the rent in Class A buildings, but tenants are more likely to pay for these separately in Class B and C buildings.
Maintenance fees, often called “common area maintenance” (CAM) charges, are another hidden cost. CAM charges cover the upkeep of shared areas such as lobbies, hallways, and parking lots. Depending on the lease, tenants might be responsible for some of these expenses.
Parking Costs
Parking in Los Angeles can be a significant expense, especially in areas like Downtown LA, where parking is at a premium. Some office spaces include parking in the lease, while others charge additional fees for parking spaces. It’s not uncommon for businesses to pay between $100 and $300 per month per parking spot.
Amenities
The availability of on-site amenities can significantly influence the overall cost of leasing office space. Many Class A buildings offer premium amenities such as fitness centers, concierge services, and on-site dining. While these perks add to the convenience and appeal of the office, they can also raise the price of the lease.
Choosing a space with fewer amenities might be a good trade-off for businesses looking to cut costs. Instead, they can focus on nearby amenities such as cafes, gyms, or public transportation, which may offer more affordable options for employees.
Additional Considerations for Office Space Listings
Square Footage Requirements
One of the most critical decisions when leasing office space is determining how much square footage is needed. The general rule is that businesses need about 150 square feet per employee. However, this number can vary depending on the work’s nature and the office’s layout. For example, a company that requires collaborative spaces may need more room than one where employees work individually in cubicles.
Lease Types
Businesses should also consider the type of lease they are signing. There are different types of commercial leases, each with varying levels of responsibility for the tenant. The most common types are:
Gross Lease: The tenant pays a fixed monthly rent, and the landlord covers all operating expenses, such as utilities, taxes, and maintenance.
Net Lease: The tenant is responsible for a portion of the operating expenses and rent.
Triple Net Lease (NNN): The tenant covers all operating expenses, including taxes, insurance, and maintenance, on top of the base rent.
Understanding the type of lease can help businesses better anticipate their monthly costs and avoid any surprises down the road.
In Sum
Before signing a lease contract, one must consider location, building class, lease terms, and added expenses such as utilities, parking, and upkeep. Co-working spaces provide a flexible and inexpensive alternative, offering private office space and shared amenities. By carefully weighing these factors, you can find the right office property to suit your needs and budget and help you succeed in a competitive market.
Find Your Ideal Office Space Today!
Finding private office space in the San Gabriel Valley doesn’t have to be complicated. Simplify your search with Onboard Co-working. Whether you need flexibility or premium amenities, we have the perfect workspace for your business in L.A. County. Contact us now to schedule a tour and elevate your workspace!
