Growing as a Tech Company in Chicago
Chicago, IL | March 16, 2020
The Chicago tech industry can be summed up in one word: growth. Year over year, the industry has grown nearly 23%. Uber, Glassdoor, and Google, along with lesser-known success stories like Cambium Networks, ReviewTrackers, and Sprout Social, have recently established new offices or expanded current space. Despite competition, finding an ideal tech space for your fledgling tech company isn’t as complicated as many assume—you don’t have to settle for a co-working space. So how do the non-Googles of the world, those startups teetering between the shared-space world and occupying their own office, determine how to choose the right space to lease and grow a company?
You find someone who’s already connected techies to their future spaces.
The Myth of “Traditional Office Space”
For growing tech entities, it’s easy to buy into the myth that office space is too expensive and comes with long lease terms, but that simply isn’t true. Yes, you should be mindful of the limitations caused by cost and lease-term length, but there are many options available for a small company. That is doubly true if you abandon the idea of the “traditional office space.”
A Steppingstone Office
Growing companies should look for ready-to-go space. Don’t build to exact specifications for your first office. Instead, use your first office as a steppingstone. First or even second offices are rarely forever homes for growing tech entities, so raising capital to create the perfect first office simply doesn’t make sense.
Two Words: Building Vacancy
What happens if you do find the perfect, pre-furnished space for your company in the immediate? Make sure to consider building vacancy! You might find the ideal space, but if you think you’ll continue to grow steadily, you’ll have fewer growing pains leasing in a building that has space for your business to grow. The ideal situation is to find existing space that has contiguous adjacent space for future growth. Many landlords are more than willing to accommodate future growth, and some will even offer greater incentives.
Yes, it’s hard to predict the future. With that said, there are professionals out there who can bring a longer-term perspective that accounts for the unexpected. From expansion options to right of first refusal and termination options, it helps to have a broker with tech-space experience on your side.
Sublease vs. Direct
Compared to leasing directly from a landlord, short-term subleases often offer tech firms greater value. But there are some dangers you need to be aware of:
- Beware of short-term subleases that are too inexpensive. If the sublease rate is significantly less than the direct asking rate, you might be flabbergasted by the rate increase if you decide to stay in the space beyond your sublease end date—you may be forced to decide between a costly increase or expensive move.
- Also, if you want to grow into additional space, you might notice a big difference between the price of the old space and the landlord’s direct rate for the new space.
- Tenants who sign a sublease risk giving up some direct lease benefits: right of first refusal/offer, possible termination options, expansion options, etc.
- Finally, know who you’re doing business with. Research the company you’re subleasing with to ensure they’re safe and dependable. If that company were to go belly up, you could be in danger of losing your sublease.
These reasons aren’t meant to scare you away from the benefits of subleasing, which can still gain your company a fantastic, furnished office at a low price. These are just a handful of parameters you need to lookout for, or better yet, hire someone familiar with these risks to help you easily navigate the sublease terrain.
Nathan Miller has been at MB Real Estate two years and specializes in custom real estate strategies for high-growth tech companies and startups. Nathan is a licensed broker in Illinois and graduated from Indiana University with a bachelor’s degree in Management and a minor from The Kelley School of Business. Using his analytical background to find creative solutions for cost-conscious clients, he loves when he’s able to provide clients with enough flexibility to expand while mitigating risk and overexposure.
Learn more about MBRE’s Nathan Miller.