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Joel on office space

Very timely article, as we're in the throes of negotiation right now for new space.  It was interesting to read about what it's like looking for office space in New York compared to a much smaller Canadian town.  Lots of similarities, a few differences.

On the whole I think it's bang-on, except in one respect.  I'm not fond of the idea of signing a five or seven year lease, especially for a tech company.  Tech companies tend to grow, and sometimes they do it in leaps and bounds.  Committing to a 5-7 year lease means that if/when you outgrow the space early (and you probably will, if you're a tech company), then you have to deal with sub-letting the space, and now you're not only in the software biz, you're in the landlord biz.  I think it's better to know what biz you're in, and avoid dabbling in others.

Right now we're going from a 3-year lease of 1800 square feet to a 2-year lease of 4600 square feet.  The shorter lease affords us the freedom to move, while the option to extend (written into the lease) will allow us to keep it longer if we don't grow.  That way we hold all the cards, though admittedly the landlord will do far fewer leasehold improvements for a shorter lease.

Anyways, thanks for a great article Joel.  My biggest take-away was the concept of using the lawyer for negotiation like that.  Cool.

aa
Friday, March 28, 2003

IMHO, I think tech companies that worry about growing by leaps and bounds before they've bought office space generally don't have to worry about five-year leases because they'll be bankrupt in two.

Grow as the work demands it, and don't forget you can always say "no"

Philo

Philo
Friday, March 28, 2003

I suppose some companies are "leaps and bounds" growing, but I tend to more associate that with the insanity of the 90s VC funding market where you had to grow your company by 20x just to please the investors. *shrug*

Brad (dotnetguy.techieswithcats.com)
Friday, March 28, 2003

I can certainly do with more OT articles like this.  JOS can turn into Joel On Software Businesses, and that's all right with me.

Given what you and Joel said WRT expansion, I'm inclined to agree with you, a little.  Joel's point was that the landlord might let you out if you pick something else from that landlord.  But what if you don't?  Sure, if rent goes down, your long lease is cash, but if you gotta expand, you -gotta- expand, and then that cash turns into a millstone.

The one out you'd have would be subletting, so the lesson seems to be: if you're a techCo, Don't Give Up The Right To Sublet.  And yeah, it's a PITA since you'd be running two businesses instead of one, but hey, in for a nickel, in for a dollar.  Until the world lays tons of fiber everywhere and everyone gets a holodeck so they can telecommute as effectively as being face-to-face, the world will need offices, and this'll be a necessary headache.

I like the bit on lawyers, too.  Not only the assertion that one is needed (I'm used to this now, even though I -loathe- the fact that you can't seem to take a crap anymore without hiring a lawyer to cover your ass), but what kind of lawyer to get.  One that works for someone on the other side.  Seems sensible.

The only thing missing is a discussion of what it's like in other tech sectors.  Naturally, Joel wouldn't know offhand.  Anyone have good info on the situation in Redmond, SanFran, Austin, and DC?

Paul Brinkley
Friday, March 28, 2003


I don't know what it's like in Redmond, SanFran, Austin, and DC, but I'm sure everyone is dying to know what it's like in central Illinois.  :-)

My first mentor taught me that software shops should get lots of inexpensive space and use it wastefully.  So, SourceGear has 22,000 square feet which we rent for about $5 per square foot, including taxes and insurance.  It's not quaint or artsy, but we've had people from Silicon Valley visit and rave about how nice our office space is.  Those same people sometimes claim that their rent price is the same until I clarify that I meant $5 per year, not per month.

Using space "wastefully" means everybody gets their own real office with a door that closes.  Not everybody has a window, but many do.  (Truth be told, I don't believe this is wasteful at all.)

Closer to the real definition of wasteful is our rec room, approximately 800 square feet with couches and a pool table.

And our trade show room, big enough to setup our 10x20 booth and fiddle with layout in full size.

And our 4 conference rooms.

And our 900 square foot lunch room.

You get the idea...

Negotiation in Champaign is a bit different.  A lease is not likely to ever be an asset unless you're talking about prime retail space.  There is always plenty of cheap empty space around town, so subletting is quite rare.  A long lease is a liability and usually to be avoided unless you're getting a sweeter deal in exchange for the longer committment.

Another difference here is that most office space is somewhere that corn recently grew.  There is literally nothing useful within walking distance of our building.  Like most smaller towns, our downtown area is dying at the hands of the mall and Wal-Mart.  Very few businesses choose to locate there. 

Actually one of the local software companies (bigger than SourceGear) recently decided to build a 10M building in downtown Champaign.  The employees said they really wanted to be able to walk to something besides their car.  People here are really hoping that downtown gets revitalized by the new project.

Eric W. Sink
Friday, March 28, 2003

Getting a lawyer is not always good if you are not already a legal expect. We had an offer accepted by the bank to buy a 7000 sq foot building in downtown at a very attractive price as it was a foreclosure property. Had the business plan and the loan was approved by our bank. We consulted with a local lawyer to handle a couple details. He was very impressed by the price we were getting on the building, called our real estate agent, made a better offer, and talked them into stalling us with lies until he had it all completed and now our building is his new law office. The bastard. When I mentioned this to the director of the chamber of commerce, she said "Welcome to Small Town America."

Dennis Atkins
Friday, March 28, 2003

I assume that you've already started a lawsuit against the lawyer or at the minimum reported him to your state licensing board. What he did was, at a minimum, unethical.

RocketJeff
Friday, March 28, 2003

Dennis -
Please PLEASE contact your state bar and report this guy.

In fact, it might be worth doing some snooping around - I suspect if you find the right attorney and have the right kind of judges, you can get Mr. Grabby evicted from his offices and take them over.

Philo

Philo
Friday, March 28, 2003

Of course not all tech (or any) companies will grow, but with a lease you have to estimate where you will be.  If you're at 15 people and you rent the right amount of space for 20, or 25, what will happen if you're in a lease for SEVEN years?  You might not be trying to grow for the sake of growth, but are you going to be at 20 people in seven years?

I don't see planning for *possible* growth as a 'dot-com' idea.  I see it as practical.  Suffering out the length of a long-term lease isn't fun.

aa
Friday, March 28, 2003

One idea I haven't seen anyone mention - satellite offices. If your company works on distinct projects, satellite offices should be easy to do - you rent a second office then move one or two teams out there.

Seems like the worst redundant expense is the T1...?

Philo

Philo
Friday, March 28, 2003

The problem with satellite offices is not the expenses involved, it's the people issues that will occur.  Usually an Us-vs-Them mentality will try to creep in as well as the "we aren't appreciated/listened to/valued" issue - from both people at the main office and people at the satellite(s).

This is on top of the normal problems with communications between multiple offices.

Been there, done that, still have the corporate polo shirt...

RocketJeff
Friday, March 28, 2003

Let me throw in a comment about the problem of outgrowing your space before the lease is up. YMMV, but we decided that by the time we get to the point where we can't fit in the space we rented, even if we can't sublet it *at all*, the economic loss is going to be rather small compared to the amount of money we'll be making.

In other words, it's not ideal, but the absolute >worst< case scenario is that we're rolling in dough, hiring like crazy, and leaking a little bit of money from an old office we can't use or sublet. Far more likely, we'll be able to sublet it.

Joel Spolsky
Friday, March 28, 2003

If you ever find yourself in that awkware position where you have just a few too many people to be comfotable in your current space, another option is letting people work from home. We have eight people in our engineering group, all seated in a nice, windowed bullpen area that would be comfortable for, at most, four or five people. Since it is very unusual for everybody to come in on the same day, this works out well. Typically there is only three or four people there at any given time. Often I find myself there by myself or with one other person. (Here you can see seating for four, the other four seats are not visible. http://dmooney.org/bullpen.jpg)

(While I would prefer private offices, during some phases of projects I end up going in only one or two days a week, so my private office on my couch in my living room. :)

Non-engineers are located in a small cube-farm on the other side of the space separated by reception and a conference room so their noise never filters over to our side.

dmooney
Friday, March 28, 2003

Argh.... conversation.... too relevant....

At our company, we're planning for slow, methodical growth; in fact, that's almost a given at this point. That means hiring a new employee for each quarter or so. We're up to 8 now, and I can certainly appreciate Joel's argument above: if we grow, then damn it all as our previous space will represent too small a portion of revenues to care about, really.

But how does that work when you're, say, three or four people over the maximum realistic number that can fit in a space? Certainly that doesn't mean it's any easier to cover the cost of the former lease if you move out and can't find a sub lessee.

Anyway, we’ve recently moved and are already beginning to feel the crunch! Holy crap, what do we do?!

J
Friday, March 28, 2003

The lease we're looking into is in a complex of several buildings by the same company.  If we ever get too large for our space its in the lease that we can transfer to another building or other floors.  This gives us the possibility of great future expansion should we need it.

Additionally its important to put growth options in the contract when you expect them, not when the owner wants you to grow.  We're being offered the other half of the floor at the same leasing rate at 2 and 4 years.  Within a 5 year lease this should work out well for us.

And thanks for the article Joel, quite informative.

Lou
Saturday, March 29, 2003

Great article.  As someone who's moved a small office twice in the last 5 years (in the Bay area), there's a lot of stuff to know. 

One missing point from Joel's article.  Telecom is hell. 

This applies to local phone service,  internet connectivity, PBX, voice mail / receptionist services, and the indoor wiring.  The specifics vary from region to region, but the vendors (particular your local Regional Bell company) are terrible at setup.  Often you'll have multiple vendors involved who don't talk to each other, even when you order from just one company. 

The only way to make it work is designate one person internally as the telecom point person, who is a single point of contact for the vendors and can keep track of what is supposed to be happening and harass them when it doesn't.  I thought it would be easier the second time but actually the screw-ups were worse.

Voice of Rationality
Saturday, March 29, 2003

I'm in the software development business and the landlord business. Renting space to "tech" companies is a huge pain in the ass.

At least around here, they always go under before the lease is up. They also never want more than a one year lease because they know they won't be around.

Unfortunately, the commercial real estate market around here is pretty bad, so you take what you can get.

Kirk
Monday, March 31, 2003

I don't know if anyone reads topics once they've scrolled down as far as this one has...  :)

I blogged a bit about our company's search for office space.  Not as good an article as Joel wrote, to be sure, but it might be helpful to someone.

http://www.dragushan.com/archives/the_mill/000585.html#000585

aa
Thursday, April 03, 2003

I read stuff this far down!

Steven C.
Thursday, April 03, 2003

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