narrow the focus of the office search and ensure that the firm makes an educated and fully informed decision about its office lease alternatives. Such an analysis can be as formal as the firm decides it needs to be and can range from a rigorous written evaluation prepared by the management of the firm, to a simple checklist. While the form of the preliminary assessment will vary from firm to firm, it is important that the firm fully understand its needs and limitations before conducting a search for office space.

Space Requirements. One of the most important things that the firm should assess upfront is its space requirements. This can be accomplished by simply counting the number of professionals and staff who are presently employed at the firm (or at least will be on-site on a consistent basis with some accounting for traveling staff) and allocating a predetermined number of square feet for each such individual. Partner offices in professional firms typically range from 250 to 300 square feet; associate offices, 120 to 150 square feet; and staff workstations, 35 to 50 square feet. Once the firm has established its office and workstation requirements, it should consider its needs with respect to common areas, including reception, conference rooms, filing rooms, restrooms, copy/facsimile rooms, and kitchen areas.

In determining its current space requirements, the firm must be careful not to overlook the projected rate of growth. Not only are leases typically long-term contractual commitments, but also searching for office space, negotiating a lease, and relocating the firm are all very time-consuming and expensive undertakings, and are difficult and disruptive to do frequently. Multiple locations within the same city can cause unnecessary travel and communication disconnects. Accordingly, the firm should do its best to determine what its long-term space requirements will be before it enters an office lease.

Location. Another factor that the firm should initially consider is where the office should be located. Often, professional services firms are located in the central business district (CBD) of a city (generally defined as the downtown retail trade and commercial area of a city or an area of very high land valuation, traffic flow, and concentration of retail business offices, theaters, hotels, and services2); however, this need not be the case for all firms. Consideration should be given to locating the firm outside the CBD, such as in the suburbs or smaller business centers, where rental rates are often more affordable than in the CBD. Depending on firm priorities, an office location that is nearest to the largest number of on-site professional and administrative staff may be important.

Additionally, the firm should consider where it wants to office vis-a-vis other important locations in the city. For example, for law firms that are composed largely of lawyers who practice civil or criminal litigation, it is probably important for the firm to be located close to the criminal and civil courthouses. On the other hand, for law firms that are predominantly

composed of transactional attorneys, it might not be as important to locate the office close to the courthouse, particularly if the firm can achieve material cost savings by locating the office elsewhere.

Last, the firm should undertake an analysis of how important it is to be in close proximity to the firms clients and potential clients. The firm should consider how often client meetings are held in the office and the clients expectations (if any) with respect to where they expect their professionals offices to be located. While it is, of course, impossible to please every client, the firm should at least be sensitive to and consider where its clients offices are located and whether a decision to office in a particular part of town would impose upon or inconvenience the client base.

Building Classification. There are different classes of office buildings that will be available to the firm. While many firms choose to be in Class A space, there are certainly other alternatives (Class B and C office buildings) that could be less expensive and might fit the firms needs. The Building Owners and Managers Association (BOMA) classifies buildings based on an alphabetic ordering. According to the Urban Land Institute:

Class A space is characterized by buildings that have excellent location and access, attract high-quality tenants, and are managed professionally. Building materials are high quality and rents are competitive with other new buildings.

Class B buildings have good locations, management, and construction, and tenant standards are high. Class B buildings have very little functional obsolescence and deterioration.

Class C buildings are typically 15 to 25 years old but are maintaining steady occupancy.3

Budget. The other major preliminary consideration that the firm should assess upfront is its budgetary restrictions with respect to rent, finish-out, and furnishings. As discussed more fully later, rent is typically calculated based on a per square foot basis; however, there are a number of additional expenses that, as a tenant, the firm should expect to be responsible for paying on a monthly basis. Moreover, the firm should anticipate being responsible for substantial upfront costs, such as a security deposit, and depending on the condition of the potential office space, the firm may also have to pay for all or a portion of the improvements and furniture necessary to bring the office space into satisfactory condition.

Accordingly, the firm should prepare a preliminary budget that sets forth an acceptable expense range for both the recurring monthly costs associated with a lease (rent plus expenses) and upfront costs that the firm might be expected to pay (security deposit, finish-out, furniture). As with any start-up,

cash flow in the first few months and years of the life of the firm is critical; thus the firm should have a basic understanding of its budgetary constraints before it begins to search for office space.

Subleasing. Subleasing office space is often an attractive option for many professional services firms that are just getting started. Most landlords require future tenants to post a significant security deposit on a lease, particularly for new, start-up firms or companies without a proven track record. By subletting office space, the firm can avoid all or a portion of the financial burden associated with such a security deposit, because the sublessor is still contractually liable to the landlord for all rent due and owing under the primary lease. Thus, while the firm may be required to post a security deposit with the sublessor, the amount of such a security deposit may be significantly less than under a traditional lease.

Not only might the firm be able to obtain significant savings by avoiding or at least decreasing the amount of security required on a sublease, but it might also realize additional savings in rent by considering a sublease. Whether the potential sublessor has already moved out of the office space or is simply trying to sublease a portion of its current office space, one of the sublessors primary objectives in subleasing office space is to offset the amount of rents due under the primary lease. Thus, for example, if the sublessor is contractually obligated to pay the landlord rent at $25 per square foot, the sublessee might be able to negotiate a sublease that calls for rent to be paid at $20 per square foot. In such a case, the sublessor will have offset the amount it is liable to the landlord by 80 percent. While the amount of rent savings that might be achieved depends in large part on the strength of the overall commercial real estate market in the area, the sublessor rarely expects to find a sublessee who is willing to pay the same rent as the sublessor is required to pay under the primary lease.

An additional area of potential cost savings that the firm can obtain by opting for a sublease relates to the design and finish-out of the office space. In many cases, office space that is being marketed as a potential sublease will have already been designed and finished out by the sublessor. In offering to sublease all or a portion of its leased space, the sublandlord rarely, if ever, tries to recoup from the sublessee the money it spent in initially designing and finishing out the office space, which can be costly. Although the overall design of the office, the size of the offices within the space, and the finish-out (e.g., carpeting, wall covering) may not be exactly how the firm would have designed the office space on its own, the firm must balance this concern with the savings in avoiding paying for the office design and finish-out. Under a traditional lease, landlords often provide the tenant with a finish-out allowance, which is a negotiated amount that may or may not be sufficient to design and finish out the office space to the tenants satisfaction.