Opinions vary on the answer to this question. We like to think of a small space user as any company with an office space need that is 3,000 square feet or less. A medium space user has a space need between 3,000 square feet and 10,000 square feet, while a large space user needs more than 10,000 square feet.
The definition also changes based on space type and metropolitan area. The numbers tend to be bigger for industrial users, where 5,000 square feet or less is considered to be small. In New York City, 10,000 square feet is considered small. On the other hand, 5,000 square feet is huge in a city like Danbury.
It is also important to answer this question from the building owner’s perspective. For example, a 3,000 square foot space user is much more important to the owner of a 20,000 square foot, 2-story building than the owner of a 500,000 square foot, 25-story building. Some owners prefer to have large space users so as to limit the number of tenants they have to deal with in any one building. Other owners prefer smaller space users, as this reduces their vacancy risk when it comes to any one tenant moving out of the building. Generally speaking, small tenants tend to be the most profitable type of tenant for the owner. They tend to be less sophisticated and therefore less demanding. A full floor tenant is much more likely to require a specific and therefore costly build-out, while a small user can often take possession of a space with a simple painting and re-carpeting.
When you are negotiating for a small space, it is important to understand the nature of the space that is available. Often times, significant discounts can be achieved on niche spaces. Depending on your flexibility, you can usually get a deal on an “option” space; that is a space where another, usually larger, tenant carries a right to lease that space in the future (in which case you will be forced to move). Another example might be in leasing a slightly larger space than you really need. If you are looking to lease 1,000 square feet but the landlord can only offer you a 1,200 square foot space, he may be willing to come down in price to meet your budget.
Posted in: Leasing Commercial Real Estate
