(CRE)conomics – The Economics of Commercial Real Estate

Factors to consider when leasing downtown office space

by Noah Broadbent

As a tenant and business owner, one of the most important decisions you will make is determining where to locate your business. Juggling factors such as where your employees live, access to public transit and rental rates can prove to be a more challenging decision than many anticipate. Whether you’re thinking about leasing office space in a downtown like Cleveland’s Central Business District (CBD) or a suburb, consider these factors as you make your decision:

  1. Amenities & Services

The amenities and services a downtown can offer simply cannot be matched by a suburban office building. The variety of food and entertainment options within walking distance in a CBD can make employee attraction and retention much easier. Many buildings in a downtown will boast Class A amenities like full-service restaurants, state-of-the-art gyms, and even something as unique as a golf simulator – a suburban office building cannot compete.

  • Higher Rental Rates

Rental rates will always ultimately be determined by the building itself, but the same building will have a higher rental rate in a downtown than it would in a suburban market. The majority of that difference in cost is simply due to the added expenses associated with operating a building downtown; because the cost of property taxes, insurance and common area maintenance are higher, the rental rates must be as well.

  • Proximity & Accessibility

For many, an office downtown means short commute times. A denser population downtown makes it more likely your employees will be living downtown.  Much of your office would be able to walk, bike or take public transit to your building – an idea that is much less feasible in a suburban office building.

  • Commuting Challenges

For those employees that do not live downtown, the commute to the office could turn out to be a major negative, especially for those in a building that does not have on-site parking. Commuting downtown from a suburb is costly and time-consuming for many employees, and can limit your potential employment base in many instances. It is important to consider where your employees will be coming from. 

  • Brand Image 

Maintaining a high-quality brand image is very important for many types of businesses, and the building you choose to call home has a major impact on how you are perceived by clients. Working in a downtown office building, especially a Class-A tower with high-level finishes, projects an image of power and importance.  A suburban office building will not have the same visual effect for those visiting. 

  • Security Concerns

Major urban areas have long been struggling with higher rates of crime, and it is no different in today’s environment. Every major downtown will have its share of bad actors – awareness and education are the best ways to prepare yourself and your employees. 

Where you choose to call home for your business is an incredibly nuanced decision, and it is one of the most important you will make as a business owner. Hiring an experienced broker to advise you during your decision-making process will ensure you’re making the right choices.

Are you a business owner looking to acquire space in Cleveland? Contact me at noah.boardbent@naipvc.com.