Securing the right lab space is a major commitment that calls for thoughtful planning and evaluation. Whether you’re a startup, a growing company, or an established organization, understanding the key elements of the leasing process can help you choose an ideal lab space that supports your business and research goals, while aligning with your budget. Here is a comprehensive guide to leasing lab space:

1. Get a Head Start

Planning is crucial when leasing a lab space. Securing the right location can take time, as it involves not only finding a space that meets your immediate needs but also anticipating future growth.

It’s important to factor in the time required for touring lab spaces, negotiating lease terms, purchasing insurance, applying for permits, and performing any required build-outs or renovations. The earlier you begin this process, the better positioned you’ll be to navigate potential delays, identify any hidden costs, and ensure that the space will support both your current operations and long-term goals. On average, securing a lab space typically takes 6 to 9 months, depending on factors such as the market and size requirements. If tenant improvements are needed, expect an additional 6-12 months for that process. By giving yourself plenty of lead time, you can reduce stress and avoid the risks of rushing into a decision that might not fully align with your needs. Be sure to plan accordingly.

2. Assess What You Need in a Lab Space

Before leasing a lab space, it’s important to thoroughly evaluate your needs and priorities to ensure the space meets your operational and research requirements. Consider more than just the location and size—think about the specific features your research demands. There are many important factors that you need to address when evaluating your lab space requirements, including:

• Do you need lab sinks? If so, how many?
• How many chemistry fume hoods will you need?
• Do you require specialized rooms such as tissue culture rooms, clean rooms, or cold storage rooms?
• Does your research project involve working with any chemicals or hazardous substances?
• Is there a proper waste disposal system available for your needs?
• Do you need access to piped gases like nitrogen or CO2?
• Does the space have proper ventilation and HVAC system in place to support your lab works?
• Does the property include an operational fire sprinkler system?
• Will your lab require access to safety showers or eyewash stations?
• Will your lab work require a clean water source, such as a water purification system?
• Does your research depend on electronics and computers for modeling, theoretical studies, data analysis, or software development?
• How much electrical power (amperage, voltage, and phase) is available in the space?
• Do you require emergency power generators and backup systems to support critical equipment?
• Will your Research and Development (R&D) involve the use of specialized tools, such as autoclaves, bioreactors, glove boxes, PCR machines/thermal cyclers, or centrifuges?
• Does the floor have the load capacity to support the weight of your equipment?
• Is the ceiling height sufficient for heavy equipment and specialized installations?

Clearly defining these requirements upfront will help you choose a lab space that supports your research effectively.

3. Verify Zoning and Compliance

Ensure that the lab space complies with zoning, safety regulations, and standards to support a secure and compliant working environment.

Determine whether any special permits (e.g., Conditional Use Permit or “CUP”) or licenses are required for your operations by checking with the City Planning department/division in the city where you’re interested in leasing the lab space and verify that the property is zoned for your intended use. For example, in the Bay Area, if the property is zoned as Light Industrial (Flex/R&D Office property type), R&D laboratory use is typically permitted, and a CUP is generally not required.

If you plan to use hazardous materials in the lab, you may need to obtain clearance and approval from your city’s Fire Department, county, or state Health Department, especially if the facility or space you are leasing has not yet been approved for the use of hazardous materials. If requested, be prepared to provide local, state, or federal regulators with a detailed list of all hazardous materials used in your lab, including their quantities.

4. Evaluate the Business Aspects of Your Lab Space Requirement

When leasing lab space, it’s essential to evaluate various business aspects alongside the amenities that the space offers. Here’s a breakdown of each key consideration:

• Location:
  Consider the proximity to research institutions, such as universities, hospitals, and research centers, to facilitate collaboration and ensure access to a pool of skilled professionals. Evaluate the location’s safety, convenience for employees, and accessibility to transportation hubs. A strategically located lab can enhance efficiency and reduce logistics costs.
• Budget:
  Assess your financial capacity to lease the space, including rent, utilities, and any additional costs such as maintenance, insurance, and build-out expenses. Project your leasing expenses for the next 3-7 years (for startups, project your expenses for 1 year or until your next funding round) and ensure that you have enough cash reserved to cover them. Understanding your budget ensures you can secure a space that meets your needs without overextending resources.
• Accessibility:
  Review how easy it is for your team, vendors, and clients to reach the space. Ensure the facility complies with Americans with Disabilities Act (ADA) standards for individuals with disabilities and has adequate parking, loading docks, and entry points for deliveries and equipment.
• Security Features:
  Evaluate the security measures in place, such as surveillance systems, secure access, and fire safety equipment, to protect both your staffs and assets.
• Scalability and Growth Potential:
  Consider whether the space can accommodate your future growth or if options for expansion are available within the building or through adjacent properties.

The following are key questions to address regarding business and operations when evaluating your lab space requirements:

• Does my existing space support my operations effectively?
• Should I opt for a lease renewal or begin searching for a new space?
• Is relocation or expansion the right choice for meeting future demands?
• Are my customer base aligned with the new location?
• Which option is more cost-effective: purchasing or leasing?
• How large does the office area need to be to accommodate my team and operations, including square footage per employee?
• Where are my employees located, and how will this location impact their commute?
• Is the location conveniently accessible via freeways and public transportation options such as VTA, BART / subways, or buses?
• Are EV charging stations available at the prospective location?
• Does my company need grade-level doors, dock-high access, or both for trucking?

5. Thoroughly Review the Lease Agreement

Carefully reviewing the lease agreement is a vital step before leasing the lab space. This legally binding document between the landlord and tenant covers the lease terms such as rental rates, length of lease terms, permitted uses, warranties, insurance, and responsibilities for maintenance and repairs.

Type of Lease:

Understanding the type of lease – such as a NNN (Triple Net) Lease, Modified Gross Lease, Gross Lease, or Full-Service lease – is essential for avoiding potential pitfalls and unexpected costs. Each lease type has its own structure for handling expenses like property taxes, maintenance, and insurance.

• NNN Lease
  In a NNN “Triple Net” Lease, the tenant pays the base rent amount plus the ‘NNN’ costs or operating expenses, which include property taxes, property insurance, and Common Area Maintenance (CAM). The tenant may also be responsible for paying any increases in operating expenses over the lease term, repairs or maintenance, utilities (electricity, gas, and water), garbage, and property management fees. These expenses typically paid upfront by the landlord, are ultimately passed on to tenants as part of their NNN costs. Be sure to account for these NNN expenses in your monthly or annual budget.
• Modified Gross Lease
  In a Modified Gross Lease, both Tenant and Landlord share the responsibility of paying for the operating expenses. The tenant pays the base rent plus additional fees, such as CAM charges or any increases in operating expenses over the lease term, while the landlord is responsible for property taxes and insurance. The tenant may still be responsible for repairs or maintenance, and utilities separately, depending on the lease agreement.
• Gross Lease
  In a Gross Lease, the tenant pays a fixed rent amount every month. The “NNN” costs or operating expenses are included in the Gross rent as they are paid by the landlord.
• Full-Service Lease
  In a Full-Service Lease, the tenant pays a fixed rent that covers both the gross rent and additional fees, such as repairs or maintenance, utilities, electricity, janitorial services, and security, depending on the lease agreement.

Lease Terms:

While reviewing the lease agreement, carefully read and assess the following details:

• Lease type (see above)
  Know the type of lease agreement that you’re signing.
• Rent amount (lease rate)
  Calculate the monthly base rent and any additional charges that may apply.
• Security Deposit amount
  Usually pay at the time of lease execution.
• Lease dates (duration of the lease terms)
  Verify the lease dates for accuracy. Additionally, before deciding on the lease dates, make sure that the lease duration aligns with your research and business plans. Determine whether a 1-year, 3-year, or 5-year lease best supports your research needs and budget. Request for lease renewal option(s) if necessary.
• Use provision
  Defines permitted uses of the leased space or any use restrictions.
• Renewal and termination options
  Pay attention to the notice periods, penalties, and options to modify or renegotiate terms as your business grows.
• Escalation clauses
  Outline how rent may increase over time, need to be fully understood to avoid surprises in future costs.

Liability Insurance:

Review the insurance clauses thoroughly and coordinate with your insurance agent to obtain the Certificate of Insurance (COI) before your move-in date. Obtaining the COI can take anywhere from 1 to 4 weeks or longer, so it’s important to start the process early. Contact your insurance agent as soon as you receive the lease draft and provide your agent with insurance clauses outlined in the lease. This will give your agent time to provide a quote and prepare the necessary policy. You will also need time to obtain landlord’s approval on the COI.

Maintenance and Repairs:
Understand who is responsible for maintenance and repairs, both for the space itself and for common ‘shared’ areas, and whether the lease includes any service agreements or warranties.

Review the lease agreement thoroughly to understand who pays what – what is included and what additional costs may be passed on to the tenant.

6. Negotiate for Concessions

Cash is king, and every dollar saved is a dollar earned, strengthening your bottom line, so be prepared to approach every detail on the lease agreement as negotiable. Here are a few tips for negotiating lease terms:

• Rent
  Negotiate for rent concession. Understand the current market conditions before negotiating on lease rates.
• Free Rent
  Negotiate for free rents and use the free rent periods to prepare the space for moving in, including setting up your computer network and Internet, building out the space to meet your requirements, setting up furniture, cubicles, etc. Subject to the market conditions, the tenant may be able to get 1 to 3 months of free rent on a 5-year lease term.
• Early Occupancy Access
  Obtaining early occupancy access allows the tenant to use the leased space before the official lease commencement date. Request early occupancy, if possible, to gain extra time for moving in and preparing the space for operations.
• Tenant Improvement Allowance
  As a tenant, you can request the landlord to help with the Tenant Improvement (TI) costs by requesting Tenant Improvement Allowance, where the landlord provides funds, usually calculated per square foot, which you can use to customize the space according to the agreed-upon modification terms. TI Allowance can help cover expenses like build-out costs, painting, flooring, plumbing and electrical work, and more. Be sure to understand the terms for such modifications. This concession typically applies to long-term leases.
• Tenant Improvements Performed by Landlord
  Instead of requesting the landlord for Tenant Improvement Allowance, the tenant can ask the landlord to handle Tenant Improvements at landlord’s sole costs and expenses, such as building out a conference room, bathroom, or break room; removing walls to create an open lab area; installing a lab sink or an LED lighting system; and other necessary modifications. Similar to Tenant Improvement Allowance, this concession often pertains to multi-year long-term leases.

During the lease negotiation process, take advantage of opportunities to negotiate all available concessions.

7. Prepare Your Documentation

Be prepared to present the following corporate and personal financial documents when applying for a lab space for lease:

• Business Tax Returns
  Landlords typically request the last three years of the business tax returns to evaluate the financial stability and creditworthiness of the tenant.
• Financial Statements
  Profit and Loss (P&L) and Balance Sheet statements for the last three years. Business tax returns can also provide this information.
• Tenant Application
  Tenant may be required to complete the Tenant (or “Credit”) Application provided by the landlord.
• Credit Check
  For startups, the landlord may run a credit check on the founder(s) and/or the individual(s) responsible for the lease.
• Personal Tax Returns
  The landlord may require the tenant to provide personal tax returns, particularly for startups or businesses with fewer than five years of operation or a lack of profitability.

8. Hire a Tenant Rep

Hiring a Tenant Representative (Tenant Rep) broker can save you time and money, and their services are usually free to you since they are paid by the landlord. Landlords often prefer working with experienced brokers to find quality tenants and avoid potential issues.

Tenant reps possess in-depth knowledge of the local commercial real estate market and can help you find an ideal lab space that meets your requirements. They also have access to off-market listings and are skilled at negotiating favorable terms, such as rent concessions and tenant improvement allowances, on your behalf. A few major CRE brokerage firms that offer tenant representation services for R&D lab properties include CBRE, JLL, Cushman & Wakefield, Colliers, Newmark, Lee & Associates, Kidder Mathews, Avison Young, SVN, Transwestern, and Voit.

By carefully considering these factors, you’ll be better prepared to secure a lab space that supports your research, business objectives, and operational needs.