Tenants Assess Office Costs

Real estate and business experts advise office tenants to carefully assess their rental costs to make sure their expenditures are not a liability. Things to look at on …

Real estate and business experts advise office tenants to carefully assess their rental costs to make sure their expenditures are not a liability. Things to look at on the employee side are how convenient and accessible the building is, how much it costs per employee and how much space they have to do their jobs. On the building side, tenants should consider operating costs, the image the building gives the company and whether that image is a profitable asset. When it comes to space, experts advise considering workplace efficiency and whether the job could be done in a less costly space. For more on this continue reading the following article from National Real Estate Investor.

For many of the Washington region’s associations and non-profit organizations, and businesses in virtually every other industry, real estate occupancy and rental costs typically are found near the top of their expense lines, right below employee salaries and benefits. Knowing that, there are a number of key points that tenants should keep in mind to ensure that they are using their offices in ways that increase revenue and productivity, while also lowering risk and protecting their investments in their people, and in their spaces.

If you treat your office as an asset, this will boost productivity and decrease costs. This will enable you to enhance your organization’s mission and promote a productive and safe work environment. Staff members and guests should have easy access to your office, and you must make sure that your real estate expenses are in-line with general industry standards.

Conversely, if your space is inefficiently utilized, difficult to access, and uncomfortable for employees and guests, and it has high costs and is generally a poor atmosphere, then your office is a liability, and this will result in decreased productivity – causing expenses to jump. Let’s focus on three main areas for the purpose of this article: your location, the building, and the space itself.

The location

Here are a few questions to consider when it comes to transportation access to, and from, your office:

  • How easy is it for your employees to get to work?
  • What public transportation is within walking distance?
  • Is there parking for your employees and guests? How does one enter and exit the garage? What is the cost?
  • How easy is it to catch a cab?

Taking this a step further, there are some “ease of access” questions to think about:

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  • Are you near major access roads?
  • Are you close to an airport? Is it important that you are?
  • Are you on a one-way road, and are you centrally located?
  • How easy is it for you to host events in your space?

Amenities are also big-ticket items. Consider:

  • What amenities are near your office? Is there an outdoor space for your staff? How safe is the area?
  • Is your office, and the surrounding neighborhood, a fun working environment, especially for younger employees?
  • Are there good places to take board members to dinner? What entertainment options and hotels are close by?
  • How far do employees have to travel for lunch, going to a pharmacy, doctors’ offices, etc.? You can increase employee productivity through decreased time away from the office.

A strong location increases members’ abilities to get more involved in your organization. This will help you secure more revenue. If you are in a convenient area, employees are able to get to work on time and spend less time out of the office. Having a lot of amenities in the vicinity improves employee satisfaction and results in fewer turnovers. This will also help you attract and retain the best talent, which will in turn make your members happier.

The building

It’s critical that the property where you occupy space is efficient. To that end:

  • Is the building appropriately priced for your organization? The industry standard for the rent-to-revenue ratio is 3 percent to 5 percent, and the cost per employee should range from $9,000 to $22,000.
  • Are the operating costs high or low?
  • Is the building core factor high or low? Are you leasing more space than you actually need?
  • What is the standard measurement for the building, and is it favorable for you, or the landlord?

A property’s quality is also important. Some things to think about:

  • Does the building’s image match your organization’s image (i.e., not too high end, and not too low end)?
  • What are the available amenities to staff members and guests, such as a concierge, fitness center, parking, rooftop deck, deli, FedEx, etc.?
  • How old are the building’s systems, and will they provide comfortable conditions for employees and guests? Do they need to get renovated during your tenancy, and how will that disrupt your operations?
  • Is there a healthy building environment (this may include a LEED certification)?

A vital take-away here is that not all properties are created equal, and having space in a “glamorous” building is not necessarily the best approach. Also, locating your association in a building that is efficient and has a low operating cost reduces your organization’s occupancy expense. Quality systems, a healthy environment and plenty of amenities can reduce your employees’ out-of-the-office time and increase their employment satisfaction rating.

The space

When it comes to the design of your space, this is a great opportunity to enhance your office through branding. Having your employees and members, when they walk into your space, clearly understand your mission improves overall morale. Associations and non-profit organizations are now using their office spaces as marketing centers.

Some questions to consider:

  • Does you space illustrate your mission to members and employees?
  • Does your space promote employee attraction and retention through the use of design?
  • Does the furniture you have provide a comfortable, positive atmosphere, keeping staff satisfied?
  • How important is it that your space is LEED certified?

Space efficiency is a hot topic these days in the commercial real estate world, as tenants are trying to keep their expenses down, while providing room for growth. Here are a handful of questions to think about:

  • Do you have standardized offices and workstations? This provides for increased efficiency and flexibility, which can reduce your overall real estate costs.
  • Is the amount of space that you lease, or own, in line with industry standards for employee-to-space ratio (1 employee per 200 to 350 rentable square feet)?
  • Do you have enough public spaces to optimize productivity (location of meeting rooms, pantries, printers, etc.)?
  • Are the appropriate departments adjacent?
  • Do you have flexible public spaces to optimize use?
  • Do you have collaborative areas to promote employee interaction and satisfaction?
  • Have you evaluated your LAN (local area network) room?
  • Do you have a sublease plan ready if you need to downsize?

The bottom line

It is easy to create an office that increases productivity, employee satisfaction and member support, while decreasing your costs. A true win-win!

Mindy Saffer, LEED AP, is a managing principal at Bethesda, Md.-based Cresa Washington DC, a corporate real estate advisory firm that exclusively represents tenants and specializes in the delivery of fully integrated real estate services. You can reach her via e-mail at msaffer@cresa.com or by calling 202-783-3896.


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