Business Strategy: Why Real Estate Should Be Included
Why Your Real Estate Should be Part of Your Business Strategy
By Elizabeth Holmes
This is the time of year that many companies are finalizing budgets and business strategies for next year. However, many companies do not include real estate as part of the planning and budgeting process. Here’s a quick overview of why real estate should be discussed during budget season and how your real estate can play a vital role in your overall business strategy and planning.
Why Include Real Estate in Your Annual Planning Discussion:
• Ensure your budget is accurate based on market rents: Many of our clients do not stay up to date on the real estate market until their lease is about to expire. This can be a problem when budgeting for new space. For example, we have seen rents increase over $5/SF in Class A office buildings in Central 128 over the past 5 years. So while your company is currently paying $32/SF for a Class A lease signed in 2018, the market rent for the building is now $37/SF.
• Discuss Square Footage Needs and its impact on the budget: Reviewing your space needs will significantly impact the budgeted vs. realized office expenses. For companies growing quickly, you may find that you need additional space before lease expiration. Conversely, you may realize that you need less space due to hybrid work and are able to shrink your footprint upon lease expiration and save money.
• Utilize Your Office Space to Support Your 2023 Strategic Initiatives: Read below how your office space can be utilized to promote the success of your company’s larger strategic plans and initiatives for 2023.
How Real Estate Can Be Part of Your Overall Company Strategy
Your office space does not have to be a reactionary task only discussed in the months leading up to lease expiration. If included in your annual strategy discussions, there are many ways that your real estate can promote your larger business goals and initiatives. The following are ways you can solve business problems with real estate solutions:
• Growth & Expansion: Analyzing your office space in conjunction with your revenue and employee growth predictions can ensure that you have ample space to run efficiently as you scale up rather than reacting every time you run out of room. Can’t predict your long-term growth? Your real estate advisor can assist with flexible lease language and options to minimize the risk associated with adding additional square footage.
• Hiring & Retention: Particularly in today’s environment with remote work, it is extremely important to align your hybrid work policy with your office space. For some, this means moving to a high-image space that has a collaborative space plan so that when employees are in the office, they are excited to be there and also feel more productive in the office. For other companies, a commute analysis of the employees in the office 4+ days/week by your real estate advisor can help you determine whether relocating your office can shorten commutes. Or, by comparing your office amenities to your competition, you may find ways your office amenities can entice top talent to work for you instead of your competitors.
• Process Efficiency: Remote work has brought process efficiency to the forefront for many of our clients. Reviewing which tasks can be accomplished more productively in the office versus remote will indicate how you will use your office going forward. By focusing your office space on being task-focused, you may determine you need a new layout, less (or more) square footage, or have the opportunity to combine several locations into one.
• Bottom Line Management: If your 2023 business plan focuses on cost reduction, your office space can always be reviewed to find ways to cut costs. Your real estate advisor can assist with simple lease language edits to reduce operating/tax costs above the base year (we had one client paying $5/SF additional in operating/tax costs due to them never requesting an updated base year since their initial lease in 2005). Your real estate advisor can also help you determine whether you are paying above market rents, could reduce your footprint, or relocate to a neighboring market to assist with cutting costs.