Adding Value to your Business Through Office Space

Make your Real Estate Work for You

A business’s book value is calculated by subtracting its liabilities from its assets. While many other forms of valuation exist, this method gives us a fundamental understanding of how we can add value to our businesses. In the following article we’ll show you basic principles and give you real world examples of how the right real estate strategy can help your business Increase Sales, Decrease Expenses, and Add Assets. 

1.Increase sales

Your office can help you grow sales by increasing exposure to potential customers as well as  enabling your employees to be more productive.

The easiest way to begin capitalizing on this strategy is by locating your office in close proximity to your target customers. If you’re a B2B business this may mean locating yourself in the central business district. If you’re in supply chain management you may want to locate your business next to manufacturing and distributing facilities. If you are B2C you may want to consider locating yourself on a busy pedestrian or vehicle corridor, this is especially important if you see customers at your office or allow walk-in business. This not only has the potential to increase sales by exposing your company to more customers but also can reduce travel costs if you travel to your customers location.

Once you’ve found your location, enhance your presence with prominent signage. Some properties and local municipalities may have restrictions on signage, so this is something that should be discussed when you are comparing potential properties. Prominent signage will increase the chances of one of your customers seeing you when they are nearby.

Another driver of sales is employee productivity. Since we only have so much time in a day, an extra call by one of your salespeople or another 30 minutes for one of your developers to work on a new product could mean $1,000’s in sales. To enhance productivity you’ll want to focus on designing space that matches the type of work your employees are performing. In other words, you need the correct ratio of dedicated quiet spaces and collaborative spaces. For more on this topic see our article on How Office Design Affects Productivity.

Example: Let's say you strategically locate your office in closer proximity to your target customer, install prominent signage, and design your office to reduce the amount of distractions for your salespeople. This leads to one additional sale per month from drive by’s, your two salespeople are also able to make one additional call per day. With your close rate of 5% this leads to an additional 2.5 closed leads. Multiply those closed leads by your average sale of $1,000, this leads to $3,500 in sales per month or $42,000 each year. 

2. Decrease Expenses

Another way to add value to your business through real estate is reducing expenses. The two main ways to achieve this are reduced occupancy cost and reduced employee turnover.

You can reduce occupancy cost in many ways, but it starts with your office procurement process. During this process you should evaluate the best type of space for your business. If you are an early stage company shared or virtual office solutions might be most cost effective. These days even mature companies are evaluating ways to save money on office space through multiple space types. This might mean a mixture of shared, virtual, and traditional office space. Regardless of which office type you decide is the best fit, you need to compare options. Receiving bids from multiple properties is the best way to make sure you are getting the best office available for the most competitive price. A report produced by Bonfire in 2019 called “The State of the RFP” shows that the average public sector RFP achieved 22% cost savings. While this may vary in the private sector it still shows the potential cost savings that can be achieved by an RFP process.

The right space can also lead to higher employee satisfaction, which can help attract better talent and reduce employee turnover. This again starts with location, as employees today want to limit their commute times, and would prefer to either walk or bike to work. Once they arrive at the office, there’s a plethora of amenity options to increase satisfaction, such as attractive lunch options, fitness activities, ect, but a recent survey of 1,614 workers found employees prefer natural light and views over any other office perk.

Example: So you’ve weighed your options and decided to lease a 2,500 square feet private suite for three years, you’ve utilized an RFP process during your space search, you choose a location in proximity to your talent pool, and you’ve made sure every employee has exposure to natural light. By utilizing other proposals as leverage you were able to get the price on the space you wanted down to $20/SF down from the $22/SF list price saving you $5,000 a year or $15,000 over the term of your lease. One of your employees who previously commuted 45 minutes to work had been looking for other opportunities closer to home, but has decided to stay since his new commute is a 10 minute bike ride. This saved you $1,000 in recruiting costs and $3,173.08 salary over the new employees' three weeks of training. This saved you $8,173.08 in the first year of your lease and would save you a minimum of $18,273.08 over the term of the lease.

3. Addition of Assets

This might not be as straightforward, but you can’t grow your assets without growing your real estate. The main point here is to ensure that your real estate plans match your business growth plans. You can’t purchase additional equipment and open up a new manufacturing line without sufficient space. In the same way you don’t want to limit the number of employees you can hire because you don’t have enough desk space for them to work. Be sure to think ahead during your office search and have a plan in place. This might mean right of first refusal on adjoining office space, or staging your lease terms to enable you to move into a larger office when needed.

Another way to increase the value of your business may be to invest in real estate itself. This may not be the right move for every business, since real estate is a business in itself and most businesses want to focus their operations on their core business, but with the right plan and partners you may be able to reduce your occupancy costs and/or create additional income through the investment of real estate.

The final way we’ve found to increase your business value through real estate is with branding. Your brand is an asset and should be valued as such if you ever decide to sell your business. The prestige of signage and naming rights on the right building can give your brand a lasting impression and position your company as the market leader in your industry. While naming rights of sports arenas and stadiums may command up to $25 million a year, office building naming rights typically are structured within the lease agreement and can be negotiated for without additional expense. If the timing is right, this may be possible even if you don’t occupy a majority of the building and should be considered if you’re moving into a new building or if the business who had the naming right has recently moved out.

Example: Your business is growing quickly so you decide to lease extra space to allow room to grow, to mitigate the extra rent, you plan to sublease the 3 extra offices and 4 open desks to month to month tenants. During the RFP stage you also found out that naming rights were available for the building, so you negotiated naming rights along with prominent signage into your lease. Since you leased a larger space you were able negotiate a lower rent, therefore you’re actually able to make $‭508 a month above what you paid for the space and still give your subtenants a reasonable rate on their spaces. After ten months you win a $1,000,000 a year contract you’ve been pursuing. You immediately send your subtenants their 30 day termination notices and within a month you are able to increase your workforce by seven, enabling you to manage that new contract. Within the first year, you have earned an additional $‭5,080‬ through subleasing your additional space, and are able to immediately scale your workforce to cover your new $1,000,000 contract. A year later you get an offer to sell your business that you can’t refuse, you explain to them the value of your brand and the fact that you still have 5 years on your lease which includes signage and naming rights on the building. This is valued at an additional $150,000 which is added on to the sales price. 

The Key to Ensuring you get the most value from your real estate.

Taking advantage of any of the above strategies requires proper planning and consideration of all factors during the office procurement process. The single best step you can take to ensure you choose the correct office space for your business is to seek the expertise of an office space leasing specialist. A commercial real estate consultant can provide tools and experience  to help you identify and prioritize your list of criteria, and evaluate available office locations that meet those criteria.

As Pittsburgh's most transparent real estate consulting firm, specializing in office space leasing, Venture Real Estate is here to provide the tools and guidance you need to ensure you get the most value from your office space. We leave no stone unturned as we walk you through these five important steps of the office space leasing process:

1. Development of Criteria needed for your office space.

2. Identification of available spaces that meet your criteria

3. Tour and Rate Spaces

4. Request for Proposals (RFPs) - make landlords bid to have you as a tenant.

5. Compare, Negotiate, and Select - make the right selection and negotiate the best terms

If you would like to learn more about the tools we provide, and our ideal space guarantee, click here to speak with one of our experienced specialists. We look forward to working with you!

Is Your Team As Productive As They Could Be?

How Office Design Affects Productivity

we shape our buildings; thereafter they shape us - Winston Churchill

Cubicle farm, open office, personal offices: your office layout can say a lot about who you are as a company, but it can also have a profound impact on the morale and productivity of your employees. So, how can conscious design choices increase your employees’ productivity and overall work satisfaction? 

First, let’s take a look at what type of work is being done in your office. Are your employees doing deep work such as coding, editing, or research? Or are they tackling creative endeavors that require collaboration? Once you understand what type of work is being done, and how frequently, you can start to examine how much of each type of space is required for your particular office. 

A formal study of your organization may help in determining the breakdown of what your organization requires, but oftentimes a discussion with your employees can reveal much of what you’re lacking. Many times your employees know their own pain points and discussions about those can help illuminate where your office design can improve. 

No matter where your current design may be, or where you think you need to go, one thing is clear, no one style works for all employees and all types of work. In order to maximize the productivity of your staff, and your space, you need to design the correct ratio of “caves and commons” - dedicated quiet spaces and collaborative spaces. 

Let’s take a look at the four main types of space that comprise office design: 

1. Focus - For work that requires uninterrupted concentration for prolonged periods of time. These spaces need to be free from the noise of open office and signal to co-workers that the work being done is not to be disturbed, if at all possible. Designing small spaces, such as individual offices with doors or cubicles/nooks outfitted with sound absorbing materials, in an area of the office dedicated to this type of work allows employees the necessary time to concentrate on deep work. Recent studies have found that employees who work in completely open office spaces spend upwards of 40% of their day either dealing with an interruption or attempting to get back to where they were before the interruption. Providing dedicated space for this type of focus work can have an immediate increase in both employee happiness and productivity. 

2. Collaboration - Creating spaces for impromptu meetings like common areas, dining areas, and soft seating can help increase collaboration between teams and colleagues. A dedicated space for cooperative work can also aid in reducing distraction for other employees, helping those that need to work together to feel empowered to do so and do so efficiently. 

3. Ideation - Libraries, labs and other formal and informal learning spaces, allowing employees to hone skills or learn new ones. Employees who are engaged in gaining new skill sets and sharing their skills with others will be encouraged to find innovative ways to improve not only themselves but also the company. 

4. Socialization -  Flexible seating areas in a designated lounge can help combat burnout and increase cross team collaboration. 

The right combination of spaces can help employees feel empowered to do the work they need to do and provide your company with higher quality results. Offering employees “free addressing” offices, where they don’t have assigned workspaces, but can instead choose the correct space for the type of work the day or part of the day requires is a great way to provide employees with the autonomy to meet their own needs. Just be sure to continue to provide each employee a space to stash their stuff; any valuables they may have, paper that might still be required in your industry, and a sense of ownership can be a huge bonus for most employees. 

Regardless of the breakdown of the type of space required for your particular office there are a few universal principles that can aid in productivity and morale in nearly any office. High quality lighting can reduce eye strain, headache, and new research shows it can actually boost memory and our increase our ability to learn. A recent survey of 1,614 workers found employees prefer natural light and views over any other office perks.  While a recent research study found optimization of natural light in an office significantly improves health and wellness among workers. In fact, this research revealed that workers in daylight office environments reported a 51% drop in the incidence of eyestrain, a 63% drop in the incidence of headaches and a 56% reduction in drowsiness., All of which can demonstratively lead to increased productivity.  And while we’re making simple changes to the office, the addition of indoor plants to current “lean” designs reduces stress and increases concentration to the tune of up to 15% greater productivity. 

Meeting the design needs of your employees and your business means not falling victim to design trends of rows of cubicles or the completely open concept offices; it means thoroughly understanding the work that needs to be accomplished and providing the environmental tools to your employees to set and reach those goals. 

When Should I Start My Office Space Search

Whether it’s your business’s first office, your business expanding, or it’s time to relocate - timing your office space search correctly is critical to obtaining the right space for your business. More often than not, the process of finding the perfect space can take longer than expected. If you’d like to skip the math - we’ve built a calculator that can do it for you. But, a thorough understanding of how each step in the process works can help you navigate the search.  We recommend beginning your search for space at least twelve months before your desired move date, though more time may be required if your business requires unusual criteria, such as an amount of space over 10,000 square feet or an extensive build out of your new space. 

While a year in advance may seem like more time than necessary, there can be a lot to accomplish during that time period. Remember a decision regarding whether to stay in your current location or move to a new one may need to be made prior to your lease’s required notice period. If you have a renewal option in your current lease that you believe to be below market rate you will want to receive and compare all Requests for Proposals prior to the notice date in your lease, as providing notice of nonrenewal will negate your ability to use this predefined rate. The best way to determine the specific lease search start date for your business is by determining your target new lease start date, usually the day after your current lease ends, and working backwards. 

Once you’ve determined your new lease start date you can get work determining the necessary criteria for your new space and developing your Lease Procurement Timeline. Your list of requirements should be completed approximately five to six months prior to your new lease date. However, there are several factors that can increase the necessary length for this period: If you haven’t yet decided on the area for your new location you should add an additional 15 days for your criteria time frame.  This extra time will allow you to evaluate different locations and determine the best area for your new office. If your business will require a buildout of any type, you should add 45 days to your timeline. If your space is larger than average or your buildout is more complicated than usual you can calculate the additional time needed as ten days per thousand square feet.  After you’ve established the needs of your company, you or your tenant representative, can begin searching for your space. 

Compiling the list of potential properties and verifying that the listings are currently available and meet your needs can take a bit of time. We recommend that this list be completed and verified at least four months prior to the start date of your lease. If your anticipated lease term is less than three years you should also add an additional 15 days as there will be fewer spaces available for a term of this length. After you have completed the groundwork of searching for and verifying potential properties, the work of touring properties begins. To provide adequate time to tour all properties, evaluate, and compare, all tours should be completed three months prior to your notice date or 30 days before your Request for Proposal deadline. 

Now that you have toured and ranked the potential properties you’re ready to send a Request for Proposal to, at minimum, your top three properties as well as your current property if applicable. This request should be sent with a return deadline of two months prior to your start date. If you are planning a lease term of five years or longer you should add an additional fifteen days to this period as a lease term of this length may allow you greater leverage in negotiations and may require additional time to accommodate. This period will be used to evaluate the proposals, negotiate specific lease terms, and review the lease for the property you have selected. 

Completing your property search according to this schedule will provide you with enough time to conduct a thorough search of properties that meet your business' needs, negotiate the terms of a new lease, and organize the move for your business.  If you’d like to double check your calculations, our Lease Procurement Calculator or a phone call with one of our leasing specialists can help set you on the right track. 

As Pittsburgh's most transparent real estate consulting firm, specializing in office space leasing, Venture Office is here to provide the tools and guidance you need to find the ideal office space for your business. If you would like to learn more about the tools we provide, and our ideal space guarantee, then contact us to schedule a complimentary 30-minute consultation with one of our experienced specialists. We look forward to hearing from you!

A Philosophical Look at Office Space

Technology / Cultural Changes / Autonomous Collaboration

“Location - Location - Location” was the dominant mantra regarding real estate for decades, but things are evolving. We aren’t eliminating location as an important factor however, thanks to technology and cultural shifts, it now has some competition - namely flexibility and adaptability. Co-working, shared suites, and hotdesks are terms tossed around regarding work spaces, let’s discuss those along with insights into the changing dynamics of work spaces.

Mobility 

Work mobility is being transformed by the  dual forces of technology and cultural change. Mobility is beyond the idea of where you work, it's a mindset founded on adaptation and growth. When thinking of the type of work space you need it's important to understand what type of space best fits your organization and the type of work you do. Perhaps more importantly you will want the ability to adjust your space to the changing dynamics of your business. The ability to do this hasn’t always been an option because we hadn’t built processes and buildings that reacted to their tenants needs, however now both landlords and developers are recognizing tenants’ needs to adapt to a variety of work tasks. Choosing an office is an important aspect of starting or running your business, we can help you understand the various choices while also building a smart strategy that adjusts as you grow. As you think of your office or work space it may be helpful to consider how mobility and technology fit into your overall vision. It’s very cliche to apply the term democratization to a concept but sometimes it fits. Technology has democratized how we work and increased mobility is a positive side effect of this progress. From large organizations to freelancers, there is an abundance of freedom when it comes to where or how work gets done. This changes the thinking for how offices and buildings should be designed, at a minimum it shifts our view on how leases should be structured. 

Until recently there wasn’t wide access to flexible office space. What changed? Entrepreneurs, workers, and organizations have been conditioned via the internet to demand the ability to customize virtually everything they come into contact with. The solution from a property management or building owner perspective was “co-working” spaces and other flexible office environments. If you squint and look into the future you will see that offices and how we work will continue to evolve away from the highly rigid systems of the past. As a tenant you should want a great office along with a highly adaptable leasing process that develops with you. Mobility should go both ways, how you position your organization in the marketplace and your leasing/office structure.

Collaboration / Cultural Shifts 

Collaboration and the desire to be autonomous urges us to make changes to our work environments. These changes manifest into a positive feedback loop between technology tools and worker collaboration that creates work environments that are flexible and open. Speaking to the notion of openness, let’s agree that fully open offices aren't always desirable or superior to all people or workflows. Some may prefer a private space to conduct most of their work and others bounce between various settings. It’s important to build an environment that allows for those choices because it increases the enjoyment and productivity of work. The technology driven nature of work today reinforces the idea that it's become culturally normalized to work in various settings depending on the task or personal preference. For example - teams gather in a small conference room to discuss priorities and collaborate then individually the work might happen in a green space, small office, or open loft. The underlying theme is that the work space is optimized to improve output. Over the last ten-plus years co-working environments have been one way that offices have been designed to optimize a decentralized workforce.

Choosing an office/work space requires a careful examination of an organization along with your vision for the future. HBR does a nice job laying out the various factors that go into picking an office layout. Every organization needs to evaluate the various characteristics that embody your team and its processes. If you have a well established group then it might not be a bad idea to be transparent and involve them in this process. 

Consider these questions as you think of leasing or building an office:

Which work behaviors do we want to promote and support?

What matters to our employees and how will that change over the next few years?

How do we think of flexibility as work gets completed?

What do we want visitors to think when they visit our space?

Are there other members of the community that might use our space?

What are the most productive areas in our current work space?

Which type of office best suits your organization?

Co-working - Use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas, and knowledge. This type of space is used by large well established organizations, startups and individual freelancers. Collaboration is a fundamental characteristic of this type of work environment. 

Private Suite - Collection of private offices, open areas, and possibly other spaces (meeting rooms, kitchens, reception, etc), that is private to one organization. Think of an organization or team that prefers the flexibility and openness of a coworking space but wants it all to itself. Growing companies or a specific team within a large organization (ex. Data Science team). Private suites work for groups that equally value privacy and teamwork.

Shared Suite - Similar to Private Suite, but shared by multiple organizations. Organizations that have cultures and objectives that complement each other would be ideal in this type of space. Well suited for multiple organizations that want a similar office environment and share the costs. 

Private Office - Enclosed work space for one person, suitable for activities which are confidential, demand a lot of concentration or include many small meetings.

Hot Desk - Involves multiple workers using a single physical work-station or surface during different time periods.

How and where we work is evolving to match the way people operate, interact, and produce today. We perform best in an environment that provides access to great tools while in a well designed space that suits the organization and its culture. Collaboration, mobility, and adaptability are more than just buzzwords, they are guideposts that should be looked to as you are considering leasing or building a new office. We love helping people through the process of leasing or building a new office - let us know how we can help.