Move, Build or Expand and Stay: Questions to Ask When Considering New Office Space
Feeling the squeeze in your office space? Does your current space no longer meet the needs of your growing company? There are a few paths you can take at this fork in the road: move, build or stay put and expand.
If your lease is set to expire in the next 12 to 18 months, this is a great time to reassess your office space and the needs of your company. The amount of time it takes to examine your real estate needs and align those with your business requirements is often underestimated. Even if your lease is not set to expire for two years or more, it’s not too early to look at your lease, review the options and plan accordingly.
Whether you end up deciding to stay or move, knowing your options well before your lease terminates will work to your advantage. Answering some of the questions below, with the advantage of time, will help you make your decision without jeopardizing your negotiating power.
Does your space align with your company’s strategic goals?
Your goals could be focused on any one or a number of these elements – cost, brand, growth, decentralization/centralization, financial measures such as liquidity or debt ratios, talent retention and attraction, culture, HR policies relative to workplace and overall portfolio optimization goals. A thorough review of your company strategy as it relates to real estate is important. It is one of the top three expenses in most businesses. This is the starting point.
Have you utilized every nook and cranny of your current space?
It’s easy as you grow to make space accommodations here and there until you wake up one day and realize that no one has any elbow room, you’ve doubled up private offices and there are no meeting rooms left. When you launched your company, one conference room and a cubicle set-up may have sufficed. Today, your team of five has grown to 20 and you’re working more collaboratively. This might mean your physical space is largely unproductive when it comes to movement and group interaction. You may need more space or you may need to rethink your current space plan. Understand the options before you proceed with a move.
Is there adjacent space into which your company can expand?
Perhaps extra square footage is exactly what your company needs and you’re fortunate enough to have vacant office space next door. Expanding in your current location may be the perfect solution for your company. While there will be an expense to build out the space and your rent will increase due to the added square footage, it may be more cost-effective than moving and the loss of productivity and revenue that can result from the disruption of a move is greatly reduced.
Does your space plan encourage productivity?
One way growing companies make space accommodations as they grow their teams is by relocating departments into different parts of the space they occupy. While this might seem resourceful and convenient, have you assessed metrics to determine how separating departments affects your bottom line? In an article in the Harvard Business Review, senior researcher at Microsoft Research, Gina Venolia, validates the belief that employees working on different floors feel as if they are working in different cities. Little to no physical interaction between departments means little to no chance encounters between employees - encounters that, according to “Workspaces That Move People” in the October 2014 issue of the Harvard Business Review, are shown to increase productivity and innovation. It’s important to spend the time assessing workflow and productivity as you consider your new space and how both of these elements relate to future growth.
Will you lose loyal customers if you move to a different location?
Companies that have been in the same location for many years and have a loyal following can often feel as if their real estate is part of their brand - the essence of who they are. If this is the case for you, it is wise to consider how moving to another location might affect your customers and if the opportunity for attracting new customers and generating new business in this new location can offset the business you may lose in the move.
What does a move mean to your employees, current and future?
Right now we are in the midst of a talent shortage with little relief in sight. Attracting and retaining employees is incredibly important. If your business has enjoyed the benefit of happy, engaged employees, you’ll want to consider how a move will impact them. Moving within a submarket may not be a big issue, but moving 10 miles across town and significantly increasing commute times for your employees could impact retention. Also, amenities within the building and within the space are key and increasingly important in the war for talent. Whether you move or stay, assessing your space plan and amenities is critical to your talent strategy.
If your space requirements are of a significant size, you may want to consider a build to suit for lease or ownership.
There are many pros and cons to both leasing and ownership and these will be unique to your business strategy. Buying an existing property or new construction is a long-term investment that offers you permanency and stability while a lease may offer more flexibility. Don’t make quick assumptions about cost or impact to your company’s financials - there are many variables. Be sure to conduct a thorough own/lease analysis with your consultants and financial advisors to understand the impact to the balance sheet, liquidity, appreciation, tax considerations, cost and other critical elements.
Importantly, the decision to own vs. lease real estate must also align with your strategic and financial goals.
How long does the build to suit process take and what is involved?
If you’re considering a build to suit, new construction option - whether for lease or ownership - it is advisable to work with a trusted and experienced owner’s representative or development consultant. Your consultant can help you build the team that is right for your project. This means evaluating the cultural fit, cost and experience of a team which includes architects, developers or builders, engineering and environmental firms, title, survey and others.
Site selection will be key and there is a long list of requirements and conditions to assess to make sure you select the right property. There are also many city and other public requirements to evaluate and many processes to follow. An experienced consultant can help you navigate these waters. Depending on the size and complexity of your building, this process generally takes 12-24 months or more from concept to completion. High-level components of the building process include but are not limited to: site identification and due diligence, team selection, design, budgeting, financing, entitlements, public incentives procurement, permitting, construction, moving and more.
Clearly there are many options to consider as the real estate needs of your company change over time. It’s common to feel a bit overwhelmed by all the variables and decisions. KimbleCo can work with you to determine the best option for your business and help you navigate whichever route you choose. Contact us when you’re ready to start the conversation. juliekimble@kimbleconsult.com