Office strategies
Does your real estate strategy mesh with your business plan?
By Fred Koury
October 2009
Corporate real estate is too often taken for granted.
As the CEO, you are focused on your customers and their needs, and you probably don’t spend a lot of time thinking about real estate until either your lease is up for renewal or the roof starts to leak.
But real estate should be an important part of your business strategy.
There are a lot of factors in real estate that affect your company, both directly and indirectly. The one that is top of mind for most executives is cost.
Some companies opt to fix their costs as much as possible by buying space. For example, Target and Wal-Mart own the vast majority of their stores, and the value of the real estate they own helps the overall valuation of the corporations.
Other companies choose to lease so that their focus remains on their core com-petencies and the real estate management is left to others.
The route you take depends on your business plan. If you have capital, it’s a great time to buy your own space. On the other hand, it’s also a great time to secure a great space at lease prices that haven’t been seen in many years.
When you are analyzing your real estate needs, don’t stop at just costs.
If you are in a poor location, you may have increased costs because of vandalism or theft, and you will also have a harder time attracting top talent. If the location is difficult to get to, a long commute can encourage people to look for jobs that are closer to home.
Also, think about how your space reflects on the image you are trying to portray of your company. If someone claims to be a high-tech leader and you visit their office and find tattered furnishings and an outdated space that looks 20 years old, does that really say “high tech” to you or any other customer?
Consider how other companies use their spaces to reinforce their brand image. Go into the offices of a large law firm and you are likely to find a luxurious look that says, “We are high-class and have been around forever.”
It’s all about using your real estate to maximum effect. Look around your office and ask yourself what message your space sends to your visiting customers.
And it doesn’t stop with just the look of your space. How is the layout configured? Could you have people sharing space so you can reduce the amount of space you need (and the costs that go with it)? Is the space set up to maximize workflow? Or are you encouraging people to cooperate and act in teams in a space that limits personal contact and hinders communication?
Even if you are looking at just the bottom line, how much you pay in rent every month might be reduced if you take the time to have a professional analyze your situation and renegotiate with your landlord. You might have to add a few years to your lease, but in return, you’ll get a reduced rate and thus an improved cash flow.
Always try to get an exit clause in your lease if you can. You never know which way the market will go next and having an out can save you a lot a grief. And while it’s true that the market is battered and it’s a buyer’s market, don’t lose sight of your integrity. Even though you may have the advantage, treat your landlord with respect and negotiate a fair deal, because, as the old saying goes, what comes around goes around.
This buyer’s market won’t last forever, so now is a great time to figure out whether you real estate strategy is still meshing with your overall goals.
