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Real assets Featured

4:56am EDT January 2, 2002

Employees and benefits are the top expenses for most companies. Not far down that list is real estate, whether its rent or debt service. When times are tight, few employers look past trimming staff as a way to decrease expenses.

But shutting the doors and selling a branch office isn't the always the answer. There may be ways to better use that space, or save on the costs to run it rather than just closing the office.

"Few business owners look at their real estate and analyze it," says Ted Barr, co-founder of Allegro Realty Advisors in Cleveland and former senior manager in the Real Estate Solutions Group of Deloitte & Touche LLP. "They're running their business and making do and it creates their own inefficiencies. Those inefficiencies are probably costing them about 20 percent of their occupancy costs.'"

Barr and Allegro co-founder Joseph Greulich, also a fomer D&T real estate consultant, say they've helped clients save anywhere from a few hundred dollars to more than $20 million a year. Barr says they've made changes as small as where a manufacturing firm ordered cleaning supplies to helping outsource distribution and warehousing services for a large retailer.

"We don't do anything a business owner couldn't do for themselves," Barr says. "But many just don't have the time or don't have the resources to hire one of the major consulting firms."

Here are some the questions Barr and Greulich's ask clients when reviewing their facilities:

  • Look over your occupancy costs. What are you paying for rent or debt service? How long has it been since you negotiated with the landlord or bank?
  • How is your office organized? Has your staff changed in size and the office layout not changed along with it?
  • Analyze energy costs. Would it make more sense for your company to buy energy in bulk or from another provider?
  • Are you growing? How about in five years or 10 years? Do you think you'll need more or less space?
  • Should you rent or own? Often there are better tax benefits if you rent.
  • Has your customer base moved?
  • Do you carry a lot of inventory? A different locationcould save on inventory tax. Do your trucks have good highway access to and from your facilities?
  • What kind of transportation do your employees use? Perhaps a move closer to a bus or rail line would entice employees to stay.
  • Is there land on your property that you never use and don't plan to use? That could be marketable land which could provide you with a steady revenue stream.

Deloitte & Touche Real Estate Services