Key Insights for Choosing the Right Office Space
Real estate, especially office space, is usually a firmâ€™s largest expense after personnel. In most instances, firms and investors will make huge decisions without having a good plan and insight. In addition, the firms or investors fail to align their business strategy and goals to their real estate strategy.
As a result, the business will experience significant consequences in future. It is important for investors to align their business and real estate strategies to succeed in the modern competitive business environment.
When starting an office, an investor faces some complex and unfamiliar decisions regarding office space. Hence, determining the major and right insights will help you reduce the risks associated with choosing the right office space.
Below are some key insights for choosing the right office space:
1. Consider the emerging trends of office space requirements
In the last few years, investors and firms are focusing more on value of the office space. Businesses are moving towards smaller office spaces in higher quality buildings. Such office spaces have a more efficient space-per-employee. In addition, the demand for specialized office space has increased in recent years.
Nowadays, tenants are leasing accounting, client-facing and data center office spaces in different locations. This means that demand for consolidated and large office spaces has gone down.
2. Understanding Mobility and Technology
The modern workforce is very mobile because of technological advancements. An employee can work from the office or coffee shop but still communicate with the other employees or hold a meeting in the boardroom through Skype. Mobility has the potential to reduce real estate costs and footprint of end users.
Moreover, face-to-face communication and interaction is still vital for conducting business. Therefore, the trend in office space design is to increase mobility while at the same time increasing or maximizing the potential for teamwork when employees are in the office.
3. Create a Customized Real Estate Strategy
Business goals and objectives determine office space needs. For firms that aim at recruiting the best employees, their current real estate goal is most likely location. Such a firm will likely look for office space in a suburban or urban area or an area that is located close to a university so that it can get the best highly educated and highly skilled technical employees. For other firms, the location is about the brand.
Their brand requires a premier location and interior space. In short, every successful real estate strategy should mirror or align to a firmâ€™s business goals. As such, investors should align their business goals to their real estate strategies so that they can reap maximum benefits.
4. Optimize Your Work/Office Space to Reflect Your Business Goals
In order for a firm or investor to reduce costs and enable peak performance, the firmâ€™s work environment must be aligned with its work patterns. There is an emerging trend where office design is shifting from many large office spaces to fewer small individual work spaces.
Most of the available space in these new offices is dedicated to interactive uses. The major purpose of the office has shifted towards increased interaction. Productive office spaces should support new technologies, mobile technology solutions and virtual interaction to enhance interfaces and promote telework.
5. Determine How Much Office Space You Need
Before a business starts searching for office space, it needs to determine how much office space it requires. Time is a valuable resource and there is no need for you to waste ample time looking at office spaces that are too small or too large. You can hire the services of a commercial real estate agent who will only show you office spaces that have the proper size for your business.
In most instances, the real estate agent will ask you the number of square feet your business requires. This will enable him/her to determine which commercial real estate properties are within the square footage you need. You should also let the agent know how many permanent rooms or workspaces you may require.
While determining the size of the office space, it is vital that you factor in future growth. This is because you will probably be signing a lease or purchasing office space that you will be locked in for some years and the business may grow. Therefore, add about 10-20% reserve square footage to accommodate any future business growth. When you have additional office space in reserve, you will save your business from extra expenses of moving to another office and terminating a lease before its expiry.
6. Selecting Location of the Office
There is an old real estate adage which says that location-location-location will influence the cost. This adage is very insightful when choosing the right office space. If you choose the wrong location, your business will experience a strong negative monetary impact. You can maximize your value and minimize costs by considering all aspects of choosing the right office location.
There are numerous factors that influence office location. Unfortunately, there does not exist a one-aspect-fits all solution when selecting the office location. You must evaluate all aspects of location and determine which aspect has a huge influence on your business.
Some of the aspects of office location that you should consider include:
a) Cost Considerations
As earlier noted, there are three things that determine cost in commercial real estate: location, location and location. The same factor affects cost of office space. For many young firms, cost is an issue although it can trade off with any other consideration listed below. In most cases, expensive office spaces are located in metropolitan areas. If most of your customers are in downtown metropolitan areas, then you have no choice but to choose an office in such areas. Buildings with high vacancy rates provide low cost office spaces.
b) Proximity to Suppliers
If your firm deals with physical products that require regular supply, you may consider locating your business near your warehouse or supplier. This consideration becomes more significant if the product you deal with is time sensitive. For instance, if your firm deals with products that require customers to sample them first, taking an extra day while waiting for the product samples to arrive may make your customers to opt for your competitor.
c) Proximity to Customers
As stated above, your only choice may be to locate near your clients. Other businesses that need to be located near customers are:
- Industrial dependent business, for example, distribution and logistics services will have to be situated near industrial centers.
- Retail oriented businesses that require being located with other retail establishments.
- Service businesses that target a specific niche market will have to be situated near the customers that they serve.
d) Proximity to the Workforce
As your office expands you will be required to employ more employees. If any of the above mentioned factors are not important considerations for your business, then closeness to the workforce that you need for your business should be your first priority. If your business needs professional employees who are highly skilled, a location near the more successful suburbs would your best option. If clerical workers or low skilled workers are a greater concern, then a location near a major town will be the best option.
e) Public Transport
If you are in an urban area you will need to think about the nearest underground stations. Are there any alternative stations in case of closure? Which lines are nearby? If addition to the tube, check the nearest mainline station and how often the trains are.
Tubes, rail, and road may all be subject to closures which could have an impact to both your visitors and staff during their trips to your new office. Check if there are any long-term closures planned. Rail stations and tubes can close for many years if there are very important upgrades planned. It is therefore important to check if there are any long term closures planned before you sign on the dotted line.
A stressful journey or a long trip can put employees in a bad mood before they even reach the office. Think about the journey into work for your employees. If you are moving into a different location you may want to consider the effect on employeesâ€™ means of transport.
If your visitors or employees will be driving to work, think about the local traffic pattern. Is the proposed site in a notoriously crowded area? When are the busy times? How will this affect the journey of your employees and visitors to your new office? Take a drive test to and from the office during rush hours.
7. Purchasing or Leasing Office Space
Once you have determined the right location and the proper size for your new office, you may face the choice of either purchasing or leasing it. Both choices have merits and demerits. By carefully considering which factors are vital to your business, youâ€™ll make the right decision and locate your new office in the best location at an affordable price.
Purchasing Office Space
- Excess room can be leased to other tenants to generate monthly income
- Modifications and expansions to the building are only restricted by your budget and zoning ordinances
- Can increase in price and build up capital for the business
- If money is the problem, a quick sale of the building may not be possible
- Longer lead time to move in because of the commercial real estate closing procedures
- Larger up-front cash outlay
- Responsible for all repairs and maintenance
Leasing Office Space
- May be able to sub lease excess room to other tenants
- Modifications and expansions could be negotiated as well as financed by the landlord
- Monthly or yearly expenses are known in advance
- Smaller up-front cash outlay
- If less (or more) space is required, you can walk away from the office space at the end of the lease-term and move to more appropriate facilities
- Can negotiate repair and maintenance functions
- Short lead time to take possession and move in
- Excess space sits vacant while you pay the monthly rent for it
- Modifications and expansions can be restricted by the landlord
- Never builds-up equity
- Too long of a lease-period can lock you into an office that no longer serves your interest
8. Environmental and Sustainability
A sustainable office interior can not only save you some cash on your energy bill, but it also raise productivity, lower absenteeism among employees and boost motivation.
Consider the following points and start saving some cash from day one:
a) Air Conditioning
Finding an office space with a new air conditioner unit can save you a substantial amount of money. Find out if the air conditioner unit is of good standard. It is also important to determine how much it would cost you to replace or repair the air conditioning unit. Get an electric and mechanical survey done.
b) Energy Efficiency
When renting or selling a property, the landlord is required by law to produce an official document showing the environmental performance of the office or the property. This will give you an insight of how energy efficient the office or the property is.
It is also important to check the energy performance/ efficiency of the air condition systems, ventilation and heating systems. Get an idea of energy expenses from the previous tenants or from the landlord.
c) Natural Light
Natural light is a recommended factor towards achieving a good environmental rating. Natural light not only increase your productivity among your employees, but it also reduce your energy expenses. Visit the proposed office space for your new office during different times of the day to access how natural light enters the space.
There are so many unfamiliar and complex decisions you will face when choosing the right office spaces. You need some insights to help you choose the right office space that will benefit you. When choosing the office space, you should consider location, emerging trends in office space requirements, mobility and technology in the office, environment and sustainability, among other aspects. These insights will help you to succeed in the modern competitive business world.