Recent news headlines have made it clear the soft economy in northern Nevada has resulted in a real estate market in which prices are historically low, especially for office space. Rent levels for office space have decreased drastically in some submarkets and buildings and being a tenant's market the incentives, perks and concessions have increased. While price is, and should be, a driving factor in the real estate decision it is also important for tenants to consider other factors in the real estate decision that could save money (or make more money) in the long run.
Contrary to popular belief, price alone should not dictate your next office decision. In fact, America's top companies say there are three qualities that are more important in selecting an office than the price. The property should give companies a greater ability to recruit employees, align with the corporate image of the company and encourage and cultivate employee productivity.
First, top companies say the ability to recruit and retain employees is an extremely important factor in selecting the location of the office, the type and quality of a building and even the layout of the office. The largest line item on most corporate profit and loss statement is usually wages and salaries followed by office rent or mortgage. If the greatest amount of business expenses are spent on staff then why wouldn't a company select an office that makes employees desire to work there or stay there?
The average office worker spends nearly 23 to 37 percent of their work week at the office. Simply put, employees need to like the office. They need to feel that it is safe, convenient to get to and from, be welcoming to their clients and align with the work they are doing.
Here are few examples of how some types of firms could meet the needs of their workforce. Top tech firms can provide a creative office environment that fuels employees by offering ample lighting, plenty of windows and collaboration areas. The property should be within close proximity to coffee shops and eateries and be convenient to commute to and from. High-end corporate law firms can provide an office setting that showcases the firm allowing attorneys to attract more high-end clients. This includes selecting an office building that is in a choice location and offers pleasant views, an elegant lobby and common areas and provides private meeting space that accommodates confidentiality. Ease of access is also important.
Aligning the office with the company's image is the second factor in making an office decision. Not all firms have the same image but all firms should keep their desired image in mind when making an office decision. The average office lease is five years, so the office decision should not be taken lightly or without consideration of the long-term impact.
While most may think of "image" as high-end, it might be that your desired image is to show frugality and conservatism. Therefore, a downtown high-rise is not the ideal property type and rather a class B office in a suburban submarket may be the best choice. However, if your firm prides itself on being exclusive and established it is probably in your best interest to match that image to the building and the downtown high-rise may be the right alternative. The office should adhere to the standards of the company's employees, clients and shareholders or investors.
Finally, the office should provide workspace that is conducive to and encourages employee productivity. By providing workers with an office where employees can work without getting distracted or uncomfortable they will in turn be more productive.
Just as wages and salaries are the largest line item on a P&L statement, most revenues also come from workers, so why not provide a workplace that allows them to flourish? The most common causes that can put a damper on productivity related to the office are poor HVAC and inadequate lighting. These are common qualities of aging or inefficient buildings. Newer properties may cost more but their upgraded building systems could be worth it. Other factors that negatively impact the workers time in office include long commuting times, lack of amenities such as restaurants, a lack of parking, and other elements which make it difficult for the employee to be at the workplace.
An office that is not in line with the three principles above can be detrimental to the firm. It can result in staff losses, an inability to recruit top-tier employees, poor workmanship and low productivity. Ultimately this could lead to a loss of clients and investors. This could have a huge hit on the bottom line. If you save money by renting subpar space, that decision may end up costing more in the long run.
For example, the reduction of 10 percent of your workforce can cause loss of billable time and will also cost the company time and energy in restaffing. Now imagine the detriment on a much larger scale.
Contrary, if you select an office that allows for top-tier recruiting and fosters productivity, even if it is at a slightly higher lease rate, you can have a positive impact on your bottom line.
In closing, the average office lease is five years, or half a decade. It is not a decision that should go without ample thought and consideration. What appears to be a good idea in a recession may look foolish in the recovery. Next time you are in the market for an office, remember paying slightly more on rent to have an office that allows for the recruitment and retention of top employees, is in line with the corporate image and increases employee productivity is worth it.
Tim Ruffin and Melissa Molyneaux are office specialists with Colliers International's Reno office. Contact them through www.neavdaoffice.com or 823-9666.
