As corporations grow and change over time, their real estate needs evolve as well. Managing real estate change and identifying the right locations and facilities—at the right time—is crucial to a company’s success. When new plans go into production and ideas develop into clear business strategies, the real estate goals and needs of corporations must change accordingly. This change could be as simple as when a small software company needs to grow its team or a manufacturer expects to expand its product line. Or perhaps it’s a bit more challenging such as the dawning realization that the best new business opportunities are found and transacted in halfway across the globe in Dubai. Whether your company is booming or contracting—or simply taking the next measured step—it is critical that business leaders and executives first truly understand their real estate needs and then are prepared to act when the time has come to make a change.
All strong corporate leaders know to evaluate their company’s structure and growth plans in the context of what their needs are at present and what trends and factors may influence their business down the road. Having a clear understanding of their current needs and how those needs may or may no longer be relevant one, three or five years down the road leads to balanced decision making. It is surprising, however, how few apply this same technique to their real estate decisions—which are often driven by immediate or even temporary factors. The difficulty in making a smart real estate transition lies in the need to balance your company’s long-term needs with those that are more immediate. Executives must be thoughtful about real estate change to avoid making reactionary decisions based on how the company is currently operating or how the market is fluctuating in the present, especially since real estate almost always requires binding long term commitments.
When considering making a substantive real estate change, it is essential to work with an adviser who not only understands real estate in your desired market, but who understands your business. Hiring a broker is not always the right choice when managing rapid growth and change, because this decision is more than a transaction—it represents a critical move for your industry and business. Be wary of an adviser who is only concerned with one directive—managing significant real estate change is a multi-faceted action that must take any number of objective and subjective concerns into account.
With a bird’s-eye view of your industry and company goals well in hand, business leaders will know the time is ripe for a real estate change when it is necessary for strategy, capacity or cost.
Making strategic moves
Having the right geographic location is imperative if your business strategy requires access to customers or access to talent. Refine and review your goals and evaluate your current physical footprint to identify weaknesses and opportunities in your current location. If it is not possible to find one perfect location that will attract both clients and talent, executives need to weigh which constituency will have a greater impact on their business.
Some companies require access to a particular brand of talent in order to develop their company culture. For example, most automotive companies are now seeking space in Silicon Valley to have the best and most immediate access to technology and the talented individuals who are developing and innovating. A strong real estate adviser will offer keen insight as to how a particular type of property or neighborhood location will impact your quest to attract talent.
Identifying if you need to move to maximize capacity is a simple 1-to-1 equation: either you need more space or you need less. However, it is key to be cautious with making this type of change and important to avoid making an urgent transaction, which can lead to a short-sighted choice or paying too much for a space you feel desperate to secure. The business world—particularly with consumer, restaurant and retail brands—is filled with stories of companies over-expanding too quickly and going bankrupt. Before committing to a change, consider how long you anticipate needing the new space. Different considerations will come into play if it will be used for one year or 10 years. In some cases, a temporary solution is more useful than a permanent one. Your real estate expert should be able to offer negotiating strategies that create valuable flexibility in otherwise long-term binding commitments.
If, however, the plan is to reduce capacity in an area or overall, it is critical to make smart choices. Real estate consultants can help manage challenges in creative ways, and can deal with difficult lenders and landlords, renegotiate rates for the space, and advise on options to exit or reduce your overall real estate portfolio.
Ensuring the price is right
Many factors contribute to the true cost of property, which can have a hidden—but dramatic effect—on the bottom line. All too often, business leaders think of real estate as a fixed cost, without considering the substantial non-monetary costs and considerations that can have a significant impact on their budget. Remember that the cheapest space may not always be the best one. For example, if a location is unattractive to employees, a company may end up with a high turnover rate, which can lead to a staggering recruiting cost or increased salary demands from employees. At the same time, companies who own valuable property can make money off of real estate transactions, invest in the market or even rent out their unused space for a profit.
Making the right changes and finding the right location and environment is critical. Whether the need is to manage growth or contract operations, making a measured and thoughtful real estate move has the potential to change the course of history for your company. Balance your business needs with the challenges of ever-changing demographics, populations, zoning, commercial and community needs can be difficult, but is imperative for long-term success. Making the smart real estate move is a decision that has long-term consequences, even when the need that drives the change is not. With the right set of factors and knowledge, executives can understand when the time is right, and make a balanced decision to enhance their operations.