Occupying space is rarely as simple as just signing a lease and closing documents, and moving in. The best users of commercial real estate go into their spaces with strategies that are designed to reduce costs while increasing the ability of their spaces to serve their business. Here are five smart strategies that you can apply to your company's real estate portfolio.
Leasing Commercial Real Estate
The same rules that apply to home ownership don't apply to businesses. In most cases, leasing is a better option for two key reasons. The first is that the rate of growth for commercial real estate is usually lower than what you'd like your business' return on capital to be. When you tie money up in real estate, you're taking it away from funding operations where it could generate a much higher rate of return for you or your shareholders. The second is that your business' needs frequently change, making existing buildings either too big, too small or in the wrong place. Leasing space eliminates all of these problems since you keep your capital free for other uses and you can always move when your lease ends.
Controlling TI Costs
While you don't want to create an unpleasant place for your employees, creating corporate palaces is usually a bad investment. In leased space, you'll eventually walk away from the TIs you install and in owned space, a new owner will probably want his own TIs and will just rip yours out. Open floor plans, using color for decoration, and other strategies create an inviting workplace that won't cost too much.
Smart Green Upgrades
Occupying environmentally friendly commercial real estate doesn't just reap benefits for the ecosystem and for your company's public image - it can also save real money. However, environmental upgrades aren't all equally valuable. For instance, the photovoltaic system that is a wise investment in an area like Los Angeles with expensive electricity and high levels of insolation doesn't make as much sense in Minneapolis where power is cheap and sunlight is scarce. On the other hand, lighting upgrades, water efficiency upgrades and insulation upgrades can frequently achieve one to three year payback periods. They're good for the environment and your bottom line.
Owning Multi-Tenant Space
If your company chooses to own its commercial real estate, there's a way to mitigate the inflexibility of owned space. Buy a multi-tenant building and occupy a portion of it. Occupied buildings frequently have higher returns than unoccupied ones, so your capital will be used more effectively. If your business grows and needs more space, it can expand into a leased space when that tenant moves out. On the other hand, if you need less space, you can fill the space you vacate with a new tenant. Multi-tenant space gives you control and flexibility.
Embracing IT
Bricks and mortar work better when they're seasoned with a healthy dash of silicon. Every aspect of commercial real estate can work better when your company embraces IT. Physical building operations can benefit from using building automation software that integrates lighting, access control, security and climate control to create a workplace that is safe, comfortable and efficient. Property management software helps you handle the nuts and bolts of running your building, while lease management software helps you track critical dates for your occupied spaces while giving you access to comparative data so that you can see which spaces are the most efficient. IT can also help you select sites by providing access to competitive and market data while helping you stay connected while you're on the road.
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