If your corporate real estate strategy includes owning properties rather than leasing them, you end up walking a bit of a tightrope. Done right, you can enjoy greater control and lower costs over time. Done wrong, you can end up with thousands or millions of wasted square feet. Here are five strategies that can help you optimize your owned-property strategy.
1) Test the Waters
No matter how focused on owning space your corporate real estate strategy might be, leasing space still has an important role in building a successful portfolio. When you're looking at new markets or expanding into new areas of business, it can be hard to be sure of exactly what you need in terms of square footage, configuration or location. Spending a bit of time in leased space to help you understand the lay of the land will give you the ability to make more educated decisions and ultimately purchase better spaces. In the long run, this will reduce the amount of unusable vacant space that you have to carry on your books.
2) Seek Flexible Space
If you live in a mature area, your neighborhood commercial streets are probably dotted with the remnants of inflexible retail buildings. Whether it's an adobe-styled fast food restaurant with a big bell or a pizza restaurant with a peaked roof that looks strangely like a hat, these properties can be very hard to re-brand.
While some exteriors are inflexible, interiors can be equally hard to reconfigure. The best spaces to buy are those that can be quickly adapted to different uses. This lets it serve your business as it changes. It also makes it easier to lease out or resell if it no longer fits your corporate real estate portfolio.
3) Run a Multi-Tenant Building
Once you own a space, configure it so that you can easily split it up, even if you're the only tenant. For instance, you could leave the hallways intact but knock down the walls between the suites. That way, you can easily re-build the walls if you have space you no longer need. Having a corporate real estate strategy that leaves buildings relatively untouched can also save money on tenant improvements and other build outs. You can still create a sense of corporate identity with signage and decorating elements.
4) Buy Too Much
It might seem counterintuitive to increase your occupancy by buying too much space, but a corporate real estate strategy for owned real estate is different than the one you would use with leased space. Since owner-user buildings are relatively illiquid, you can't assume that you'll be able to move every time your business's needs change.
When you buy a building that is too large, it starts out as a multi-tenant building. If you need to expand, you can gradually move tenants out as their leases roll over. On the other hand, if you need less space for your business, you can carve out pieces of your space (see the strategy above!) and lease it out to existing tenants or new ones.
5) Embrace Cost Center Status
Realize that owning real estate means that you're going to have some costs. Once you integrate red ink into your corporate real estate strategy, you can free yourself up to actually reduce expenses. For instance, if you have vacant space, the idea isn't necessarily to get the best possible rent for it. Instead, it's to get what you can to offset as much as possible of your carrying costs. This minimizes your losses while also giving you the flexibility you need for ongoing success.
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