Determining Your Real Estate Requirements

Published on Thursday, 12 June 2014 09:08:12    Written by Marc
If your company uses real estate for its operations, then you are not in the business of real estate per say. The sites that you lease only serve to host your operations, which is the heart of your company. If your work involves managing real estate leases for your company, chances are you are constantly under pressure to try to find ways to reduce your real estate costs; after all, each time you lease a new space it comes at a cost. When you are the building owner, you constantly seek to increase the size of the real estate you control because real estate brings you revenue; however, when you are on the user side, you are always trying to minimize the space you lease.

real estate requirementsBecause of this, each time I leased space I always tried to set the real estate requirements as the minimum space we could live with, without compromising the efficiency of operations. This determined our requirements, not the space my colleagues said they wanted or to accommodate the forecasted growth, but the real space that was needed to operate. I noticed that the vast majority of people are always afraid of not having enough space. It is a little like when we buy groceries right before a meal; it seems we always buy twice as much as what we had on our list, by fear of not having enough food at home.

Listening to most head of business units, you would conclude that there is always growth happening everywhere. In reality, real growth does not happen all the time and not in every business unit or company. Growth, from a real estate space requirement, actually tends to happen in steps, with nothing that seems to be happening for a while and then all of a sudden there is a burst of growth. This is because often times if you have slow growth, you could always add a few more employees here and there in a space, even in an office space. Then at one point, there is a requirement for a small (or larger) group of new employees, and we realize that we really need more space to keep working in decent conditions.

When leasing space, it is important to determine how much space people will really need the day they move into the site. If people are moving from another site, it does not mean that they will automatically need the same space at the new site, even if you end up with the exact same number of people. Depending on the configuration of a site, you could host a different number of people without altering their quality of life. For example, a building with straight walls will normally accommodate more offices (closed or open) than a building with walls that are either round or with numerous corners like some architects seem to like to design. These buildings may look nice from the outside but promote loss of spaces for the tenants. In addition, height could affect the space requirements. This may seem obvious for a commercial, an industrial, or a warehouse site, but it could affect even an office space as you could store more items with a 10 feet ceiling than an eight or nine foot one. There are numerous items that, when added together, could substantially affect how much space you will need to host a designated number of people.

In addition, when moving to new sites, it is good for management to look at the requirements of the people. This will help determine the real estate requirements. In some cases, you might be able to save some space by having employees go from closed office to a more open office concept. While removing someone from a closed office is difficult during normal times and often only serves to demoralize the people, doing it for a number of employees at once during a site move tends to be more accepted. If you are the only employee losing your closed office you will get upset, but if you are one of the 20 employees that loses their closed office when moving into a new site, then you do not take it as personal. In addition, some open office layouts might be done in such a way that people might come to like their new space as much as the older one. For example, in all offices there a number of filing cabinets that needs to be located somewhere close to the people. Instead of putting them on walls, they could make great dividers for open offices (cubicles). You can even save space when you place them against the wall, you need to leave space in front of them to be able to open them. If you place them next to open offices, you already have that open space free, so no need to add extra space (the open office just gets a little smaller for the moments which the cabinet is opened, but if the cabinet is for the employee in question, then there is no problem. In addition to saving space, this adds a level of soundproofing between employees and moves the cubicles a little further apart, giving them an added sense of privacy. Adding a few plants here and there on the floor and on top of some filing cabinets and you could create a nice environment while reducing your real estate space requirements. I did this a few years ago when I had to move my team to a new site. More than half of my staff had to lose their closed offices because our new policy on office attrition did not allow them to have closed offices. In addition, to my surprise I did not get one single complaint, people actually were happier with their new open office than their previous closed ones. It cost us nothing since we only rearranged cubicles, cabinets, and plants.

Determining how much space is required in a new site is something that needs to be brainstormed and then calculated in detail because once the space is leased, adding more always comes at an extra cost and trouble (even if you have an option to take more space right next door) and taking too much too early is a waste of money. While the downside of not taking enough space will be seen rapidly, the downside of taking too much space might not be as obvious because people tend to fill naturally void spaces. You can walk an office that is 20 or 25 percent too large for a group and never know it because people leave all kinds of things on the floor, many of those which are not really needed or which would be better off at a storage space.

Bottom line, although you might be time crunched when planning for a new site, taking the time to evaluate carefully how much space is really needed instead of blindly relying on the first numbers that people give can help to save money in the end.