Chris Carmen  /   September 12, 2016

I recently read a peer’s blog post titled “5 Signs You Need New Office Space”, which I thought was valuable and worth sharing.  However, I believe what might be more relevant is the top reasons today’s tenants decide it’s time to find new office digs.  I’ve come up with the list below, which has some of the same points as “5 Signs….”, but slightly differs.

After reviewing the list below, let me know your thoughts on the topic.  As the ‘Tenant’, I’m most interested in what you have to say.  After all, as a business owner or manager, you’re the person who pulls the trigger on an office relocation.

  1. Retaining and Attracting Talent – The market for quality employees has become increasingly competitive. This is especially true for tech companies that need employees with very specific skill sets, such as software developers. Now more than ever, prospective employees are considering office related factors when evaluating jobs.  Factors such as the location/proximity of the office in relation to where they live and socialize; amenities such as fitness facility or common gathering space within the office suite, the building, or within walking distance; the environment and culture office projects. The inability of your office space to ‘check-the-box’ on the above factors will likely mean you’ll be challenged to recruit top talent and maybe worse, prevent your current talent from landing new jobs with the employers with amenity-laden offices located in the heart of the target demographic they’re trying to hire.
  1. Inability to Grow – Until the tightening job market has become a factor in the above Retaining and Attracting Talent, a company’s ability to grow their office space was the # 1-factor businesses relocate. As office vacancy increases, companies’ ability to grow into adjacent space or even within their current building has become more limited.  Often, the only solution to growing an office while more than a few years remain on an office lease is to expand by opening a second office, either in the same building or a nearby office building.  But this is usually only a failsafe solution because opening a second office can create a number of issues for a growing endeavor. Splitting the office often means a second set of office infrastructure and administration.  But maybe most unsettling, a second office often takes on a culture of its own that evolves independently from the ‘main’ office, which is influenced by the employees, the management, and amenities in the new location.  This is fresh in my mind because one of my best clients split its office a few years ago and we just completed a project to combine the two offices into one location to solve the clash of cultures that evolved by having separate offices.  It was so important to bring all of the employees and management back under one roof, the office consolidation required selling one building and leaving a lease for the other 2 years prior to lease expiration.
  1. The Current Space Does Not Reflect the Company’s Brand and/or Culture – This factor has become increasingly important during the past five or six years due to the tightening labor market (see the above Item #1). However, albeit highly important, projecting the right image and work culture for employees and job candidates is not the only reason Brand & Culture weigh so highly on the list.  Customers are becoming increasingly cognizant of the image projected by vendors.  Not only from the obvious: “Are they taking too much $ from us”, but as a service provider, does the company reflect the type of organization they believe will make them better?  For example, does a marketing firm project a creative image, or at least an image that the customer believes will help to sell its products.  A precise and thoughtful projection of a company’s Brand and Culture by its office space and work environment cannot be overrated and is a topic I’ve blogged about often during the past few years.

  1. Space Inefficiency – The first thing we often think of when the topic of Space Inefficiency comes up is a business owner or manager believing they’re paying for excess space they’re not using. Although that may be the case, the real issues office space inefficiency causes are the loss of productivity, low employee morale, and a generally disruptive work environment. Ultimately affecting a company’s bottom line, but not as rent, but the loss of staff productivity.  During the 31 years I’ve been serving office tenants, I’ve seen awareness of this issue grow as business managers and owners have developed a deeper understanding of the cost/benefit of employee productivity, which is so often tied to the efficiency and layout of a businesses’ office space.
  1. Cost of Occupancy – Now, we’re finally on to the last of the factors causing businesses to relocate to new offices…. the lease economics. Many of you may have expected this item to rate higher on the list of reasons a company relocates, maybe even picking it as #1. But consider this: according to the Gallup organization, which produced a study on the American worker and workplace a number of years ago and updates each year, office rent accounts for roughly 3-7% of a company’s overhead,whereas,employee-related expense: payroll, benefits, payroll taxes, etc. make up as much as 70% of a company’s overhead. With that in mind, although the amount of rent and facility related expenses a company incurs is important, it pales in comparison to the preceding four factors that have a direct or indirect employee cost.  If you can have a positive impact on the above four factors, it will undoubtedly have a bigger impact on a company’s bottom line.  In fact, when office lease related costs account for less than 7% of a company’s overhead, an argument can be made for a manager to spend more money on rent to improve the office environment or location, which should have a positive impact on employee morale and talent acquisition, which makes up approximately up 70% of a company’s overhead.

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