The Office Hunt: Tips for Finding the Best Space for Your Nonprofit
The right office can make or break a nonprofit’s ability to carry out its mission. Well-designed space in the right location can help an organization reduce costs, allow for greater workplace collaboration and provide more opportunities to effectively and efficiently serve its community. As such, before a nonprofit decides where to set up shop, it should first revamp its real estate selection process by focusing on the following considerations:
Location, Location, Location
Every organization has parameters and needs in terms of office location. For nonprofits, the key is to secure a space that balances costs with location-based advantages. Whenever possible, a nonprofit should position its office(s) in areas that provide the critical resources it needs to successfully accomplish its goals, such as talented staff and proximity to government regulatory agencies, public transportation, major highways, airports and hotels. Still, costs remain a top priority, and to keep them as low as possible, organizations should look beyond occupancy costs and also consider unemployment taxes, sales and use tax, personal property tax and parking fees. If physical presence in an area with high occupancy costs is necessary, nonprofits can consider maintaining a small office in that location, while keeping the majority of its staff elsewhere.
Own or Lease?
Leasing office space delivers greater flexibility, which is often necessary for nonprofits that are anticipating significant growth or contraction. Lease arrangements also keep upfront costs low—a considerable advantage for organizations that need most of their cash to fund current and future operations. Meanwhile, for organizations with stable growth projections and sufficient cash reserves, ownership can provide the opportunity to build equity and reduce occupancy costs in the long run. Recent high vacancy rates, combined with low interest rates, have created favorable market conditions to acquire office space across much of the country, and many landlords are now more willing to sell single floors in their buildings to businesses and nonprofits.
Finding Space and Negotiating a Lease
As an organization begins its hunt, it should first step back and reevaluate its needs around space and office layout. A more modern, efficient design can reduce overall costs, boost productivity, enhance collaboration, improve recruiting and retention efforts, and portray the desired image.
When it comes to actually finding and securing a new office, many organizations choose to hire a real estate firm to help them navigate the market and negotiate the lease. In working with a firm, the process involves identifying the organization’s desired specifications, finding buildings that meet these parameters, vetting the options through tours and then preparing test fits to determine the best possible layout. Once final options are identified, the firm prepares net present value calculations for the nonprofit’s consideration. A winner is then selected, and the lease negotiation process begins.
The economics of the lease typically include base rent, an annual fixed escalator, a tenant improvement allowance used to build out the space and a pass through of increases in operating expenses over the base year. To note, the pass through of increases in operating expenses provision in a given lease is often complicated, and nonprofits should work with their real estate agent(s) to carefully negotiate these terms in order to avoid additional costs down the road.
For many nonprofit organizations, securing the right office in the right location at the right cost can be a daunting process. But with a careful approach and the right knowledge, the hunt for new space can yield great results and significantly enhance an organization’s ability to fulfill its mission.