4 Ways to Control Rising Real Estate Costs

By | December 8th, 2015|Startup Culture, Workplaces|

Good news! The United States is adding jobs. The bad news is that the competition for office space is driving up the cost of real estate. Rising real estate costs are especially impacting places like the Bay area, New York City, DC, Los Angeles, Boston and Chicago.

“People, followed by real estate, are a company’s most expensive assets,” said George Grace, managing partner of Mohr Partners, a commercial real estate firm. “Your location plays an important role in attracting people.” By being strategic, you can determine ways to control rising real estate costs. Here are four suggestions.

1. Sublease

This can be a great option for companies, but subleasing also has risks, said Grace. The biggest benefit of a sublease versus a new lease is lower rent. Additional benefits include more flexible and  shorter contract terms, simpler and more straightforward credit checks, and a lower security deposit.

The downside is that the space may not be a perfect fit for your needs and that you won’t be able to make changes to it. However, “the biggest drawback is that the landlord has the right to take back the space from the primary tenant,” said Grace. One scenario might look like this: You shop around and find the perfect space for your needs. The primary tenant presents the sublease to the landlord who turns the deal down and decides to find a tenant that will pay a higher rent. Another risk is that the company you’re leasing from can no longer afford the space and leaves. Then you lose the sublease.

2. Relocate

Hoping to attract businesses that will create jobs and pay taxes, many towns, cities, counties and states offer business incentives for relocating to their areas. By moving from one location to another, you can reduce your tax burden. For example, you can lower your sales taxes or personal income tax, which may attract employees. However, when considering these options, make sure you factor in how many people you may lose as a result of a move and how hard it may be to find the right talent for your company in a new city.

3. Distribute your workforce

The use of technology may allow you to have workers who are located throughout the United States and even the world. It’s not just about sourcing hard-to-find technology skills at a lower price. Employees can work from home and be located closer to customers without a corporate office nearby. This also reduces travel expenses.

4. Redesign your space

The design of your office can help you be more agile and lower your rent. Consider an open office design, which  increases collaboration and may allow you to squeeze more workers in the same amount of space. Just be mindful that open spaces don’t work in every work situation and for every personality type. Here are six tips for making open spaces work and ensuring that you have quiet spaces to optimize how people work.

Rearranging people isn’t the only option here. You can also reduce space needs by storing files electronically instead of in rows and rows of space gobbling file cabinets. A “paperless” office eliminates or greatly reduces the need for paper files, saves space and saves money. It has other benefits as well, like boosting productivity by making documentation and information sharing easier.

Understanding your company’s strategic goals and how they play into growth will help you determine the best ways to control your real estate costs. What’s the best fit for you?

rising real estate costs