The advent of COVID-19 has not only shaken the commercial real estate market, it has changed the way we work and especially in office environments!
March 11th, 2020: COVID-19 is declared a pandemic by the World Health Organization. During the rest of the month here in Ottawa, Olivia and her team at a local not-for-profit found themselves navigating new terrain, managing their people across various remote locations, and struggling to figure out how to provide a safe workplace.
Olivia had recently been brought into the organization as Executive Director and with a mandate for change. She was looking to improve culture and connection while increasing funding for various programs. With her team sent home because of a pandemic lockdown, Olivia had to figure out how to accomplish those goals and how much office space she’ll need both during and after the pandemic. How would she create a space that made people want to come back to work?
Different NFP Funding Models:
- Donation-based: Organizations that provide a variety of services and collect funds primarily via donation.
- Grant-based: Organizations that rely on major grants from individuals and foundations or public grants and allocated service funding to finance their operations.
- Member associations: Organizations that connect people around a particular industry, profession, recreational activity, interest, etc. and get their funding through membership fees.
Olivia recognized that, while virtual is good on paper, face-to-face interaction and the sharing of ideas between her employees in a physical space is what fuels their culture and makes their organization unique. When Real Strategy met with Olivia, we explained that there are three pitfalls not-for-profits often fall into when planning their commercial real estate strategy…
Prioritizing their cause above their people: Most people working in the not-for-profit space are doing it for the cause — the impact their organization’s programs have on the world and the community. As a result, not-for-profit executives can be reluctant (or even feel guilty) to spend donor and grant money on things like nice office space and quality furniture. It’s an everyone before us mentality.
Failure to appreciate their desirability: It’s easy for not-for-profit organizations to overlook their relative financial stability and how attractive that can be to a prospective landlord. Since program contracts and grants may typically be funded in two to three-year windows, it can leave organizations feeling insecure about making longer-term lease commitments.
Less comprehensive piecemeal planning: Feeling cash poor often leads not-for-profit organizations having to ramp up service delivery quickly, try to find any old space in the building on a short-term lease, and tie it to the program’s sunset. This patchwork approach results in tremendous inefficiency, a less cohesive office plan, and generally poorer quality space since landlords don’t spend money on short-term tenancies. Planning this way often means holding more space (and spending more) than what’s needed.
Although some organizations are going with a digital by design method post-pandemic, where everyone works remotely and the office is ditched, we advised Olivia that this approach simply won’t work for everyone. Employees’ home situations are not ubiquitous and so a more effective approach would recognize individual needs and personal preferences rather than simply painting everyone with the same brush. This strategy provides the flexibility that is essential for successful hybrid work.
While flexible policies that provide staff the option to work remotely are certainly important, another way to encourage a thriving and innovative culture is supplying your workforce with a professional and inviting office environment. We’re now over a year into this pandemic and people are starved for interaction. Ensuring you leverage this red hot office market in combination with your not-for-profit’s financial stability, should allow you to negotiate attractive rental rates and high-dollar cash incentives which makes it so much easier to construct really cool space.
Many not-for-profits have been around for decades and, as long as revenue is not dependant on a single contract or funding source, they can use this proven track record to support an aggressive negotiation strategy. When working with our clients, we find that failing to take a holistic approach to office space planning creates functional inefficiencies and redundancies that gobble up more space than necessary and wastes a surprising amount of money.
What Olivia found was that they could spend more per square foot on a smaller more efficient office footprint and still reduce their overall cost. The “with fries with that” is that she got completely refreshed office space and all new everything! Played out over time, having a just get it done or it works for now mentality will actually cost more due to excess space while the quality will suffer from the lack of cohesion in design.
Quick and dirty short-term leases don’t get landlords excited so there’s less money for maintenance, repairs, and upgrades. It’s a shame when we find great people doing important and impactful work in space that is tired and depressing. Not-for-profits have more choices than ever with the swaths of high-quality office space now available.
If properly represented, you can provide your employees with all the relevant and modern creature comforts they deserve to stay inspired and this is where an experienced broker, like Real Strategy, comes in! Contact us today and we’ll explore these solutions together.