Real Estate Tips for Not-For-Profits – Part 1
Not-For-Profit (NFP) organizations are significant contributors to our economy. They provide valuable services to their members and clients, while employing hundreds of thousands of people across North America. While the missions of charities, business associations, and other member based groups are extremely varied, they share some common challenges when considering their needs for commercial real estate.
In this blog series, Real Strategy Advisors will discuss some of the most common issues facing our clients today and give you some ideas on how to see them coming and make plans for mitigation.
Whereas for-profit companies deal with revenue, NFPs deal with funding. Charitable donations, government grants, membership fees, and event ticket sales all typify sources of NFP funding.
In many cases, the dollars that flow from these sources have been provided with strict guidelines on how and where they might be spent from either the funders themselves or via the mandate of the NFP organization. In addition, it is rare that a source of funding be provided in perpetuity. Instead funding allocation is often tied to a specific program the organization is planning to offer, and may only be fully funded for a limited time (e.g. 2 to 3 years) from a variety of the sources above.
This can make signing longer term leases or purchasing a building seem out of reach for all but the very well-funded. And since NFP organizations are traditionally loathe to spend money on their space, we’ve observed they often accept donated furniture or fit themselves into poorly laid out space to try and save money. As a result, it’s quite common to see organizations sign short term leases that at are tied to their primary funding source, usually missing out on landlord incentives like free rent or a construction allowances. They might even face a rental rate premium because they have no leverage.
Please check back as we share some tips to help remove some of the risk and capital cost associated with real estate for NFP organizations. In the meantime, please contact Real Strategy today to discuss how you can make office space more affordable for your organization.