Evolving Real Estate

The workplace and businesses are always changing and evolving. However, change has never been as dramatic or has escalated so quickly as has been necessitated by COVID-19.

An interesting result of the pandemic has been the requirement that organizations implement plans that may have been on the back burner or to which they were strongly opposed.

Telecommuting

Government-issued stay-at-home policies have made telecommuting a business necessity. Some companies had already implemented this policy, others were contemplating it and some were dead set against it. Working from home is now a worldwide reality. If businesses want to survive, then enabling employees to be productive outside of the workplace is destined to become common practice.

Telecommuting is more than just taking a laptop home. This might be a quick fix to keeping employees safe while keeping the business functioning, but there is much more to it.

Allowing employees to work remotely, whether temporarily or permanently, can result in higher employee engagement and morale. The opportunity to work from home eliminates the daily stress of commuting. It demonstrates that an employer is looking out for their safety and well-being during a major business disruption. Telecommuting provides increased opportunities to improve healthy living habits, and flexibility to care for loved ones.

Looking long-term, telecommuting may seem enticing due to the prospect of lower overhead costs, the promise of increased productivity and the flexibility for employees to work where they are most comfortable. Such an arrangement does present challenges, as well. The potential for miscommunication tops the list, followed by the lack of a close, trusting environment cultivated from regularly meeting face-to-face. Managers and supervisors must be able to implicitly trust that employees are fulfilling their responsibilities without continuous oversight. Despite these challenges, people can work effectively in remote offices, but only if the right culture has been created and companies support employees working off site to effectively collaborate and accomplish their goals.

Telecommuting arrangements are approved by supervisors on a case‐by‐case basis. Employees must be able to carry out the same duties, assignments and other work obligations at their home office as they do when work on site. An employer may or may not provide telecommuting employees with equipment or office furnishings for their home offices.

Normally, a full‐time regular workweek is 40 hours, divided into five days, Monday through Friday. Employees must be available to their supervisors and coworkers during core work hours. There usually are two core periods each day; 8:30 to 11:30 a.m., and 1:30 to 4 p.m. Employees must be available to attend scheduled meetings and participate in other required office activities from home as needed. Virtual meeting technology alleviates some of the needs to talk and confer in person. However, it is important to schedule time in the office on a periodic basis for sanity checks and social interaction.

Employees are responsible for equipping and maintaining their home offices so that they can accomplish their work in an efficient and expeditious manner. Depending on the nature of their jobs, this may require having hardware, software, peripherals, supplies, space (with minimal distractions) and furniture to work.

Cause & effect

Telecommuting may mean the workspace is shrinking. If a segment of a population is working from home, then a facility may experience a surplus of space. Many FMs espouse that brick-and-mortar will always be needed, but this development begs the question as to what size now suits the demand organization’s strategic plan.

Part of the onus of making these determinations will fall to the FM. One FM competency entails the understanding of real estate and its impact on business success. It is up to FMs to analyze real estate needs as they are expected to manage it as a physical asset that will support the personnel in a building. They must be able to provide information as it relates to the built environment and its importance to an organization’s strategy and operations. They must always focus on the long-term aspect of the real estate portfolio to meet the company’s strategic objectives while optimizing the facility’s value and space.

To that end, FMs should evaluate using this extra space to create more and larger teaming areas or provide more amenities to the workplace.

Consolidation of multiple facilities could be considered; as would selling existing facilities and moving to smaller buildings. All these would take financial considerations, Facility Condition Indexes, cost comparisons and other analysis.

Another option is leasing space to a tenant. This would alleviate the challenge of superfluous space while creating a cash-flow for the company. Becoming a landlord opens another realm of responsibilities for the FM, but it would not be much different from normal care of occupants in the building.

This direction will take evaluations, as well. FM should consider what space is available and if it can easily be segregated from their own organization and have easy access for the tenant without interfering with existing employees and visitors.

The FM should know if there will be extra operating costs if space is leased by a tenant and if a tenant improvement allowance is part of the agreement. Will sub-meters need to be added to charge back on utility usage or will a gross lease make more sense where the organization pays all such costs? Also, if tenants will not be permitted to use the organization’s internet or phone connections, then the cost to add independent lines to the facility should be factored in.

Knowing the difference between rentable space versus useable space will be important and will help determine the cost to rent the space. Other costs could include making any upgrades, adding furniture if necessary, and conducting reference or background checks.

Hiring a real estate broker to handle the marketing and leasing arrangements would also be a smart move. The overall cost per square footage and/or total monthly rent for the space should be determined, considering the costs to prepare the space, to market it, operate it and pay taxes. Rules should be set, including rent/lease payment dates, late fees, returned check policy and how payments will be accepted.

Once the costs have been defined and what segment of the business world it may attract, it would be worthwhile to find out what a target customer would have to pay at a similar commercial building.

Then, a broker can create a list of possible clients based on what is offered. Many entrepreneurs will be eager for an office where they can meet clients and have access to a conference room. Others will want storage space that is climate-controlled and provides security. Some businesses may want flexible, short-term or month-to-month leases, while others might want more stability. The types of workplace desired will vary inordinately, but there is always something out there that will meet someone’s needs and somebody out there who needs what is available.

In a lease

If an FM is leasing their facility, a different set of challenges may present themselves. If an organization finds they are leasing space that is now oversized for their needs as a result of telecommuting, an evaluation of next possible steps must be performed. They can renegotiate their lease to accommodate their new needs, look for new space that better suits their operations or sub-let their excess office areas.

In some respects, this shift in workspace needs may create a renter’s market. Landlords may be encumbered with unrented space that needs to be occupied. Buildings designed for single users may need to be revamped for multiple tenants. Whatever the reasons, as FMs find the need to renegotiate old leases or find new space, it would be the perfect time to introduce green leases.

Also known as high-performance or energy-aligned leases, green leases create beneficial agreements between building owners and tenants by equitably aligning the costs and benefits of energy and water efficiency investments for both parties. It is an arrangement that offers substantial benefits, both quantitative and qualitative, to building owners/landlords and tenants. Green leases improve the environmental performance of the leased space by securing a few critical commitments on the part of both the landlord and the tenant. It also will align financial incentives so that both parties benefit from adopting green measures. The ensuing reduction in utility consumption and possible waste diversion efforts will serve to generate savings.

Frequently, lease negotiations are marked by a flood of tenant requests that put landlords on the defensive and can escalate to a contentious tug of war, especially when it seems the tenant feels they have leverage over the landlord. Successful green leases are designed to provide financial gains for both parties supplying an incentive to enter into sustainable agreements. Such negotiations involving green-lease provisions can strengthen the overall tenant-landlord relationship, and build a solid case for building ownership to view a company with this focus as a preferred tenant and could lead to an improved working relationship with the landlord.

A green lease is good for the environment and everyone in it. It will enhance employee productivity, recruitment and retention, demonstrate vision and leadership within the industry, and create positive civic relations. It could also serve to support corporate sustainability objectives and enhance corporate/brand images for both the landlord and the tenant.

In (not) the end

Today's circumstances that FMs find themselves in may end up providing some benefits. It will challenge them to find solutions in previously uncharted territory and give rise to untested but viable innovation. It can possibly lead to increased employee productivity through telecommuting programs, save money on business operations and, in the instance of introducing and implementing green leases, help the environment. Inevitably, this could be another example of how FMs can continue to contribute to Triple Bottom Line concepts. It seems a bit ironic how even the direst situations may have their own silver linings. However, good FMs are known for creating positives out of negatives. Now seems the time to prove it again.