business builder real estate
Small space trims can add up to
substantial savings
by Charles Ziegler
Lease expirations provide the opportunity for many business owners to re-evaluate the amount and type of space they use. With careful planning, new lease decisions can increase efficiency in work flow, boost morale, and maybe even reduce the amount of space required — ultimately lowering operating costs.
Corporate space was built out in the 1980s and early ’90s at construction budgets of $50 to $75 per rsf (rentable square foot). Many companies maintained employee densities of 300 to 400 rsf per employee. Today the figures are closer to $35 to $50 per rsf build-out, and 250 rsf per employee average density. Rent as a portion of companies’ total operating expense has also fallen from a previous average of 10 percent to today’s target of 6 to 8 percent.
How to reduce rent
Consider the typical yearly rent costs of one 300-square-foot office, extended over a hypothetical 10-year lease. That’s a cool $150,000. By reducing the size of the office to 225 square feet, the total lease obligation can be reduced by a third. Reduced size standards for offices, when multiplied by the total number of employees within a firm, will have a substantial impact on overall space reduction.
Universal-sized offices at 160 to 180 sf has also become a method for reducing space. To date, many companies are evaluating but have not yet adopted this concept. It offers significant space savings over traditional-sized offices, but universal-sized offices frequently require the expense of purchasing new office furniture. The furniture is sized for the reduced area of the office, designed with vertical storage walls and other space-saving devices, at a cost of $6,000 to $12,000 per office. The space savings and reduced rent must be weighed against the initial capital expense of new furniture.
Another method of reducing space and operating costs is to design conference facilities and other work areas with full-height, pre-wired moveable partitions. These partitions can be broken down from one large room into a series of smaller rooms at less expense than hard-wall construction. Offices can also be constructed with these partitions for less costly future reconfiguration.
If a company frequently moves or “churns” employees at a rate of three major reconfigurations a year or more, partitions will pay for themselves over the course of a lease. Additionally, these systems may be depreciated as furniture, offering a tax advantage over hard wall construction.
“Hoteling” is a method of reducing space for employees who are not in the office on a full-time basis. This concept has successfully been employed at firms where employees are frequently at client sites, on sales calls or telecommuting.
Open planning, using modular workstations rather than individual private offices, has long been a method of reducing space. In addition to taking less space, open-plan workstations are ganged together by pre-wired, moveable partitions, and require less cost to reconfigure than traditional drywall offices, thus offering more flexibility to firms that frequently reorganize.
Shrinking support
The square footage occupied by file rooms, resource rooms and administrative support areas is also shrinking. The cost of scanning records should be compared to the real estate and personnel costs of maintaining an extensive file room or library. Many companies have substantially reduced the size of their file and resource areas by increased use of the Internet and on-line research and subscription services. Storing books or reference manuals in open areas along corridors or in open workspaces, rather than in a dedicated library, will also reduce square footage.
Record management and filing has also come under spatial scrutiny. The number and duration of active records should be carefully examined when planning new filing spaces. Local files (those files required on a day-to-day basis) should be accurately estimated and located near each user’s office. Central or smaller satellite file rooms should be sized with the anticipation that these files may reduce over time, as document scanning and electronic data storage become more cost effective and widely used.
High-density moveable file systems have also traditionally been a method of reducing the size of file rooms. The initial cost of these systems, including structural reinforcement of the floor, should be compared to the lower initial investment but slightly higher square footage required for static filing systems. Less expensive offsite or basement storage should be used as much as possible.
Larger companies should also consider locating administrative staff, computer rooms, mail and receiving and other support functions in lower-rent space. These operations can be located on lower or basement floors, or in less expensive neighboring buildings. Decentralized offices also offer the advantage of redundant or back-up computer operations in more than one location.
Administrative support ratios have also been declining as more employees use online services for administrative tasks. Administrative workstations are also being designed with a greater emphasis on teaming and technology. Networked computers, shared printers and clustered workstations promote a teaming environment that enables secretaries to float between a larger number of employees, thus reducing the number of administrative support personnel required to support a work group.
Retired amenities
Multiple floor reception areas have also become an amenity of the past. One centrally located secure reception area will reduce space and more clearly direct visitors.
Technology continues to play an integral role in the operations and space reduction of every company. Computer room sizes have shrunk and generally now do not require expensive raised floor construction. Computer network servers, racks and peripheral equipment require less space than the bulky equipment of the past. Computer rooms also require fewer full-time employees to operate. Technology personnel are no longer located in the computer room, but rather at help desks, sometimes located off-site.
Relocating to new space or extensive remodeling of an existing space also affords the opportunity to rewire with faster phone and data cable. Rewiring should be a minimum of one-gigahertz speed, provided by enhanced category 5 or category 6 data wire. This speed allows for future video stream to the desktop.
All of these recommendations should be evaluated, and all space designed, within the context of a firm’s business plan. Designing initial flexibility, although a popular and touted concept today, comes at an initial cost that may outweigh the anticipated benefits.
