Do You Really Need a Bigger Office?



“Why?” It’s a simple question that is not asked nearly often enough when it comes to real estate and workplace strategy. Today’s ‘tenant’s market’ means that rents are low and negotiating power is high, so many companies are—and rightly so—identifying their needs for more space, and signing leases.

But sometimes the best deal isn’t the lowest rent—it’s no new rent at all. Here are some questions that will help you explore why, and indeed IF, you need more space.

Are we using the real estate we already have as effectively as possible?

It’s 10:30 a.m. Do you know where your employees are? Many times, offices stand empty because employees are choosing to work from home, or are on-hold for open positions. But if those areas are on-record as being in regular use, that can become a significant material misperception. During a space audit of a prominent Pacific Northwest corporation, we discovered that the company had enough unused space in its main building to cancel its lease for significant space next door and to co-locate more groups, enabling collaboration. To avoid encourage more efficient use of space, some companies implement a charge-back system, putting real estate on division P&L statements.

Can we design the space differently?

Collaborative spaces are increasing in importance, while private offices are quickly going the way of the dinosaur. Rather than a new, expensive location, your organization could consider redesigning current offices in a way that would drive teamwork – while reducing the need for additional space.

Does the purpose justify the expense?

The cost of space should be justified by the activities the space makes possible (directly or indirectly). For example, if a new state-of-the-art lab is proposed, its cost should be justified by the results expected from the research it makes possible. Or, you may want a new location to reduce workforce commute times—and that should be a conscious decision made in partnership with human resources as a strategic direction of funds.

What functions are simply no longer needed?

Technology has moved faster than office redesigns; as a result, many law firms pay to lease space dedicated to functions that are no longer needed. For example, a rapidly expanding law firm may need more offices and workstations—but that same firm may no longer need large file rooms, a law library, or an onsite data center. If the less-strategic uses can be reduced, then there is more room for the new hires.  

Is our real estate aligned with our goals and business strategy?

Real estate decisions can both negatively and positively impact an organization’s ability to prosper. To swing the pendulum to the positive, look for ways that existing spaces can provide strategic support and brand visibility. For example, when a hospital system decides to invest in retail urgent care center locations, it is a decision to pay comparably higher rental rates. Yet the move typically makes sense, because it increases the quality and accessibility of patient care, and supports brand visibility objectives as well. You can also consider outsourcing some functions such as IT, payroll, and food service to further reduce your current footprint.

We’re used to doing things the way we’ve always done them. But it’s time to change. Exploring the “why” behind the need for more office space is increasingly essential in the slow-growth economy. By thinking through the strategy behind a space requirement in advance, and challenging traditional assumptions, you can align your real estate with your employment growth needs—while continuing to delight your CFO by challenging potential capital costs.

Paying the Price for $15 an Hour

Paying the Price for $15 an Hour

With the economy soaring, it’s hard to gauge the effectiveness of Seattle’s minimum-wage hike. Some small-business owners remain dubious.
When the Seattle City Council passed the $15 minimum- wage ordinance in June 2014, David Lee, founder and CEO of the Field Roast Grain Meat Company, was not happy.
“The minimum wage hurts businesses like ours that compete on a national level,” says Lee, who believes it makes employers feel “cheap” and weakens “the goodwill that bound employers to employees.”
Even so, reflecting the mixed feelings of many Seattle businesses that want to do the right thing even as they struggle to survive, Lee decided to raise the minimum pay of his workers more than 20 percent — to $15 an hour — this fall, years before he was required to do so under the law.
“I wanted to get it behind me,” he explains.
Under a complex, multitiered system, Seattle companies with more than 500 employees must begin paying a $15-per-hour minimum wage starting in January. Companies with fewer than 501 employees  have until 2019, unless, like Lee, they provide health care or other benefits, in which case the $15 minimum wage rule applies to them beginning in 2021. Lee says his decision will cost Field Roast $300,000, about a quarter of its total earnings in 2015.
Ivar’s Seafood increased prices by 21 percent in 2015 to cover an increase in employees’ minimum wages to $15. The company didn’t have to start paying $15 an hour until next year, but Ivar’s President Bob Donegan believed it was the right thing to do. The decision helped resolve long-standing tension between lower-paid workers in the kitchen and wait staff who received much higher wages thanks to tips. Donegan says most patrons continue to tip even when they are told gratuities are now included in their bills.

A CASE OF COMPRESSION: Lynn Stacy unwraps grain meat for sausage products at Field Roast,
which has a flatter pay structure because of its higher minimum wage.

Some companies, however, remain concerned that the higher minimum wage could still hurt them. BrightStar Care, which offers home care and medical staffing in most states, is operating at a disadvantage because of the minimum wage, says CEO Shelly Sun. “Our Seattle franchise has only about 50 employees,” Sun notes, “but it’s being treated like a big business.”
Because Seattle treats the franchised operation of a national chain as if it were a large business, BrightStar will have to pay $15 an hour as of January, whereas some of its competitors with similar employee numbers in Seattle may not have to pay that much until 2019. Sun says a consequence may be reducing the size of the Seattle franchisee’s staff, which could have implications for clients.
Meanwhile, the national restaurant chain Buffalo Wild Wings says it is hesitant to expand in Seattle because the high minimum wage makes it economically inefficient to hire and train inexperienced workers. Still, what was once considered a movement isolated to “liberal” western cities like Seattle and San Francisco has gained sufficient momentum nationwide to be included in the national platform of the Democratic Party this election season. 
Thanks to Seattle’s strong labor market — the unemployment rate in the Seattle metropolitan area was 4.4 percent in July (compared to 5.8 percent statewide) — the higher wages have had little negative effect on the economy.
A report released in July by the University of Washington’s Evans School of Public Policy and Governance concluded that the new minimum wage law hasn’t had a lot of upside, either. Since a strong labor market would have increased wages in any case, the study concluded, only a quarter of the recent gains could actually be attributed to the minimum-wage law — a little more than a few dollars a week. 

Revisiting the minimum-wage story | Seattle Business magazine examined the minimum-wage issue in its May 2014 issue, just as the Seattle City Council was considering an ordinance raising the minimum hourly rate to $15 in a gradual process over several years, depending on a company’s size. This is the magazine’s first follow-up since passage of the minimum-wage law.