For many accounting firms, the process of upsizing or downsizing their office space can prove to be very difficult, and in some cases result in an unnecessary waste of money. For firms charged with watching the bottom line of other companies, you need to make sure you are making the right decision for your own firm.
From many years of observing and advising accounting firms, what I have noticed is that those that are doing it right not only lock in efficient, flexible space at economic terms that work for their business, but also create work environments that reflect their culture, ethos and values. As a result, those firm can recruit and retain quality employees more effectively.
So how can you maximize the benefits of a relocation but minimize the costs? It's a topic that I consistently address with my clients. While there is no master blueprint that works for everyone, I often guide my clients based on the following key principles.
DO I HAVE TO MOVE?
Often, accounting firms jump to a relocation before giving adequate thought as to whether they can stay in their existing space.
A relocation often costs more and is more disruptive to an organization than a simple upgrade or modification of existing space, so I always like to push clients to fully assess what renovations can be done to their existing space to meet the current and future needs of the business.
Remember, living through a renovation can be difficult on your ongoing operations, so make sure that you factor this into your decision-making.
AM I SPENDING TOO MUCH?
Some partners mistakenly think that a growing rent bill is the sign of a growing firm. I know from experience that many growing accounting firms actually need less space (and expense), rather than more space.
Consider for a moment the situation of one of our clients, the U.S. member firm of global accounting and consulting network, BDO. Their business is booming through expansions into new markets and adding new clients and engagements, and they have also made a number of high-profile acquisitions of other firms.
Even so, our goal for BDO is actually to shrink their office footprint per person substantially over the next five years. For example, in a recent lease in San Francisco, we reduced their per-person footprint by over 30 percent, allowing them to fit significantly more people in less space while adding additional collaboration and support space.
While revenues are growing, BDO is being wise about its bottom line by using a flexible work strategy that improves employees' work-life balance while reducing real estate costs.
AM I AVOIDING POTENTIAL RISK?
Because of the volatility of our economy, any accounting firm signing a new office lease should seek to hedge these three potential types of risk:
- Building risk. The risk that a change to the building's ownership or infrastructure impacts your occupancy. For example, can the technology capabilities of the building change over time or will they become obsolete? Are there environmental issues, like asbestos or hazardous materials, that could affect your occupancy? Is the new ownership not as "tenant-friendly" or less interested in making changes to the building over time that will maintain it in a first-class manner?
- Market risk. This is risk related to events in the global marketplace, which trickle through to real estate and have an impact on the rent that tenants pay. Sources of market risk include recessions, political turmoil, changes in interest rates, natural disasters or terrorist attacks. For instance, the top floor at Willis Tower (formerly known as the Sears Tower) in Chicago was one of the most expensive spaces in the city. The day after 9/11, the floor ceased to have the same demand it once had.
- Business risk. The inherent risks within your own business that impact profitability. Will you lose a key client? Will a merger drastically change your space needs?
So how do you mitigate these risks in your new office lease?
Before you sign your lease, you must clearly understand your ability (or lack thereof) to expand or contract your space over the course of that lease. This is especially important if you're considering a longer-term (five- or even 10-year) lease.
DOES IT WORK FOR EMPLOYEES?
Your employees definitely work long hours. Even if they spend a great deal of time at client sites, your office still represents a home base that helps them reconnect with your company culture and others in your firm.
If your office space is ultimately a recruitment and retention tool, wouldn't understanding the commuting habits of your present and prospective employees be paramount? For this reason, seek to find an office location that is convenient for your employees - and not just convenient for the firm's partners.
Remember, too, that convenience is about more than just commute times. For instance, since your employees work long hours -- and often on weekends -- make sure the location is surrounded by amenities and services that are important to your employees, such as fitness centers, restaurants, yoga classes, day care or even "doggie day care."
ARE MY ASSUMPTIONS OUTDATED?
These days, partners and managers just don't care about varying office sizes as much as they once did, because a new culture of egalitarianism and equality has taken a root in the modern business environment.
Gone are the days of "Mahogany Row," where the offices of the partners and senior officers outshined and outsized the postage-stamp-size cubicles of junior staff. Having one standard-sized office (added bonus if it's the same size as your small conference rooms) for all partners gives firms more flexibility and allows you to use your office space more efficiently.
Instead of awarding large private offices as rewards, I typically advise my accounting clients to find other ways to recognize career advancement or a job well done. Look for new ways to bring workers together, instead of driving them apart.
One final point: I always recommend finding an experienced commercial real estate broker who doesn't have the typical conflicts of interest commonly found in the industry.
How do you know if your broker has a potential conflict? Ask if their company also represents the building landlord in this or other transactions. Even if they say they keep a "wall" between their tenant and landlord representation divisions, they ultimately may not have your best interests at heart.
A move can prove to be highly disruptive to any firm. Thankfully, it does not have to be this way. With the proper planning and strategy, a relocation can infuse your firm with newfound energy and enthusiasm that improves the performance of all of its employees.
Howard Ecker is founder of Howard Ecker + Co., a national commercial tenant representation company and brokerage firm that represents the commercial real estate interests of tenants throughout the United States.
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