Features Newswire Management

Should I Stay or Should I Go? Making the Decision to Renew or Relocate

Photo by Connie Zhou

As companies grow in size and team priorities evolve, leadership teams will begin to evaluate their current real estate leases and whether they are meeting or falling short of supporting company goals. The question arises: Should we renew our existing office lease and renovate the space to better suit our needs, or should we move on to bigger, greener pastures? It’s an important question for all leaders to consider. After all, one of the biggest expenditures for a company is its real estate, and you want to ensure that you are getting the most impactful results for your dollars.

At Spectorgroup, we work with our clients to navigate this challenging decision by thoroughly evaluating all factors. We help them look at the pros and cons of renovating in place and refreshing their current space, and also help research other real estate options that might be better suited to their changing organizational needs.

In a competitive real estate environment, the decision often comes down to the numbers: what are the metrics of each potential deal, and what is the client willing to sacrifice or splurge on? Of course, making the right choice goes beyond the numbers. Adopting a thoughtful approach to workplace strategy will help ensure that each organization gets the best use out of its square footage and can create an environment that fully supports its people.

Relocating or Renewing: The Basics
If a company is looking into renewing its existing lease, it involves a negotiation process. Whether it’s a short-term lease or a long-term lease, the landlord will generally provide a certain amount of tenant improvement (TI) dollars to update their space — especially if the company has been in the building for a long time.

Factors that are likely to drive this decision include whether the leadership likes their current location, what they want to achieve with a refresh and if they can get enough TI money to make it happen. If all they’re looking for is a refresh — fresh coats of paint, new carpeting, and updated furniture — and aren’t in need of an infrastructural overhaul, this may be a compelling option.

Those that are looking at relocating may receive better incentives to do so. Relocating to a new building will often cost the company more to build out, but if the landlords are seeking to attract new tenants, they may offer a higher amount of TI dollars. On the flip side, in a challenged real estate market, the current landlord may be willing to give a better deal, particularly in an older building that is competing with newer real estate. It all comes down to how the deals pencil out.

Don’t Skip the Due Diligence Phase
Navigating this decision requires involving the right consultants. In addition to an architectural team who will help you evaluate the physical conditions of any space, there are immense benefits to having savvy real estate brokers in your corner. Combining design expertise with in-depth market knowledge will help ensure you are making the right decision about what makes the most sense for your company.

The due diligence phase is almost identical whether you have your heart set on a renewal or a relocation. As an objective party, we carefully evaluate all exist- ing building conditions and use the information we gather to inform and advise our client. In planning out any space, we consider the basic factors that will impact comfort: this includes good air conditioning for the summers, a reliable boiler for the winter and electrical capabilities that won’t create headaches down the road.

We ask questions including: Are the windows along the perimeter likely to fall apart in the next few years? Where are the existing building systems located and are they in good shape — if not, is there a program to update them? The same goes for the lobby, the elevators, the toilets. Will the tenant need to update these themselves or are they part of the overall floor that the landlord is responsible for?

For many of these items, it boils down to what the client prioritizes. We will report objectively on all factors and provide our recommendations, and then it is up to the client to decide what is the most important use of their real estate investment.

The Importance of Workplace Strategy
At Spectorgroup, workplace strategy is a core component of our process — starting from the initial evaluation of a space. We always start by engaging the client leadership and employee teams in a series of interactive workshops, visioning exercises and brainstorms to help us identify what elements of a space will best support their culture, brand and team needs.

Organizations are looking at their office as more than a workspace but a destination and a brand hub. They want to create a design journey that authentically reflects their brand and helps encourage stronger collaboration between their team members. For example, if a company identifies that employee wellness is a top priority, that helps us in finding a space that allows us to maximize access to daylight and views and incorporate a range of spaces that foster inclusivity.

It can be difficult for any client when looking at a potential office as a blank slate and envisioning how it will come to life. Our job is to help our clients zero in on their needs and be able to see exactly how those needs can be addressed in a given environment.

The Question of Buildings: Old vs. New
In the current real estate market, your relocation will be heavily influenced by the types of buildings you are considering. Brand-new buildings chock-full of amenities are highly desirable right now, and as demand has been satisfied we are seeing these rents driven up and TI dollars down. In order to attract new tenants, older buildings are now challenged to bring in amenities that will help them compete with the newer construction on the market.

The amenities included in a building can be a contributing factor in your decision making process. For companies that will utilize fitness centers, cafes, and bookable conference rooms, having these included in a building means that you might not need to allocate space for those amenities in your individual office square footage. Other companies find it important to have their own proprietary spaces, and are less likely to need a building that offers these perks.

The Bottom Line: What Works for Your People
While the decision to renew or relocate boils down to the metrics of the deal, it is essential to tie any decisions back to finding a space that will best serve your best asset: your employees. Encouraging employees back into the office requires thoughtful consideration of the types of spaces that will help them feel supported, productive, and happy. The answer is different for every organization that we work with.

Identify the “must-haves” of your refreshed or future space and work with your architectural consultants to ensure that the space you choose will adequately Ssupport those goals.