Real Estate: Re-Examining the Oldest Overhead in Corporate Finance
Commercial real estate is one of businesses’ oldest and most fundamental overhead costs. But does it still make sense in today’s economy?
The pandemic has drastically changed how we view office space, and businesses are now re-examining their real estate investments. While it may seem like a straightforward expense, there is more to consider before writing off real estate as an inevitable overhead.
The office sector is one of the hardest hit by changes in how we work due to COVID-19. According to the National Association of Realtors, over 1.34 million square feet of office space was empty in 2022.
Companies are turning away from traditional office leases and moving towards more flexible models such as coworking spaces, virtual offices, and remote working setups. This has raised some questions about how real estate should be used going forward.
Is it still necessary to invest in expensive commercial space? Is there an alternative that can be just as effective but more cost-effective? The reality is that real estate remains a necessary part of many businesses. It is still the foundation for most corporate operations and provides numerous benefits such as networking opportunities, business continuity, shared resources, and talent pools.
However, it can also be costly and inefficient if not appropriately managed. Ghost Mountain can help you evaluate your current office space situation and help develop an efficient solution.
Corporate Real Estate and Employee Engagement
Understanding how real estate can impact employee engagement is critical. While it can be important to have a functional and attractive space, flexible working arrangements have also been found to boost employee morale and productivity.
The question is, does an office environment incentivize workers to want to work there? It is essential to consider how much real estate impacts employee engagement, job satisfaction, and productivity.
While approximately 40% of workers report being more productive working from home, the U.S. is only set to see a 5% increase in worker productivity compared to pre-pandemic levels. This leaves a lot of room for improvement regarding improving real estate and maximizing its potential benefits.
Contributing factors that may influence engagement in the workplace include the following:
- Physical environment (including design, aesthetics, and climate control)
- Technology infrastructure and tools
- Social interaction and collaboration
- Proximity to other offices/buildings
- Accessibility to amenities or public transportation
Businesses must take into account these factors when selecting and managing real estate. In addition, companies should also consider their long-term strategy when choosing a suitable space.
A comprehensive and well-thought-out plan for managing real estate costs can lead to more attractive job opportunities, greater employee engagement, and higher productivity levels. The key is to balance cost-cutting and creating a high-performing workspace for your team.
Advantages and Disadvantages of Commercial Real Estate
When considering real estate, it is vital to understand both the advantages and disadvantages of this type of overhead cost.
Advantages of Commercial Real Estate
- Increased brand visibility. A physical office space allows your company to be more visible in the local community, which can help attract new customers.
- Ability to network. Having a physical office space allows your business to connect with other companies in the area and potential customers.
- Structured work environment. Office space can provide a structured and organized work environment conducive to productivity.
- Oversight and control. Office space gives your business more control over the environment, providing employees with a sense of security and stability.
Disadvantages of Commercial Real Estate
- Environmental impact. Office space can have a negative environmental impact due to increased energy consumption, air pollution, and waste disposal.
- Commute times and expenses. Office space can lead to extended commute times and associated costs such as parking, fuel, and tolls.
- Capital investment. Office space requires a substantial capital investment which can strain finances if not managed properly.
- Flexibility. An office space may limit the ability to adjust operations quickly or easily when needed.
- Limited access to valuable employees. Office space may limit access to valuable and talented employees who may be located in different areas.
Real Estate & Corporate Finance: Making the Most Out of Commercial Space
Real estate can be a costly overhead for any business. However, with proper budgeting, long-term planning, and effective strategy, your business can make the most out of its commercial real estate space.
Whether through cost savings, increased brand visibility, or better access to amenities and services, understanding how real estate can affect employee engagement, productivity, and job satisfaction can help businesses create an optimal workplace environment.
To make the most of your commercial real estate, you can:
- Develop a comprehensive real estate strategy with realistic goals and objectives
- Establish an effective budgeting system for managing overhead costs
- Incorporate environmental sustainability initiatives into the development plan
- Evaluate current space needs to ensure they are being met effectively
- Monitor your office’s performance and adjust if necessary
By developing and implementing an effective real estate strategy, you can ensure that your business is making the most of its commercial space while achieving its long-term objectives. This can ultimately lead to increased success and a better bottom line.
Resources for Managing Commercial Real Estate
If you’re looking for resources to help manage your commercial real estate, there are some options available. From industry publications and websites to professional organizations and educational programs, there is plenty of valuable information at your fingertips.
For example, the National Association of Realtors provides various tools and resources to help businesses develop a real estate strategy and budget. Additionally, Ghost mountain can help you find innovative, energetic and qualified corporate finance executives to help you achieve the marginal savings to give you a comptetative edge in an uncertain market.
Whether corporate real estate is a costly overhead or a leveraged asset, it is essential to understand its impact on your business. Then, with the right strategy and resources, you can make the most out of your commercial space while realizing long-term objectives.
Contact Ghost Mountain today to get the help you need in developing an effective strategy for propelling your business forward. Together, you can ensure your commercial real estate is doing all it can to move the needle for your company.