Real Estate Analysis

Everyone knows that it is important to get a regular checkup from the doctor. Just get a quick and easy assessment of where they stand as far as the basics are concerned. In the best case, the doctor will give them some tips on how to do better. Worst case the doctor tells them there is something wrong and tells them what they have to do in order to get healthy again. It's common sense to keep tabs on where you stand.

The same should be true of your real estate portfolio. Real estate is a constantly shifting arena: prices fluctuate daily, buildings are built and knocked down, the demographics of a region change. Whether you have one location or a hundred it is a good idea to make sure that you are in good positions that are not hurting your business. Just like for your own health, it's important to get checked out by someone who is an expert in the field.

When the topic of a real estate analysis comes up most people in business think they can do it themselves. However, where would you start in order to figure out if you are doing the best you can be? A surface look would point at cost per square foot as the key factor of whether you are doing well or not. If you know the market rate for your area and are at or below that then you are doing well, right? Not necessarily.

If that isn't the decision point, what is? To really understand how your portfolio stacks up you need to look at a diverse set of metrics that includes: square feet per seat, cost per person, average churn cost per year, and common/shared space allocation. Then you need to benchmark this against your industry competition. Why does all this come into play with your portfolio? Isn't this an HR issue? It's important because the real estate cost is the effect of HR and Real Estate not being in alignment which is often the case.

If you have a high square footage per person, regardless of if your lease rate is at or below market you are overpaying for your space. You have too much of it. If your churn rate (or cost to alter the space with changing business conditions) is above your competitors then you may not be in the right type of space. If your shared space doesn't meet the needs of your employees then you may not have an effective workplace strategy in place (which ties directly into real estate).

Is it possible to do this evaluation internally? Absolutely, but there is a reason that most companies do not perform this level of analysis on themselves: it requires a specific type of expertise and knowledge that is outside the core competency of the business and is not performed on a regular basis. If this sounds like something that may help you then look into it. An inefficient office is a terrible drain on the bottom line and it may not even be noticeable if you don't know where to look.