in Harvard Business Review, Business Classics, Keys for Managerial Success (Boston, MA: Harvard Business Press, 1990), p. 64.
4. See note 3, p. 68.
5. Louis Henri Sullivan, The Tall Office Building Artistically Considered (Philadelphia: JB Lippincott and Co., 1896).
6. www.dictionary.com (October 16, 2002).
7. Potter Stewart, Associate Supreme Court Justice, Jacobellis v. Ohio, 1964.
18
Real Estate and Facilities
K. TODD PHILLIPS
Always bear in mind that your own resolution to succeed is more important than any other.
—Abraham Lincoln1
This chapter addresses the various issues and questions that the professional services firm should consider when leasing commercial office space. Topics include: (1) preliminary questions that the professional services firm should address prior to looking for office space, (2) how to work with leasing agents and the value that they bring to the process, (3) developing a list of potential properties on paper, (4) conducting property inspections and the most important things to look for and consider, and (5) the lease negotiation process.
The chapter then focuses on the office design of the professional services firm, including a basic discussion of space planning issues and the options to consider in laying out the office, from reception and other common areas, to the professional and nonprofessional offices and work stations. Last, this chapter touches on some of the larger nontechnical capital expenses that you should expect to incur in setting up a professional firm, including items such as furniture and filing systems.
Why This Topic Is Important
Selecting the right office for the professional services firm is every bit as important as it is for other businesses. The cost of leasing office space is typically one of the largest fixed, non-labor monthly expenses that any professional services firm incurs; thus, from a strictly financial perspective, it is important to carefully consider the various leasing options that the firm 466
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will face in light of the firm’s budgetary constraints. Not only is choosing the right office space important from an economic standpoint, but there are a host of subissues that are important for the firm to consider before entering a lease. For example, clients invariably have certain expectations about both the location and quality of their professionals’ offices, and often use such things as a proxy for judging the quality of the services provided. To meet such expectations and maintain a happy and satisfied client base, which is critical to the success of any professional services firm, it is important to consider client concerns when deciding whether to enter a particular lease.
In addition, commercial office leases and subleases are often complicated, long-term contracts that include various complex and unfamiliar provisions.
Before the professional services firm enters into contractual negotiations over a lease, it should have a basic understanding of the more familiar and negotiable terms that are found in the standard commercial office lease. This chapter addresses each of the foregoing subjects, among others, and offers insights as to how the professional services firm might best arm itself to address these issues. Chapter 19, on legal counsel, also discusses some of the issues to be considered by the firm before entering into legally binding agreements such as leases.
Once a lease has been executed, there are still a host of issues that the professional services firm must address. If, for example, the office space in question has not been finished out, the firm must develop an office design and layout that is consistent with the image the firm hopes to project, and which promotes both productivity and cohesion among the professionals and staff.
If, on the other hand, the office space has already been finished out by the landlord or sublessor, the firm must assess whether the current design meets its requirements and, if not, whether and to what extent additional construction must be undertaken. Finally, assuming that the office is not furnished, the firm must make arrangements to furnish the office space, which will include an assessment of the furniture and work-space needs of both the professionals and staff employed by the firm, as well as the common areas and back office of the firm.
Leasing Commercial Office Space
The most common arrangement for professional services firms to acquire office space is through a lease arrangement. This section covers the process for determining leasing needs and identifying appropriate space.
Preliminary Considerations
Before the professional services firm begins to search for office space, it should undertake a preliminary analysis of various factors that will help
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narrow the focus of the office search and ensure that the firm makes an educated and fully informed decision about its office lease alternatives. Such an analysis can be as formal as the firm decides it needs to be and can range from a rigorous written evaluation prepared by the management of the firm, to a simple checklist. While the form of the preliminary assessment will vary from firm to firm, it is important that the firm fully understand its needs and limitations before conducting a search for office space.
SPACE REQUIREMENTS.
One of the most important things that the firm
should assess upfront is its space requirements. This can be accomplished by simply counting the number of professionals and staff who are presently employed at the firm (or at least will be on-site on a consistent basis with some accounting for traveling staff ) and allocating a predetermined number of square feet for each such individual. Partner offices in professional firms typically range from 250 to 300 square feet; associate offices, 120 to 150
square feet; and staff workstations, 35 to 50 square feet. Once the firm has established its office and workstation requirements, it should consider its needs with respect to common areas, including reception, conference rooms, filing rooms, restrooms, copy/facsimile rooms, and kitchen areas.
In determining its current space requirements, the firm must be careful not to overlook the projected rate of growth. Not only are leases typically long-term contractual commitments, but also searching for office space, negotiating a lease, and relocating the firm are all very time-consuming and expensive undertakings, and are difficult and disruptive to do frequently. Multiple locations within the same city can cause unnecessary travel and communication disconnects. Accordingly, the firm should do its best to determine what its long-term space requirements will be before it enters an office lease.
LOCATION.
Another factor that the firm should initially consider is where
the office should be located. Often, professional services firms are located in the central business district (CBD) of a city (generally defined as the down-town retail trade and commercial area of a city or an area of very high land valuation, traffic f low, and concentration of retail business offices, theaters, hotels, and services2); however, this need not be the case for all firms. Consideration should be given to locating the firm outside the CBD, such as in the suburbs or smaller business centers, where rental rates are often more affordable than in the CBD. Depending on firm priorities, an office location that is nearest to the largest number of on-site professional and administrative staff may be important.
Additionally, the firm should consider where it wants to office vis-à-vis other important locations in the city. For example, for law firms that are composed largely of lawyers who practice civil or criminal litigation, it is probably important for the firm to be located close to the criminal and civil courthouses. On the other hand, for law firms that are predominantly
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composed of transactional attorneys, it might not be as important to locate the office close to the courthouse, particularly if the firm can achieve material cost savings by locating the office elsewhere.
Last, the firm should undertake an analysis of how important it is to be in close proximity to the firm’s clients and potential clients. The firm should consider how often client meetings are held in the office and the clients’ expectations (if any) with respect to where they expect their professionals’ offices to be located. While it is, of course, impossible to please every client, the firm should at least be sensitive to and consider where its clients’ offices are located and whether a decision to office in a particular part of town would impose upon or inconvenience the client base.
BUILDING CLASSIFICATION.
There are different classes of office build-
ings that will be available to the firm. While many firms choose to be in Class A space, there are certainly other alternatives (Class B and C office buildings) that could be less expensive and might fit the firm’s needs. The Building Owners and Manager ’s Association (BOMA) classifies buildings based on an alphabetic ordering. According to the Urban Land Institute:
• Class A space is characterized by buildings that have excellent location and access, attract high-quality tenants, and are managed professionally. Building materials are high quality and rents are competitive with other new buildings.
• Class B buildings have good locations, management, and construction, and tenant standards are high. Class B buildings have very little functional obsolescence and deterioration.