Managing property to (a) minimise cost, (b) maximise the ability to implement business strategies, (c) enable staff to be productive, and (d) include green design – is sustainable practice.

A topic of hot discussion in many workplaces and board rooms over the last decade has been whether to stick with separate office spaces or go open plan. From a straight accounting point of view, open plan offices allowed for a direct calculation allowing on average 10 to 15 square metres per person. However, many staff used to argue the toss for separate offices for reasons ranging from status to need for privacy.

Today, this debate has become irrelevant as mobile staff have increasingly diverse needs for meeting places and gathering spaces as much as separate offices and open plan work stations.

Increasing numbers of staff work from home, or out in the field, but retain a need for a base to come to, catch up with team members and, check in with colleagues, administrators and managers.

This trend has impacts on the balance sheet including the cost of leased space as well as the work place environment required to attract and retain quality staff. For instance, 150 staff may only need 120 work spaces, which can lead to significant savings.

And the shift towards more tailor made work environments offers the opportunity for a funkier design to assist in retaining staff in work places they can enjoy. At the same time it also offers opportunities to ensure sustainable design is incorporated. In New Zealand, interest in effective work-life balance in the workplace is here to stay.

Situation
An established Auckland law firm based in leased offices in Auckland’s central business district was reviewing its office space needs and location.

The company occupied five floors in a high rise building on a main inner city street. One of the oldest law firms in Auckland, it was known for its central city location. However, the building had changed ownership and the firm was considering the benefits of relocation to new offices.

The law firm’s partners came to Parallel Directions for advice on whether to stay or go. They wanted clarity on whether moving would be their best option, both financially and for the reputation of the firm. They needed to consider whether the cost of sourcing, leasing and fitting out new office space was preferable to negotiating a new lease agreement with the new owners of their existing offices.

Solution
Parallel Directions applied its Stay-or-Go process. The process involves a detailed examination of the existing commercial property lease and conditions, trends in the market, and the strategic needs of the business.

The 15 equity partners in the law firm were interviewed as to their views both about their location and the future direction of the business.

Parallel Directions consolidated the information and ranked the partners’ preferences, and coupled this with a review of the existing commercial lease agreement’s rental and conditions.

It was recommended that the lawyers stay where they were, as the location best represented the image of their business, rather than a relocation to more expensive new offices. There were opportunities too for renegotiating the lease agreement with the building’s new owners to achieve a better deal.

Outcome
Parallel Directions negotiated a new lease agreement for the law firm that avoided a rent hike that would have been a third more than the existing lease. In return, the building owner was able to have the law firm stay in the offices with continued naming rights and as an anchor tenant with a long-term lease.

The client was happy as it was clear the options had been examined and weighed up in detail and the best option chosen, which would support the company’s reputation and business strategy and stacked up as a good financial option at the same time.

As money to finance commercial property purchases starts to tighten, a number of businesses considering buying property are likely to opt for leased commercial premises as an alternative.

We are not in the business of advising clients whether buying commercial property or leasing is a better option. However, it is useful to look at some likely scenarios that occur when the property market gets tough. We all know it is a complete schamozzle at the moment with speculation going in every direction. However, Parallel Directions predicts there will continue to be opportunities for good deals leasing property.

Business leaders will need to be extremely careful who they lease from. Every property owner is at a different stage of their risk cycle and considered advice will be crucial. Undoubtedly, behind the scenes, with banks security rules being tightened and interest rates on the up, there will be some property developments that will struggle and lease discounting may well become a feature of the market.

After 10 years of continual growth in the New Zealand market, Parallel Directions has now attracted significant overseas investment and formed a partnership with international loss adjusters, GAB Robins. The company is represented in 38 countries by a total of 4,000 professional staff. The new investors recognised the value and opportunity of Parallel Directions’ unique offering around the optimisation of property lease portfolios.

We are going to continue the tradition of the Parallelogramme for existing and new clients to offer some insights and news into current trends and happenings in the commercial property lease market.

Top of mind for everyone right now is the ranging reports and predictions about the slowing economy and potential recession.

Welcome to my new look Parallelogramme. When you last heard from me, it was when Parallelogramme was an e-newsletter. And now with information coming out our ears on the Internet and via email, I thought I would go for a postcard style way of keeping people in touch and use this blog.

So I’ll be posting the latest news and trends in the commercial property lease market regularly.

And to kick off, I want to talk about something that will be top of mind for everyone in business right now; the state of the property market. A key question for many business leaders in the midst of the doom and gloom will be considering what to do with their property portfolio.