From Garage to Growth: What Startups and Entrepreneurs Need to Know About Real Estate
From Garage to Growth: What Startups and Entrepreneurs Need to Know About Real Estate
| 17 May 2018
Real estate can be a dynamic and flexible asset for your organisation, capable of driving business performance, strengthening your brand and bringing together a community of people. Taking the time to define the strategic role that real estate will play in your business from the onset will set your organisation up for success in the long run, creating a physical and experiential platform that helps you support your most important asset: your people.
The stage of growth your company is in plays a huge role in how you think about your workplace and the level of investment you should be making in space. With that in mind, this chapter is based on the common stages organisations go through as they scale.
PHASE I: THE MOVE FROM GARAGE/HOME/COFFEE SHOP TO COWORKING
POPULATION 1 TO 3, GROWING TO 10 TO 15
As your company grows from one or two employees into a small team, so will your demand for space. Suddenly, a home office or a coffee shop is no longer a viable option. Although you could have everyone work remotely, the agility and pervasive collaboration required to build your business is best supported when you are together. But with growth uncertain and investments prioritised towards growing your business, the idea of signing a long-term lease, buying furniture and investing in equipment all seem inordinate.
HOW DO YOU PROVIDE AN EFFECTIVE WORKPLACE WHILE FOCUSING YOUR INVESTMENTS ON GROWTH?
Two ways of providing an effective workplace are using shared workspaces and coworking environments.
Shared workspaces serve as an effective entry point into office space. The ‘shared workspace’ model aggregates demand for space across multiple tenants and in turn offers flexible, short-term contracts in lieu of leases. By sharing space, tenants gain access to a broader variety of resources, such as meeting rooms and spaces that support a range of work-style preferences, as well as infrastructure, technology and services.
Coworking environments take shared workspace models a step further by placing a greater emphasis on community and experience.
In these models, tenants are considered members, with access to a range of services, curated events and professional development opportunities. Community is truly a benefit, and by investing in experience, coworking provides a place where entrepreneurs build networks and leverage relationships with other members to catalyse business growth.
WHAT TO LOOK FOR IN A COWORKING EXPERIENCE
Experience varies broadly by coworking environment and membership level. Most coworking spaces are designed to encourage interaction and collisions, resulting in opportunities for members to network and share learnings, capabilities and resources. When looking for space, consider the primary role that an office will play for your team by asking these questions:
• Will you be doing all or most of your work from the coworking space? Look for environments that provide on-demand access to individual spaces and that support a range of work styles. Consider support for quiet and focused work, availability and types of collaborative spaces and potential added costs associated with accessing space not included in your membership.
• Will you use the space primarily to collaborate as a team? Look for membership that provides access to a private team space. Consider
the flexibility of the space: look for writable surfaces, large screens that allow you to share information digitally and the ability to arrange the space in a way that works for your team.
• Will you be connecting with customers, teammates or partners remotely? Consider how well the environment supports virtual collaboration through videoconferencing, acoustically private meeting rooms and wireless network bandwidth.
• Are you still building the business and could use help? Many coworking memberships include access to discounted or free business services and professional development opportunities targeted at entrepreneurs and startups. These can range from human resources support to Web development and may be supported through staff available onsite.
PHASE II: FROM COWORKING TO YOUR OWN OFFICE
POPULATION 10 TO 15, GROWING TO 80 TO 100
Your company is growing. Fast. Your company may only have 10 or 15 people today, but you plan to grow to 80 to 100 in the next year or two. Your shared office space has worked well up to this point, but now you are entering a new phase: you need more space to grow, and
you want more control over how you configure, operate and brand it. It is time for an office of your own.
STEP 1: CHOOSE A LOCATION
Although choosing a location may seem to be a straightforward decision, this is an important step in your long-term real estate strategy. Most organisations do not stray far from where they first put down roots. So, although it may be tempting to choose an office location that
minimises your commute, it is important to also consider the following:
• Attraction and retention of talent: Consider who you are looking to attract and where they will be coming from. Commute times,
particularly in talent-rich markets, can and do have an impact on the decisions people make to join a company.
• The neighbourhood: Often cast as the suburbs-versus-the-city conundrum, it is important to consider what is located near your company. Does the surrounding area offer the kind of amenities and services your people will want and need during the day and before or af ter work (cafes, fitness centres, supermarkets, etc.)? Does the brand of the area align to your own?
STEP 2: DEFINE YOUR FOOTPRINT, AND ORGANISE YOUR SPACE
Your first office represents the start of your real estate and workplace strategy. How you occupy, configure and assign space, and the types of amenities and services you provide, will establish a set of baseline expectations. Getting these right in the beginning ensures that you
will be able to scale responsibly later without being in the awkward position of having to ‘take things away’. Key questions to ask include the following:
• What is the role of the office? If you are moving from a coworking space, you have probably established quite a mobile and flexible way of working. The office will be one in a network of places where work is done— so what role should the office play in that network? Do you need to provide everyone with a desk to check their emails and do focus work, or is the office primarily a space for your teams to gather and cocreate? The answer will likely be somewhere in between and will ultimately drive most key decisions about the workplace.
• How much space you do you need? Determining how much space you need is not always easy, especially given the volatility most startups experience in hiring. One rule of thumb is to use a square-metre-per-person range and apply it to your three- or five-year head-count projection. Although it is good to build a cushion into your estimates, do not be too aggressive. A lot can change in a three-year period. The hurdles that come with faster-than- anticipated growth are far easier to clear than the costs of carrying too much space and low morale associated with empty offices. For greater flexibility and to manage risk, talk to your tenant representative about negotiating expansion or hand back rights into your lease.
• What kind of space do you need? The best way to determine what kind of space you need is to think about how you work and/or how you would like your people to work. Do your people work alone, or in teams? What is the average size of a team, and how regularly does the makeup of a team change? Are people’s work patterns largely similar from one day to the next, or is there a high degree of variability in the work process? How do your people communicate with one another and those outside your organisation? How do you gather as a community? How do you recharge?
Organise your space around the answers to these questions, starting from the perspective of the individual employee and working your way out:
• Assignment of desks: The decision to assign desks or not depends on the outcomes you are trying to achieve and the work patterns you look to adopt to be successful. Does the type of work you do suit mobile working? Is there an active flexible working policy in place? Would the ability to work alongside different people and/or teams accelerate
• Collaborative space: The amount and type of collaboration space you need will be determined by the frequency and format in which you meet, the size of your meetings and the tools you need to collaborate effectively. Most meetings tend to be small and impromptu. A greater number of smaller spaces will likely provide more utility than a smaller number of large spaces. Ensure your enclosed space is truly acoustically private.
Spaces that give the illusion of privacy but do not in actuality provide privacy are of little
use to anyone.
• Variety of workspaces: Ensure choice— individuals have different work patterns and work preferences. By providing a range of places from which work can be done, you provide employees with access to space that fits their tasks and personal work style preferences most effectively. In turn, people feel more productive and better supported by the organisation.
• Community space: Plan your community space to be attractive and multifunctional. No one will spend time in a windowless breakroom. Position your community space for impact, making it a place that people will gravitate to throughout the day. By making it multifunctional, your community space can serve both as a social space and as an alternative workspace.
STEP 3: FURNISH, EQUIP AND BRAND
Furniture can be a huge cost when you make the first move into your new space. It is tempting to go the IKEA route and buy inexpensive pieces, and it is just as tempting to make huge investments in high-end office lines.
The answer to this dilemma lies somewhere in between: make every dollar count, and spend on the things that matter. Here are a few do’s and don’ts to keep in mind:
• Do invest in the things that matter most to your day-to-day work. This likely means a super-fast and reliable Wi-Fi connection, dual monitors at your workstations, larger monitors in your meeting rooms, ergonomic chairs and sit-stand desks.
• Don’t paint your walls in your company colours and call it branding. Instead, consider how you can display your product or service or how your thinking has evolved, and/or showcase your work in progress. These efforts will convey your brand far more effectively than a bowl of branded chocolates on the
table in your reception area.
• Do experiment with the technology products and services that are free or come at a nominal fee. The latest videoconferencing equipment will be obsolete before your lease term is up. Instead, consider the tools you use to communicate in daily life, such as text messaging, FaceTime/Skype/Google Hangouts and messenger apps such as Slack, and look for ways that they can scale to support your team.
• Don’t buy too much ‘soft seating’. Everyone likes the idea of meeting on a couch until they sit through a meeting on a couch. Comfortable seating is good and has a place in your office, but it should not replace the functional seating you need to get real work done.
• Do provide good coffee and at least some free snacks. Breaks are the best times to create and foster community. Do not miss that opportunity by forcing people out of the office in pursuit of a decent cup of coffee or a quick snack.
• Do understand that how you allocate and fit out space will speak volumes about what you value and directly influence the behaviours that occur within it. If you say you value transparency, ensure that people are visible. If you value collaboration, invest in space that supports it.
PHASE III: FROM ONE FLOOR TO TWO OR MORE
POPULATION 100 TO 250, GROWING 200 TO 400
By the time you hit a population of 200, your people will likely be spread across two or more floors and most will have defined roles and specialties. Gone are the days when one person wore 10 hats and when knowledge was transferred almost by osmosis.
Although growth and expansion of this kind is certainly a sign of success, it can also create new and sometimes unwelcome changes to how work gets done:
• Silos: As people begin to specialise and departments or business units take shape to tackle core business functions, silos can more easily form. The increased use of short-term contract employees means not everyone is as familiar with each other as before, when the company was smaller. The division of people across multiple floors or buildings can exacerbate this issue by breaking down informal communication channels.
• Travel: As their span of control widens, leaders in the organisation will begin to travel more regularly, leaving underutilised space and direct reports who require more intentional connection to achieve business goals.
• Meetings: As teams become more distributed, the number of formal meetings will likely increase to accommodate remote participants, placing greater demand on enclosed meeting rooms with audiovisual equipment.
• Managers: As authority is delegated to more people, the population of people managers will increase, thus increasing the demand for private space and decreasing the amount of ‘white space’ in calendars across the organisation.
There are a range of ways that your workplace strategy can help you combat (or conversely, exacerbate) the challenges inherent with these changes. Consider the following:
• Density is not a bad word: Density is what makes cities vibrant, exciting places. The same can be true of your workplace. Do not be afraid to increase your density; just do it wiseley. Consider how space can be shared rather than shrunk.
• What works for 10 people does not necessarily work for 100 (or more): Behaviours and relationships that happened organically will now require more intention. Consider how information is shared, mentorship is supported and business goals are permeated throughout the organisation. Define clear roles for community and business champions.
• Invest in growing your community: As you scale, building community will not happen as naturally as it did when you were 15 people in the same room together. Helping people build and maintain networks within your organisation is a critical part of employee engagement. Allocate, provision and activate space that people are drawn to.
• Establish clear norms and protocols, and talk about them regularly: These tools help to reinforce community and help individuals and teams come together around a common set of goals.
PHASE IV: FROM ONE LOCATION TO MANY
POPULATION 200 TO 400 +
As your organisation continues to grow, you are likely to expand geographically. New locations are an opportunity to be closer to customers, access a bigger talent pool and expand brand presence. It is time to think of your office as a network of places, all working together as one platform for your employees. How will experience be consistent and reflect you as an organisation? And how will the sites be distinct and reflect the work being done there? How will you preserve or reignite your culture as you scale?
Depending on your business model and organisational structure, the new site may fall into one of three (or even all) categories: regional, functional or coworking:
• Regional sites: These sites represent the business in a specific region—think Australian headquarters. They serve as brand beacons, providing closer access to partners and customer and housing a variety of functions. These sites require access to a diverse talent pool that supports the broad range of roles.
• Functional sites: These sites are home to specific business units or functions, such as research and development, sales and customer service. Where the regional site may serve as a hub, these are the spokes focused on serving a particular business area.
• Coworking sites: Coworking sites should continue to be an integral part of your portfolio strategy. They can be used either to grow and test new markets and/or to incubate new products/services without significant infrastructure investment. Readily available coworking sites also mean you can grow quickly, establishing a team without waiting for the new lease and build-out of space.
Although each location in your portfolio will serve its unique purpose, the overall experience should consistently reflect your values. These three strategies can help you drive a more consistent experience:
• Service is the most flexible amenity: You can scale it appropriately to each site and target the specific needs of the local population. By making the employee experience a central element of your strategy, you can reduce a ‘haves and have-nots’ experience that is common as organisations scale.
• Keep space standards and protocols flexible: Specific site purpose and the work done there might require some adjustment, but creating guidelines for planning and space types will help the experience feel consistent.
• Integrate brand as the common variable across all sites: Brand can be integrated in ways that are tangible and abstract—events, interactions, even signature snacks that are available at every office. Consider how you integrate and celebrate both company culture and local culture, working with your local teams to find balance between the two.
Real estate is not the domain of mature companies alone. The smartest startups consider it an enabler of their business and a benefit to their people. When treated as a strategic tool, your workplace can enable your people, nurture your culture and promote your brand. When sidelined as an inconvenient but necessary expense, your workplace can hinder your ability to attract, retain and properly support talent.
Getting the foundational elements right early on—a location people can easily access, an environment that supports the way you want people to work, branding, services and events that reflect your culture—will serve you well as you scale.
Nicole Fitzgerald leads CBRE’s Workplace Strategy and Change Management team in the Pacific. With a background in business strategy, planning, brand and design, she brings a people- focused approach to creating highly engaging workplaces and is known for challenging the status quo, creating opportunities and reducing risk. Ms. Fitzgerald is a recognised leader in creating and driving transformation programs across a diverse range of industries, including health, education, services, technology, food & beverage and finance. She believes the office should play an integral role in building and maintaining organisational culture and creating a workplace community.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.