By: Eric Sorensen, Managing Director and Brian Chernett, Senior Director
Managing organizational expenses is vital to meeting a nonprofit’s mission. Every penny spent should support the important service you provide to the community. There are areas nonprofits should not cut corners, such as programming and finding the right team, which are essential in meeting your goals. However, our team takes a closer look at common capital and operating expenses nonprofits incur and provides real estate solutions to help mitigate these costs.
A capital expense (CAPEX)* is often a concern for nonprofits that own their space but shouldn’t be overlooked by those who rent as well. Building out office space can come with out-of-pocket costs such as hard and soft costs, IT infrastructure, and furniture. However, it doesn’t have to, especially in today’s tenant friendly market. If your organization intends to occupy your space long-term, the impact on your bottom line can be accounted for over the length of your entire term.
Ways to reduce capital expenses/out-of-pocket costs:
- Mitigate your exposure to capital expenses by pursuing turnkey buildout* opportunities.
- Target sublease alternatives or pre-built, fully furnished spec suites* that incorporate new design standards (extremely common in Chicago).
- Look for second generation space* that has good “bones” and requires minimal updating.
Renting real estate is often the second highest ongoing operating expense (OPEX)* an organization faces. You want to make sure you are not spending beyond your means, but you should not be afraid to explore higher quality space especially if it less square footage. There are many ways we can help you minimize the cost of space.
Ways to mitigate operating expenses:
- Increase space efficiency by implementing an effective workplace strategy to reduce your office footprint. The larger your footprint, the more a space costs operationally. A good workplace strategy might include the incorporation of co-working space, hoteling, and technology that enables your employees to work remotely. Progressive buildouts often include bench style seating that encourages collaboration and an abundance of private meeting space to enhance the team environment.
- Use building conference rooms and additional amenities, in lieu of building them within your space. For example, in lease scenarios, a non-profit can negotiate the free use of a building conference room, which can translate into as much as +- $2MM savings over the term of a lease.
- Negotiate applicable operating expense exclusions within a lease. For example, tenants often include clauses in a lease that exclude them from expenses related to the installation, operation and maintenance of any specialty service in the building. This includes the building’s parking garage, food service facilities, athletic, health and recreational clubs, and conference center for the building.
Being smart about your nonprofit’s capital and operating expenses will ensure you meet your mission. Our team will partner with you on a thoughtful approach to your real estate expenditures to help you meet your organizational goals.
*See sidebar definition.
Eric Sorensen, Co-Lead of the Chicago Not-for-Profit Advisory Group, has over 20 years of experience working extensively with nonprofits and associations, structuring strategic plans that align his client’s real estate with their mission. His experience includes site selection for office and technology centers and executing corporate and professional relocations.
Brian Chernett, Co-Lead of the Chicago Not-for-Profit Advisory Group, has 14 years of experience developing and executing comprehensive real estate solutions for organizations across the U.S. Specialties include multifaceted transactions, portfolio strategies and management, strategic planning, site selection and sublease/disposition assignments.