• Chicago

Real Estate Considerations Affecting a Nonprofit’s Mission

By Brian Chernett, Senior Director and Eric Sorensen, Managing Director
Not-for-Profit Advisory Group

The fundamental difference in space occupied by nonprofits and typical commercial office tenants is often one of utilization. An after-school activity center may require high ceilings for a gymnasium or space for a cafeteria. A community medical facility may have special storage needs for medications, extra-wide elevators for stretchers, or require special zoning. Sometimes the real challenge lies simply in convincing a landlord to accept an unconventional tenant.

Beyond the physical differences, there is a striking philosophical difference: nonprofits are mission-based organizations. They exist to address a particular unmet or underserved need in society. They also typically operate with slim margins, constrained budgets, and the unremitting knowledge that every dollar spent on operations is a dollar not spent on serving their essential mission.

Real estate is not just the second-largest expense for most organizations, it is a fundamental long-term commitment with a range of both risks and rewards. Occupancy decisions have a significant effect on any nonprofit’s core mission and program, and creativity in these decisions has become a mandate. This could mean considering options like a commercial condominium, or fully scrutinizing the wide range of tax incentives designated for specific cultural or community use. Or, it could mean a exploring a whole new ideological roadmap previously uncharted by nonprofit organizations.

Leveraging the Workspace: A New Perspective

Despite budget and operating challenges, today’s nonprofits are increasingly taking cues from for-profit corporations when making real estate decisions. While still addressing obvious cost cutting opportunities and economies-of-scale strategies, savvy nonprofits use sophisticated workplace strategy as a means to achieve the principal mission, please constituents, and retain valued employees. This process draws from the physical environment— location, technology, amenities and features— along with the guiding elements of the organization’s culture to achieve the key financial, operational, and business goals.

So… How Do We Begin?

Devising a comprehensive workplace strategy means first addressing several key considerations.

  • What is your organization’s mission?
  • How would you describe your organization’s culture?
  • What are your primary sources of funding?
  • Who are your constituents and do they need to access your space?
  • How much space is too little? Too much?
  • Is your current space an appropriate representation of your brand?
  • How important is proximity to transportation?
  • Has employee recruitment and retention traditionally been a problem?
  • Do you feel there is a need to improve your internal processes?
  • Would/could you consider residing in a different location/neighborhood/submarket or even another state?

A thoughtful approach to these considerations will lay the foundation for the end-to-end real estate strategy. A strategy that not only allows a nonprofit organization to remain true to its mission, but to also effectively evolve as changes occur through M&A activity, economic fluctuations, and donor inconsistencies.

Welcome to a whole new era. Deciding on an open plan versus a more insulated space is now just as important to an operating strategy as selecting the right location. Thinking about the employees who live and breathe the organization’s mission is now just as important as pleasing the board members and reaching potential donors. Communicating the brand’s essence through the physical space is now just as important to nonprofits as it is to law firms. We encourage you to embrace this change and the natural opportunity that lies alongside it.

Brian Chernett has 14 years of experience developing and executing comprehensive real estate solutions for organizations across the U.S. and around the world. Specialties include large, complex transactions, portfolio strategies and management, strategic planning, site selection and sublease/disposition assignments.

Eric Sorensen has over 20 years of experience 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.

  • Chicago

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