By: Eric Sorensen, Managing Director and Brian Chernett, Senior Director
As a nonprofit organization, choosing a new home has a different set of considerations than those of a typical office tenant. Going far beyond site selection and rental rates, the decision should strengthen the organization’s value to constituents, support its mission, and help drive capital campaigns. In most cases, nonprofits lease office space. However, in the right market and with appropriate funding, building ownership is an option to consider.
Our team takes a closer look at the factors nonprofits face when deciding to renew, move, or invest and guides you through your options.
Renewing Your Lease
Nonprofit tenants often renew their leases due to:
- Favorable occupancy costs
- Employee satisfaction
- Minimal to no disruption
- Efficient office layout
- Ongoing flexibility due to short-term lease commitment
- Option to reallocate investment capital elsewhere
- Agreeable employee commuting patterns
Moving to a New Location
Common reasons tenants move include:
- Employee attraction and retention challenges
- Inefficient office layout
- Expansion or contraction needs
- Desire for a location change
- Space utilization issues
- Unfavorable occupancy costs
Investing in a Building
Owning real estate can be a strategic opportunity for certain nonprofits. Reasons to buy include:
- Maximum long-term operating control
- Potential ability to modify/expand facility
- Potential upside associated with residual value and potential tax benefits
- Long-term appreciation in value
- Potential to design a custom space in line with organizational needs
Before buying, consider the following:
- Upfront initial investment required, opportunity cost of capital
- Responsibility for maintaining/insuring/repairing building structure and systems
- Potential challenges in selling a custom building
- Responsibility for site contamination/remediation
- Direct exposure and management of city bureaucracy
Chicago Public Schools (CPS) experienced several of the above deciding factors firsthand. CPS engaged Cushman & Wakefield to advise them through a headquarters relocation with a primary objective of “right-sizing” to increase efficiency and maximize overall cost savings. After a thorough assessment with our team, it was determined that CPS would dispose of its headquarters and relocate to a leased space. This led to increased efficiencies, millions of dollars in annual savings, and a more collaborative environment that improved CPS’ culture.
The decision to renew your lease, relocate, or buy depends on each nonprofit’s unique mission and goals. Our team will partner with you to ensure your real estate exceeds the needs of your organization, serves your target community, and supports your mission.
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.