Offices for Charities - 3 Good Reasons to Ensure Price is NOT the Sole Criteria

It's been an interesting time to live in Toronto over the last few weeks. And today felt like the first real day of summer. So by the time I arrived at my second meeting today I was feeling more than a little cranky about our Mayor and not just a little bit overheated. Imagine my pleasure then to arrive in an oasis of cool bright space, with trees, lovely architecture and carefully designed areas that were both accessible and inviting. I felt calmer (and cooler) immediately...

All this in a space that houses a charity.

I've expressed before my concern over not spending enough on charitable infrastructure and "back of house" support, but clearly this is an organization that has had a great opportunity to afford a lovely space to pursue their Mission.

And then I worried that maybe it was "too rich", that Mission had suffered due to spending too much on the space. Maybe they would have been better off if their sole criteria in creating this space was to find the cheapest place at the cheapest price?

Here's why I don't think that's the case:

1. For-Profit organizations clearly believe that nice spaces help attract and retain talented staff. Charities need to attract and retain talented staff too, so while they may not need to be quite as fancy as Google's new home in Toronto, deciding on price only can't help morale either. And if better space has this positive affect on staff, imagine the value for the clients and patients this charity serves...
2. Productivity goes up when the work/office spaces are flexible, attractive, have the right tools and allow for appropriate privacy and quiet. So if charities are seeking to be as efficient as possible with donated money, increasing productivity makes sense.
3. Nicer space may actually make the Ask easier. Few prospects want to donate to renovate a tired Class C building to a bare minimum standard. But having seen the impact on people I was prospecting when I showed them the drawings of a truly remarkable renovation capital campaign I can attest to the value of dreaming bigger than just about rock bottom pricing!

Price will always be king. But perhaps more charities should take a page from the For Profit world and make aspiring to better working spaces nobility as well.

5 Advantages of Charities Owning Their Offices - and the Risks

We ran a seminar on real estate for charities last week, and a number of Executive Directors, Directors of Finance, and CFOs came out to share best practices, enjoy coffee and muffins, and review “Real Estate for Charities 101”.

If you ignore the largest (e.g. YMCA, etc.) or longest-standing (e.g. settlement houses, etc.) organizations, certainly most charities today are leasing their spaces. So one of the themes that we explored, especially since we have recently completed several projects where charities and foundations have purchased their own buildings and office spaces, was the pros and cons of buying / owning versus leasing / renting.

As I work with charities it’s easy to see the allure of owning your own space.

• Can be leveraged – in difficult financial times or to fund a project the option exists to take out a mortgage / secured line on the property
• Provides cost certainty – other than the fairly predictable cost increases in utilities, the main cost (the mortgage) can be predicted very accurately for years to come
• Potential for “upside” – your payments build equity and not the landlord’s bottom line, plus with no “middleman” owning can save money over time, and  you could even take in tenants or fellow charities to help them / increase your own revenue
• Greater control – while some landlords may not like / or even allow certain charities (or the mission or clients they bring into a building) this is less of an issue when you own
• Profile and pride – having a central location can bring greater confidence to prospective donors, allow for marketing and sponsorship opportunities, and give the staff and stakeholders a central theme to rally behind

However, the challenges and risks with owning a building for charities and non-profits are significant. Obviously a building is not very “liquid” so if cash flow is a concern it might be better to have the funds simply earning interest in a fund, bonds, or even just a bank account. Buildings require upkeep, so a reserve fund and on-going capital costs must be accounted for. For some organizations owning a building can send the wrong message to donors: “I don’t want you to put my gift towards your building, I want it to support your programs” goes the donor’s thinking.

Finally, a purchase of a building is a massive exercise. It can distract you from your Mission. Moreover, since charities are often looking at older “bargain” spaces, issues of hazardous materials and building code violations are more frequently a concern than in newer spaces.

So among many other topics, the bottom line from our Real Estate for Charities 101 seminar was that if purchasing your own office building or office spaces in on your wish list, do make sure you get the best possible professional advice and map out a clear strategy towards this goal.

Charities and Office Space: New Kinds of “Home”

Not every charity has an office, and some of those that do sometimes don’t incur significant costs. For example, some charities own their space (more often the case for more established or larger organizations). Other charities have agreements with Board members or sponsors / donors who provide space for free, or arrangements with a level of Government to pay nothing or well below market rent.

And of course for many small charities there are no such costs: run out of basements or church halls their spaces are donated as well.

Of course, if you are a charity that owns property and is paying Property Taxes, check and see if you’re eligible for a rebate. For example, in Toronto charities can receive a 40% rebate.

But for many charities, the reality is that rent and associated costs are often the second or third largest line items on any Budget (usually after Salaries and/or Program Costs). So in our world of funding reductions and challenging economic times charities and non-profits of all kinds are thinking about how to better manage this cost.  In addition to ensuring you have the right expert support on the real estate side, here are some themes I'm seeing on this front.

Often the starting place is to see if you can be one of those fortunate organizations that can get free (or inexpensive) space from a Board member or sponsor / donor.  It’s more often requested than recevied, but it's a great place to start, and we all know that you don’t get if you don’t Ask!

Being thrifty by nature, charities have also explored a variety of shared space and “co-location” options over the years. Find the right partner(s) and suddenly your “common” areas like reception space, meeting rooms and kitchenette become a shared cost – not to mention the photocopier and utility bills. Not to be undertaken lightly, this option requires detailed partnership agreements, but has a proven track record.

Another similar option to co-location spaces is a Hub. These shared spaces are differentiated by providing a “one stop shop” for participants and clients, where the organizations co-locating find further synergy due to their joint focus on a particular cause, issue or geography. Some are led by one larger organization (e.g. a United Way), others by ad-hoc groups who can more effectively address issues by operating together.

The last office concept I’ll mention for in post is virtual offices for charities. Based on the for-profit model used by Regus, Telsec and others, charities are now setting up virtual office spaces for other charities. One of the earliest versions I’m aware of (founded in 1998) is CAN (Community Action Network) Mezzanine in London England which proudly advertises on their website that for £93 per week you can rent a fully serviced desk.

More on Canadian innovations on this front in the near future.