Is there a there a there there? What startups and entrepreneurs need to know about real estate

Real estate can be a dynamic and flexible asset for your organization, capable of driving business performance, strengthening your brand, and bringing together a community of people. Taking the time to define the strategic role real estate will play in your business from the onset will set your organization 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 you are 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 organizations go through as they scale.

Phase 1: 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. While 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 prioritized toward growing your business, the ideas 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?

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 the 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 catalyze 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, share learnings, capabilities, and resources. When looking for space, consider the primary role an office will play for your team:

  • 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 workstyles. 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 video conferencing, acoustically private meeting rooms, and wireless network bandwidth.
  • Are you still building the business and could use help? Many coworking memberships include access to discount or free business services and professional development opportunities targeted at entrepreneurs and startups. These can range from HR support to web development and may be supported through staff available on site.

Phase 2: from cowarking to your own office

Population 10 to 15, growing to 80 to 100

You are growing. Fast. You may only be 10 or 15 people today but you’ve got plans to be 80 to 100 in the next year or two. Your shared office space has worked well up to this point, but now you’re entering a new phase: you need more space to grow and you want more control over how you configure, operate, and brand it. It’s  time for an office of your own.

Step 1: Choose a Location

Although choosing a location may seem a fairly straightforward decision, this is an important step in your long-term real estate strategy. Most organizations don’t stray far from where they first put down roots. So while it may be tempting to choose an office location that minimizes your commute, it is important to also consider the following:

  • Attraction and retention of talent: Consider whom you are looking to attract and where they will be coming Commute times, particularly in talent-rich markets, can and do impact the decisions people make to join particular companies.
  • The neighborhood: Often cast as the suburbs vs. the city conundrum, it is important to consider what is around you. Does the surrounding area offer the kinds of amenities and services your people will want and need during the day and/or before or after work (restaurants, fitness centers, drugstores, etc.)? If not, you may eventually need to provide some of these amenities/services internally. Is this kind of offering (and associated expense) part of who you are or would you rather rely on other businesses to provide it?
  • Room for growth: Once you’ve settled into a particular community or neighborhood and your people establish commute patterns and connections within that vicinity, it’s unlikely you’ll want to stray very far. Ask your broker about how likely the neighborhoods/areas you are considering will be able to accommodate you as you grow.

Step 2: Define Your Footprint and Organize 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’ll be able to scale responsibly later without being in the awkward position of having to “take things away.”

  • How much space you do you need? Determining how much space you need isn’t always easy, especially given the volatility most startups experience in hiring. The best rule of thumb is to use a rentable square feet (RSF)/person range and apply it to your three- to five-year headcount projection. (See Box 1 for common ranges by size of company.) While it is good to build a cushion into your estimates, don’t be too aggressive. A lot can change in a five-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. Your vacancy should fall in the range of 5 percent to 8 percent on top of your three-year growth projection. For greater flexibility, talk to your broker about negotiating expansion 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’d 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 organization? How do you gather as a community? How do you recharge?

Organize your space around the answers to these questions, starting from the perspective of the individual employee and working your way out:

  • The size of your desks should be defined by what happens If your work is paper intensive, you may need more desk space. But if your work is mostly digital, the size of a desk will likely be defined by the size, number, and configuration of your monitors. Don’t oversize individual workspace—it just means less space somewhere else.
  • The amount and type of collaboration space you need will be determined by the frequency with 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 don’t actually provide it are of little use to anyone.
  • 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 organization.
  • Plan your community space to be attractive and 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’s tempting to go the IKEA route and just as tempting to make huge investments into high-end office lines.

The answer lies somewhere in between: make every dollar count and spend on the things that matter, not what will get your office photograph in a magazine. 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
  • Don’t build-in flexibility by putting everything on True flexibility comes with enabling people to move, not furniture. Workstations on wheels will just create fire and safety hazards (think of all the cables) and will not scale.
  • Do experiment with the products and services that are free or come at a nominal 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 ” Everyone likes the idea of meeting on a couch until they have to sit through a meeting on a couch. Comfortable seating is good and has a place in your office, but it shouldn’t 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 Don’t miss that opportunity by forcing people out of the office in pursuit of a decent cup of coffee or quick snack.
  • Don’t paint your walls in your company colors and call it Instead, consider how you can display your product or service, the evolution of your thinking, 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 understand that how you allocate and fit out space will speak volumes about what you value. If you say you value transparency, ensure that people are visible. If you value collaboration, invest in space that supports it.

Phase 3: from one floor to two or more

Population 100 to 250, growing to 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 ten hats and when knowledge was transferred almost by osmosis.

While 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:

  • As people begin to specialize and departments or business units take shape to tackle core business functions, silos can more easily The division of people across multiple floors or buildings can exacerbate this by breaking down informal communication channels.
  • As their span of control widens, leaders in the organization will begin to travel more regularly, leaving underutilized space and direct reports who require more intentional connection to business goals.
  • 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.
  • 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 organization.

There are a number of ways 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 The same can be true of your workplace. Don’t be afraid to increase your density; just do it wisely. Consider how space can be shared rather than shrunk.
  • What works for 10 people doesn’t necessarily work for 100 (or more). Behaviors 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 organization. Define clear roles for community and business champions.
  • Invest in growing your community. As you scale, it won’t happen as naturally as it did when you were all 15 people in the same room together. Helping people build and maintain networks within your organization is a critical part of employee engagement. Allocate, provision, and activate space that people are drawn to.
  • Establish clear norms and These help to reinforce community and help individuals and teams come together around a common set of goals.

Phase 4: from one location to many

Population 200 to 400+

As your organization 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 organization? 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?

Once again, the right location is key, but an added variable is the purpose of the new site. Locating a call center in a prime downtown space may give you brand presence but at a significant labor cost increase. Finding the right labor market is essential—missing the mark can lead to long-term wage inflation and significant competition for the best talent. This is a good time to leverage brokerage services that provide in-house labor and location analytics services and can help you target sites that meet strategic needs.

Depending on your business model and organizational structure, the new site may fall into one of two (or even both) categories: regional or functional.

Regional sites represent the business in a specific region—think United States regional HQ or San Francisco office. They serve as brand beacons in the region, providing closer access to partners and customers, and housing a variety of functions. These sites require access to a diverse talent pool that supports the broad range of roles.

Functional sites are home to specific business units or functions, such as R&D, sales, customer service. Where the regional site may serve as a hub, these are the spokes focused on serving a particular aspect of the business.

You may also consider a return to coworking as a way to grow and test new markets and/ or incubate new products/services without significant infrastructure investment. The collisions and networking opportunities coworking provides are just as invaluable to an established brand as they are to a startup.

Readily available coworking sites also mean you can grow quickly, establishing the team without waiting for the new lease and build-out of space.

While 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 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 organizations 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.

In Summary

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.

Lenny Beaudoin, Senior Managing Director, CBRE Group, Inc.

Georgia Collins, Senior Managing Director, CBRE Group, Inc.

Nina Charnotskaia, Director, CBRE Group, Inc.