Why Startups Need A Real Estate Strategy

Since the start of my career, I have noticed that startups are lower tier clients in the brokerage community. I have heard every explanation – “The time spent on small commissions means time wasted on big commissions”, “They don’t have real money”, “I don’t do deals under 10,000 square feet.” This is a huge problem when considering the risk that startups take when making their first real estate decision. At Cresa, we represent clients both big and small because we value the process, not just the transaction. Our expertise stems from the solutions we so strategically develop for our clients, and startup deals require more effort than is understood.

A broker’s skill set is challenged when working with a startup company. You have to stay within strict budgets, choose the correct location for accessing talent, find an environment that radiates their culture, and select the perfect size that will accommodate their growth plan. But with so many startups occupying coworking spaces, at what point does a startup begin to consider their own space?

Here is a pyramid that represents the life cycle of a startup company. You can see that at each phase, the company slowly grows. Once the company secures funding, they begin expanding their team. This is often when they realize that a traditional lease makes more sense financially and culturally. Larger office space is required, new departments might be necessary (marketing, human resources, operations, IT, and accounting to name a few) and more personnel is hired of course.

Here are the three most significant factors that new businesses consider when choosing their first office space, and why professional help is needed to understand how each can affect their business.

Retention
You’re a new business and you finally received funding. You have a core team and you finally feel that the business plan is organized. The last thing your hard work needs is to lose staff members while you’re trying to grow. It can be difficult to keep your team motivated in trying times, and unfortunately, the office space itself can be a big factor that effects retention. Especially as Millennials and Gen X begin to take over the workforce. At Cresa, we work with our clients to understand the opportunities and challenges created by shifting demographics, changing workplace values, changing workstyles, and new advances in technology. Creating an environment that enhances the employee experience will keep your team on board.

Recruitment
Recruiting new talent is a current issue for all startups and right now, talent is TIGHT. Denver’s record low unemployment means that all companies are competing for the same talent. You can be sure that office space is compared from interview to interview, which will either negatively or positively impact you. If you want top talent you need top office space, and location is key. You must be located near your talent. So, at Cresa we identify labor markets and trends and integrate them into a location strategy in a way that sets your business up for success long-term.

Culture
Culture is the most important aspect of every startup because culture is what distinguishes your company from the competition. Strong company culture has also proven to be positively correlated with retention and recruitment. So, use your home as an example. How did you decorate your home? How do you want people to feel when they enter your home? Why did you choose to the neighborhood you’re in? These are the questions that must be asked because the office becomes the home of your business. It should unify your team, reinforce who you are and serve as a constant reminder of where you’re going. At Cresa, before we even discuss real estate we discuss your business. It’s important to know the company and its culture before suggesting real estate solutions.

In summary, at no other stage is a strategic real estate plan more crucial than in the beginning stage of a new company. Many great companies fail during their transition from a startup to a small business because of real estate-related complications and expenses. As a champion for occupiers, Cresa believes startups deserve to be a priority.