Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/700533
July | August | 2016 Commercial Investment Real Estate SPECIALIZING IN NONPROFIT The nonprofit specialty is a niche area for office leasing firms. To get an idea of the opportunities and challenges of the nonprofit sector, Commercial Investment Real Estate interviewed Peter Davies, CCIM. CIRE: For your market, how large is the nonprofit sector in terms of number of clients? Davies: Approximately 2 million Canadians are employed in the charitable and nonprofit sector and more than 13 million people volunteer for charities and nonprofits in Canada. There are approximately 170,000 nonprofits and charities of varying sizes in Canada, and the sector represents just over $106 billion, or approximately 8 percent of Canada's GDP. CIRE: What is the greatest challenge in working with nonprofit clients? Davies: In short, it is sometimes a challenge to establish the individual or small group of individuals that will ultimately have the final say on project-related decisions and direction. Nonprofits tend to have a much larger stakeholder base [than for-profits] with direct input into where they should locate their office space and the manner in which it should be designed. Nonprofits often involve all employees of the organization in the decision in addition to their board of directors. Even though this often leads to a longer decision-making cycle, we believe this is a tremendous way of improving employee engagement, attraction, and retention. CIRE: In terms of space and location, what factors do nonprofits consider most important when leasing space (beyond those discussed in the survey)? Davies: It is no secret that employees of nonprofit organizations are typically compensated less than their for-profit colleagues. Thus, commute times, employee comfort, access to amenities, and of course, access to transit are almost always the top considerations. In collaboration with our clients, we try to promote the work-life balance attributes associated with properties and locations being considered. It is often the qualitative aspects of any potential property and location that will enhance or detract from employee satisfaction and ultimately the desired organizational culture. CIRE: Generally, what are the terms of an average nonprofit lease? What type of buildings do they occupy?? Davies: Similar to for-profit firms, the lease term is often dependent on the size of the organization. Medium-size to large nonprofits tend to look at 10- to 15-year lease terms, and smaller groups tend to require more flexibility and thus their lease terms will average about five years. Transit accessible class B and C buildings are in greatest demand with our nonprofit clients. As our Benchmarking Survey detailed, nonprofits tend to seek a balance between image and accountability, and this is often reflected in a nonprofit's desire to locate on a mid-to-low floor at a class B or C building, regardless of their financial capability to afford a nicer building or location. CIRE: What causes most nonprofits to search for new space? Do nonprofits ever purchase space? Davies: Similar to for-profit firms, nonprofits search for new space as they expand or downsize, and if they find their current building, location, and/or pricing no longer meets the needs of their stakeholders and employees. There are often tax benefits with ownership that can be compelling. The question of ownership vs. leasing is as much an ideological question as it is a question of economics. The concept of investing in bricks and mortar vs. investing in specific services within the organization's mission is frequently discussed. We are often asked to participate in board level strategy sessions. CIRE: For commercial leasing professionals, what are the opportunities presented when working with nonprofit clients? Davies: Our nonprofit clients are incredibly loyal because they often understand that a substantial amount of time and effort goes into helping them find the right balance between accountability and impact. Many executive directors and other senior staff sit on boards of other nonprofits, thus the opportunity for referrals is extensive. There is also the opportunity to witness the benefits of our efforts that go beyond the real estate transaction. When working with organizations like Ronald McDonald House, Plan Canada, the Salvation Army, healthcare providers, or educational groups, it is extremely rewarding to play a fundamental role in helping them build the foundation of where and how they will fulfill their mission for many years to come. 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