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Long-term space planning as a retention tool.

In the scramble to attract new office tenants and retain existing ones, every manager has known the frustration of seeing tenants lured away by the munificent concession packages offered by another building owner. The cruelest blow may be to lose an otherwise satisfied company because the building can no longer accommodate expansion. Years of conscientious service are worth little if a tenant has not space in which to expand.

While this scenario may happen, it is less likely to occur if the tenant, working with the leasing broker, building manager, and space planning consultant, develops a long-range strategic facilities plan.

What is strategic

facilities planning?

Although most office building leases now run between three and five years, an 1988 survey by the International Facilities Management Association found that less than 50 percent of larger companies and less than 25 percent of smaller companies planned out their space needs for long-term use (more than three years). In part, this reluctance to plan ahead reflects the increased volatility of today's high-technology business environment. A decade ago, businesses were comfortable with a seven-to-ten-year planning horizon. Today, few are comfortable projecting beyond five years. Thus businesses are often faced with unanticipated needs for expansion or space reconfiguration.

Long-range strategic facilities planning (SFP) is an attempt to incorporate overall business strategies and forecast a facilities policy that minimizes erroneous, potentially expensive decisions about present and future facilities requirements.

For the tenant, SFP helps ensure that facilities are available at the right time, in the right place, at the right cost. For the building owner or manager, SFP helps anticipate and accommodate the space requirements of major tenants without lost revenues or major reshuffling of occupants.

How SFP works

Most strategic facilities planning is performed by architectural/design professionals, working in conjunction with the company's real estate representatives and senior management. Through a series of interviews, reports, and data analyzes, the planning process, which takes an average of four to six months, projects anticipated marketing, financial, and personnel requirements.

One component of strategic planning, called programming, has both a macro level and a micro level, both operating in much the same way and more or less concurrently. The macro level focuses on overall staffing square footage and adjacency requirements, current and future. The micro level concentrates on the information necessary to develop an interior configuration of the space.

The first meetings in the SFP process are those between the space planning firm conducting the analysis and the real estate officer or the tenant company's facilities management staff. A leasing broker is also likely to participate.

At these meetings, data are gathered on the existing facilities management plans, timetables, floor plans, employee rolls and organizational charts, and company space standards (square feet per employee). Based on this information, a game plan for further research is developed, including the number of people to interview and the number of company offices to be visited.

Next, interviews are set with the highest ranking officers of the company, including the CEO, the COO, and the executive committee. The goal of these interviews is to gain direct facts about anticipated company needs in marketing, production, and services.

Executive interviews are essential to the planning process. Top officers are best equipped to discuss long-term goals and future revenues, expansion and diversification plans, and major structural reorganizations.

Additional issues affecting a company's SFP include what image the company wishes to project to customers and employees, and locational issues that affect space needs, such as where the company's clients are located. Interviews are also conducted with the heads of each company department - marketing, sales, production, human resources, research, and development.

The macro level of programming focuses on expansion plans, work flow among departments, and any current configuration problems. Overall work flow analysis points up which departments must be on the same floor, a major determinant of the requisite floor plate size and shape.

The macro analysis results in a narrative summary of image and location needs, combined with five-year annual projections for each department's space needs. Support functions, such as lunch rooms or mail rooms, as well as a factor for circulation, are added to reach the total usable square footage required. Site selection requirements, which may be extensive, are also factored in if the analysis is being done for new construction.

The micro level analysis follows much the same process as the macro, but on a broader scale. More people are interviewed and more finite questions are asked. Most space planning firms interviewed each employee or a set number of people in each job to obtain the first source of information. For example, the department managers are the key source of detailed information, supplemented by representatives of the department, if work station standards must be derived.

The space planning firm then conducts follow-up interviews to clarify points in the questionnaire and obtain valuable "off the record" information. Conducting interviews after employees have completed a questionnaire allows for more focused answers to questions and saves expensive interview time.

One way to determine how many people to interview is to determine what the smallest unit of the company is, be it a department or only one group within a department, that could be moved autonomously. For example, the employee recruiting/interviewing component of the human resources department usually needs a stronger adjacency to the company's main lobby than the department's employee records or benefits administration.

The company is also asked to list every person, every room or support function (such as conference rooms and file areas), and every piece of equipment (with sizes). By combining these totals with standard building circulation formulas and the weighted departmental adjacency requirements, space planners can determine the overall space requirements for each company unit.

All of this data is entered in coded form into a computerized spreadsheet. Elaborate "what if" analyses of components permit shifts in different portions of the internal configurations until a proposed plan is reached.

Finally, financial review of the plan's impact on rents, construction costs, taxes, and operating costs is analyzed. At this point, the impact of the plan on the company's image and organizational goals is also reviewed. Once minor adjustments are made to reflect tenant review and "real world" conditions, the plan is finalized.

Ideally, this strategic facilities plan should be updated semi-annually or annually to reflect changes in business projections. In this way, anticipated space needs can be adjusted on an ongoing basis, rather than when problems arise. If a company's business is volatile or if the business culture demands consistent, equitable environment allocations, it becomes even more important to review the company's projections regularly. With such foresight, a tenant can negotiate more favorable lease terms, and all parties can plan more efficiently.

Case study: Alston Bird

When the Atlanta law firm of Alston & Bird recognized in 1986 that it needed more space for growth, the firm hired the real estate leasing and brokerage firm of Cushman and Wakefield to assist them in locating new quarters.

During years of incremental expansion, Alston & Bird had accumulated a labyrinth of offices in three contiguous, older buildings in downtown Atlanta. With the dual goals of improving functionality and more accurately reflecting their professional image in their facilities, the attorneys began a multi-year facilities planning process.

After several months, the firm narrowed its site search to 145,000 square feet in a new, high-profile building in midtown Atlanta. However, because the law firm wanted to reaffirm its decision before negotiating a lease, Cushman and Wakefield contracted with Heery Facilities Management Group, a unit of Atlanta-based Heery International, to assist in the decision making.

Heery developed macro space requirements for Alston & Bird, based on the law firm's standard space allocations per attorney. Law firms typically allocate space on a per-attorney, rather than a per-employee basis. This space includes not only the attorney's office, but a portion of space for paralegals, secretaries, files, administration, computers, and conference areas. Alston & Bird allocates 640 square feet per attorney, in line with 600-to-700-square-foot industry norms.

Heery briefly tested the law firm's requirements against their current downtown building, but this option proved unworkable. Even with an opportunity to expand in the existing buildings, the space configurations could not be improved without extensive and expensive renovation, nor would it accommodate Alston & Bird's growth.

Next, Heery analyzed the firm's first-choice building in more detail. This analysis included blocking and stacking diagrams for Alston & Bird's floors, the development of a database and diagrams to compare these preferred space configurations with available space, and a review of the lease terms and the work letter.

During the same period, Heery also began a micro analysis of Alston & Bird's needs. Senior partners in the firm's major practice groups - tax, real estate, litigation, and others - were interviewed. Space needs for the library, computer rooms, food service area, and copy rooms were also estimated. Lists were compiled of individuals in every department by function - from partners to couriers.

This process was simplified because the law firm has a very knowledgeable facilities group with good historical data and an in-place long-range plan. In September of each year, a new group of associates enters the firm, apportioned between the major practice groups.

One component of Heery's assignment was to project dates and square footage for expansion needs. A stepped diagram was developed to show the law firm's planned expansion and space requirements. These diagrams were then used by Cushman and Wakefield in the lease negotiations. A committee of attorneys and administrative managers from the firm reviewed all proposed plans for the space.

Although this was not the case with Alston & Bird, many space decisions can stall at the middle-management level and impede the progress of relocation decisions. Another common problem is that executives are reluctant to document five- or ten-year projections. The fluctuating business environments make executives even more uncertain and reluctant to plan.

However, the high dollar value of long-term leases and the opportunity to negotiate impressive savings support the need for five-plus-year planning horizons. Such a plan is not static, but must be reviewed and revised on a periodic basis.

Assuming that the financial aspects of the lease terms are comparable, the final space decision often hinges on three main factors:

* efficiencies of the floor plate,

* workability of the layout, and

* image criteria.

Floor plate efficiency varies with the shape of the building, the spacing of windows and support columns, and the placement of building core. After accomplishing preliminary plans for several buildings, mathematical calculations may reveal which buildings are more accommodating and could house the greatest number of people in the most functional manner.

In the case of Alston & Bird, this testing exercise focused on the best office and floor layout of their selected building. The primary variable in the analysis was the relationship between the attorneys' secretaries and paralegals' offices. After four arrangements were tried, options were presented to the firm for selection.

The workability of the design may also influence the final decisions on office layout. The work flow and movement of employees and clients of one plan may have "just seemed to work better" than another configuration. For example, if the building core creates inordinate travel distances to accommodate critical work-flow paths, a different adjacency may be the best solution, even if slightly more space is used.

Flexibility of the floor plate to accommodate future changes is also important. Alston & Bird's highly regulated expansion program and clear, enforced standards lessened the degree of flexibility needed. However, flexibility was addressed in the standardization and zoning of non-office workstation functions. For example, the kitchen/break rooms, certain support staff, and the reception areas are always in the same location on different floors.

Generally, the more straightforward a building's floor plate, the more adaptable and efficient the space. Of course, the simpler building may have fewer image-related features. For example, the Philip Johnson-designed building chosen by Alston & Bird has an octagonal floor plate. In essence, the building's corners are shaved off, creating four oddly shaped interior corners.

To accommodate Alston and Bird's strict space standardizations, these four corner areas were used as conference rooms on each floor. The repetition provides a sense of orientation and visual interest, while maintaining the law firm's conference room to attorneys' space ratios.

Although image criteria are generally factored in at an early stage, some buildings just "look" more like a client than others. In the case of Alston & Bird, the firm wanted to portray an image that was both progressive and solid. The final selection of the One Atlanta Center in Atlanta's Midtown area portrayed an upscale, progressive image in a growing area of the city.

Heery's facilities management group continues to update Alston & Bird's strategic facilities plan as business conditions change and the firm's practice evolves. The flexible plan has already enabled Alston & Bird to expand its square footage by 37 percent, with options to add over 160,000 square feet at intervals during the next 15 years. With the help of long-term strategic facilities planning, the tenant and the owner may both be assured of adequate space availability when needed.

Sharon K. Mount is vice president in charge and program director for Heery Facilities Management Group in Atlanta. She has directed programming and strategic facilities management planning for over 16 million square feet of space. She has developed facilities management options for many major users, including Chase Manhattan Bank, Rockefeller Center Management Corporation, and the Federal Home Loan Mortgage Corporation.

Ms. Mount is a sustaining member of the International Facilities Management Association, has written a number of articles, and has spoken extensively at industry conferences on facilities management.

Heery facilities management is a unit of Heery International, Inc., headquartered in Atlanta. Heery International is a full-service design, engineering, and construction program management firm with offices located throughout the United States and the United Kingdom.
COPYRIGHT 1991 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Mount, Sharon K.
Publication:Journal of Property Management
Date:Mar 1, 1991
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