How Do You Determine The Space Needed To Set Up Your Office?

When you are all set to start a new business or when you are moving into a new building, the first question that strikes your mind is that, how much space you need for your office. As a business owner, you must be able to determine the amount of space you need for your office. But how would you do that? You just have to plan carefully, as too much or too little space can be the budget breakers.

Getting locked in a wrong space can interrupt your business significantly, making it difficult to operate. However, there are certain techniques employing which you can get into a right space. First of all, you need to evaluate your current situation and decide your expectations for the business growth over the next few years. Asking the following questions to yourself can help you come to a conclusion regarding the office space size.

• How many employees are there currently?
• Can employees share the space or they need an individual desk?
• Do I have to add employees in the next couple of years?
• When will I add new staff to the company?
• What kind of employees I might be adding in future? Administrative, executive or sales?

Knowing how many employees you currently have and how many you would add in future, helps you operate your business comfortably, and you can expand your business easily without any costly interruptions. Basically, the amount of space you require is determined by the type of your business and the head count. The conventional space for an office space is about 150-350 sq. ft. per person; it is the type of the space you require to accommodate your business that plays a significant role in narrowing the range.

At the lower end of the range, we have the open plan design which has no private space for the employees; this configuration is commonly designed in the call centres and sales offices where desktops and workstations are grouped together. At the other end of the range we have traditional private office layout with cubicles around. Most of the private offices and law offices follow this configuration which has large conference rooms, support rooms, file rooms and pantry.

At the initial stage, you can keep an estimate of about 250 sq. ft. per person; calculating it for the number of current employees and also by keeping in mind the number of employee you would add in future, will give you a rough estimate of the amount of space you need. The rough estimation can further be refined and narrowed down when you start searching for space.

As the business owner, you’ll have a better understanding about the business and can easily identify the positives and negatives of a space, and determine if it suits your business well; you can choose private office, open space or the combination of both based on the nature of your business. It helps you to estimate the amount of space you would need during your lease term.

Indian Real Estate Market Sees the Highest Office Space Addition!

According to a recent study conducted by a global property consultant, Indian office space market witnessed the completion of 10 million sq. ft. during the third quarter of 2015 and the overall office space addition was the highest in 9 quarters. However the news to cheer is that, most of these supplies were pre committed to occupiers a few years back. This means that if an occupier decides to lease the space now, the propositions that are available are just a few.

Here are a few highlights of the report:

•  The research has reported that, Bengaluru led the new supply addition while the development completions surged by 21% on a quarterly basis and around 44% on yearly basis. Also, the commercial and SEZ developments were completed across Pune, Bengaluru, Hyderabad, Gurgaon and Chennai during that quarter.
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  Looking at this report, the transaction service experts have said that, the availability of new office space continues to be minimal, as the developers are still facing difficulties of liquidity to undertake commercial real estate. But the fact is that, the supplies that are coming these days are mostly the pre-commitments made by occupiers in the past.
• The business of commercial realty is highly leveraged because it’s not like the residential market where the customers start paying for the properties like apartments right from the planning stage of the project. In commercial real estate business, the developer can start earning only when the building is complete.
• The consultants who are tracking the commercial real estate sector say that, it’s seeing an exactly opposite scenario to that of residential market, as the demand is outstripping the supply. According to the commercial real estate experts, the market is seeing brunt since when the developers stopped high leveraged developments (commercial buildings) after the global financial crisis.
• Even though, the demand for office spaces is at the peak, there is a great dearth of quality office spaces. The scarcity of good office spaces continue in the prime locations. The supplies which are coming in are either of inferior quality or they are in the locations which lack infrastructure.

Office space absorption of more than 9 million sq. ft. was registered in the third quarter of 2015 across the major cities in India clocking the growth of about 20% on an annual basis. This rise in office space absorption, which is mainly driven by corporate occupiers from the sectors like IT/ITeS, finance, health care and ecommerce companies reflected a sustained improvement in the office space leasing across most cities.

However, the scarcity of Grade-A office spaces has compressed the capitalization rates significantly, and this has made the commercial real estate scenario seem better than what it was after the global financial crisis in 2008. This change is helping the developers who already have high grade office projects that are generating good income.

Forced Appreciation: A Booming Trend in Real Estate!

Forced Appreciation is buying something that’s not a good investment and turning it out into a good investment. Real estate investors can also use the force to make their investment worth their decision. Especially, the investors who own commercial properties that are value-based are prone to forced appreciation.

Assume that you can manage to get your rental to generate a little more income; this income divided by the capitalization rate will be the value your property will appraise for. So, you can force the value up by surging your income stream, and this is nothing but forced appreciation.

Forced Appreciation needs Foresight

• The investors can’t just blindly get into forced appreciation, as it requires a foresight while buying any real estate deals, so that they can plan for the value creation. Firstly, the investor will have to see the value potential the property might have. Many times, the real key for being an ideal real estate value investor is seeing the value or opportunities that are missed by others.
  
• The investors will have to analyse a few things like, are there any things that you can add to the property in order to increase the rent? Is the property capable of serving the tenants to its best? Is there any chance of redesigning the space so that it generates more revenue? Are there any services or amenities that can add more value to the property?
  
  

Make Your Strategy Work

• Once you know how to create value to the property, you need to create a well thought out plan that lays out the vision of your value creation. The essence of your plan should spell out pointedly, how you are going to add value to your property and generate more revenue. This can help you in executing the plan; it can also help you in raising the debt and equity funds.
  
• You can then sell your plan to the potential stakeholders. If you have found a solid deal having lots of value creation opportunities, it will be easy for you to get buy-in from potential partners. But finally, the ability to see the value in a deal and the ability to communicate it is the most critical thing, where you have to bring out your entrepreneurial spirit.

If you just look at it, the forced appreciation strategy looks really simple. But what’s hard to see is the hassle accompanied with the property. But a little hard work, unique strategies and marketing intelligence can turn out an average investment to a great one.

Commercial Real Estate Trends for 2016

The Commercial Real Estate (CRE) industry now seems to be in a solid grip when compared to the previous years. While the US economy continues to progress, the investors are seeing incredible performance across most of the property types and markets. So, what would be the future of Commercial Real Estate? Will it be fruitful? Here are the 4 trends that are expected to play a significant role in the on-going year.

1. Global Urbanization:

It looks like the global urbanization trend continues in US as it does in the other parts, as the Millennials and boomers lookout for enhanced access to jobs and amenities, from shopping to healthcare. It’s been noted that, the US urban population has increased by 12.1% from 2000 to 2010, outpacing the nation’s overall growth of 9.7%. And, even the sub-urban seem to be taking more of an urban form, having mixed-use development and limited automobile dependence. While this trend of urbanization continues, it certainly creates a huge demand for retail, housing, offices and other property types.

2. Rise in Interest Rates:

The interest rates seem to rise for sure this year; the forecasts may vary, but it’s more likely that, the Federal Funds Rate (FFR) will rise at least to 1% in 2016, with the treasuries of 10 years pushing fractionally higher towards 3% mark. There are number of factors for the interest rates being low for now, like limited inflation and the strong dollar. But, the Federal is more likely to weigh the effects of each and every move before it adds an additional friction to the current economic growth trends.

3. Increased Capital Flows:

US property market is the most stable and transparent market in the world because of which it has been an easy choice for many investors. According to Real Capital Analytics (RCA), a research firm, just the foreign purchases of US real estate properties rose up to $62 billion with Norway, Canada, China and Singapore leading the wave. Looking at this statistics, a substantial proportion among the Association of Foreign Investors in Real Estate, expect increase in investments in US.

4. Limited Supply Additions:

Limited supply additions seem to continue with only modest supply growth in the sectors like multifamily housing, student and senior housing, single tenant industrials and so on. As the last recession was a bit deep and protracted, the lending sources were extremely doubtful about funding new constructions. Also, many local and regional banks were hit by the residential mortgage crisis, and both the commercial and residential real estate were seen as highly risky sectors. Because of this many lenders decided to leave real estate, which resulted in limited supply.

Looking at the above mentioned points, we can say that the property landscape of US in 2016 will almost be similar to that of 2015. Also, many economists say that, employment situation of US would remain on its current path adding the demand for housing in various forms.