Maximize your organization's real estate spending during a downturn.
Challenge: How can our association maximize opportunities to save money in a down real-estate market?
Solution: Real-estate values and rental rates have decreased significantly, with values of commercial real estate down 20 to 50 percent. With the expectation of an upward trend toward market stabilization in 2011, nonprofits can leverage a down market now through the following opportunities:
Building purchase option. With decreasing building values, increased vacancy rates, a lack of demand for office space, and the availability of tax-exempt financing for 501(c)(3) organizations, many opportunities exist to purchase commercial properties at significant discounts.
Early lease renewals. Landlords faced with decreasing values, increasing vacancies, and mortgage-loan maturities are doing everything they can to retain existing tenants. This allows tenants with less than two to three years remaining on their lease to extend their lease term in exchange for a reduction in rental rates, a decrease in the amount of square footage leased, the receipt of tenant-improvement allowances to renovate their space, or other concessions to reduce the tenant's overall lease costs.
Decreased construction costs. Construction costs have decreased due to a lack of projects, making office renovations more affordable.
Municipal incentives. The competition for additional jobs and related tax revenues associated with a nonprofit's tenancy in particular jurisdictions has resulted in municipal governments providing tax incentives to organizations that relocate to both leased and owned properties.
A down real-estate market presents many opportunities for nonprofits. Talk to your real-estate service provider to help develop the right strategy for your organization to maximize these opportunities and increase your bottom line.
Brad Wilner is senior associate for CB Richard Ellis, which provides ASAE-Endorsed commercial-real-estate solutions for associations and nonprofits. Contact him at [email protected] or 301-215-4127.