Financial Benefits of Flexible Workplace
Author: Kevin Connelly
V.P. of Accounting & Finance | CommonGrounds Workplace
As vaccines have rolled out and become very accessible, and the country is turning a corner
on the pandemic, we need to start envisioning what going back to work will look like. While
there are many items to consider, the financial impact cannot be ignored. We have gone
over a full calendar year without being in the office; equating to a lot of empty space that
companies are still paying rent on. Is there a desire to change the amount of space used for
the next few years or change the layout? That’s hard to do when you are stuck in a 10-year
lease with all planned CapEx upfront.
This is just the reality of the real estate industry, right? Well, it doesn’t have to be. As your
long term lease expires, considering the alternatives is a must. There are many financial
benefits to switching to a more flexible option, like CommonGrounds (CG) Workplace:
Cost Per Sqft
When comparing term space with a traditional landlord versus signing an agreement with a
flexible company like CG, many businesses solely compare the rent to the license fee.
However, to do a full comparison you must factor in the additional costs. Not only does the
license fee include staffing the location and operational expenses such as utilities,
repairs/maintenance, and insurance, but the buildout of the space as well. All CapEx is
complete so that your employees are walking into a fully finished (and in the case of CG)
enterprise-grade workplace on day one. Next time you are evaluating, make sure to factor in
all of the costs in running your own space, and guaranteed, the license fee will be
significantly lower. It really becomes a no brainer.
Term Flexibility
When negotiating space from a coworking operator there are a myriad of options as
compared to leasing directly from a landlord. Due to a landlord’s strict requirements from
lenders, long-term leases are the only option. Agreements with an operator (like CG) can
vary from month-to-month to 5 years depending on your business needs. By choosing
shorter terms, your company has the ability to pivot and make operational business decisions
without being hampered by a prior real estate decision.
Hackable Environment ™
The Hackable Environment™ was designed to allow customizations on a worksplace based
on employee activity, without having to start from scratch. This type of flexibility decreases
both the cost and time it would normally take to change the layout of an office. With no
permits needed, there could be up to 10 weeks of time saved and hundreds of thousands of
construction costs. In an ever-changing business environment, it is impossible to predict
what your office needs are one year from now, let alone 10 years down the road. This
Hackable Environment™ gives you the flexibility needed to stay relevant.
FASB Lease Accounting
The new FASB standards on lease accounting (ASC 842) have become a huge pain point for
accounting departments across the country. Liabilities on balance sheets are increasing
which could give investors more pause when evaluating your business. Additionally, the
upkeep of these complicated calculations has resulted in software licenses and increased
man hours. It would be advantageous for your business to get around this requirement,
therefore any office term less than 12 months would not need to be considered. However, if
you want to sign an agreement with a longer term, CommonGrounds may be your only
option to get around this requirement.
What matters most in determining whether an agreement over 12 months becomes a lease,
is the space assigned to your company and the flexibility. If the agreement assigns you
Office 101, but does not allow the right to move your company, that’s a lease. If, for example,
CommonGrounds assign your company 800 sq. ft of office space in Philadelphia, with the
right to move you around within our floorplan, then your company’s office space will not be
considered an identified lease asset. However, what is very important in this consideration is
the financial feasibility and economic benefits to alter the office space. Due to
CommonGrounds Hackable Environments™, we are uniquely positioned as the only flexible
office space operator truly able to offer this perk. The flexibility of our walls gives us the
ability to rearrange the space around to accommodate the best economic arrangement in
placing all of our members. Due to the low cost of moving either the members or the walls,
there are no economic limitations prohibiting CommonGrounds from moving companies
around, therefore any office agreements with CommonGrounds written this way will be
considered a service contract and not be an identified lease asset for GAAP.
2020 was a challenging year in many ways, but with challenges comes change and change
can be for the better. Many businesses had to learn how to survive through this difficult
period, but at CommonGrounds we want to help your business thrive. That begins with lifting
the financial burden of your office lease and choosing a space that is a better fit for your
needs within the timeline that you choose. At CG we have always said “love where you work”
and we guarantee you’ll love the financial relief that comes with the flexibility of a CG
workplace.
