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“I can’t afford to be here, but I can’t afford not to be here.”
I’ve reflected on that statement since I heard it from my office neighbor.
Fast forward more than 27 years and there’s a discussion in the Rosen Institute premium member section about real estate.
(We talk 24/7 on Slack about everything. It’s useful at many levels and always comforting to know that we’re not alone when we need help).
One member asked how much others are spending (as a percentage of their budget) on work accommodations – whether they rent an office, own a building, work remotely, etc.
Some members reported spending as little as three percent. Some are spending more. I was struck by the low numbers.
For some members, the low percentage could reflect soaring revenues. In fact, one member told me that was the case.
For others, the low percentage could just mean cheap space.
Can’t Afford Not to be Here?
I heard the quote above from Dave, my office neighbor, the day I moved into our beautiful space back in 1990.
He later became my accountant and friend. He sold his very successful practice some years back.
I had just moved into the office building and it was expensive. My buddy was in a big suite next door and he was spending even more.
We started talking about the rent. It was high, but this building was nice. It was brand new, Class A space, built with the finest materials. Some very high-end national law firm (Ogletree, Deakins), consulting (McKinsey & Company), and banking executives consumed most of the building.
Dave said, “I can’t afford to be here, and I can’t afford not to be here.”
I was young and naïve, and I had to get my dad to personally guarantee the lease. So I wasn’t really sure what Dave meant.
He pontificated – as he was wont to do – and made three points:
1. The space is expensive.
It’s more expensive than most spaces in the city. Having a premier address in a high-end building doesn’t come cheaply.
2. The expensive location sends a message.
The message gets broadcast by others. It tells clients that you’re successful. It tells them that you have other clients supporting the business and they can trust you because others trust you.
We all know lawyers who whistle out loud when they hear that a particular firm has moved into a particular building. It gets people talking.
3. The physical space builds trust because it projects power.
When clients show up in a nice building, they sense they’ve come to the right place to see the right people.
It’s not an accident that throughout history the rich and powerful have sequestered themselves in massive, impressive structures (before and after death). They use physical space to take and keep power.
Office space, while not the only way to build trust, is one quick way to do it. It may not be logical, but humans love a good building.
Recently, I stood on the sidewalk with a lawyer, in front of her office.
Her space was built out nicely and took up a corner of a pleasant two-story building in a pleasant area.
The space was great, but it’s not a building people talk about, think about, or notice.
She pointed down the street to a towering office building in the center of the downtown area. She commented that lawyers in those buildings charged twice as much as she did for the “exact same service.”
She couldn’t understand why clients were willing to pay more for the same thing.
What if it’s the Building?
What if spending six or twelve percent on rent, instead of three percent, means doubling your revenue? Unless you’re bad at math, you should be able to see that leasing pricier space is sometimes a smart move.
That’s what Dave meant when he said, “I can’t afford to be here, but I can’t afford not to be here.”
Every firm has a different position in the market. That position is driven by the vision of the owner and the execution of a strategic plan. Every firm approaches the market differently.
High-end space isn’t useful for many firms. Expensive space could actually damage a firm’s strategic position. Office space has a marketing impact and needs to be consistent with the overall objective of the business.
There is no one-size-fits-all approach to office space.
There are as many approaches to office space as there are lawyers and clients.
Personally, I’ve modified my approach over the years. I’ve shifted as we’ve changed our ideal client and marketing message.
We still pay for some Class A space, but we use far less of it by…
- Outsourcing the majority of our work
- Shifting the team members to remote work styles
- Encouraging everyone to distribute geographically.
We’ve found that in today’s market, a combination of physical space with modern technology and remote work sends the right message to our target clients.
Notice that today’s most valuable companies balance their amazing physical spaces (think Apple) with their existence in the ether (think Google).
Things change, but they also stay the same.
Our approach is right for us. That doesn’t mean it’s the right approach for you.
You need to find the right match between your vision, objectives, clients, messaging, and budget. You need to think about what your space says.
Your Space Sends a Message
Make sure it’s the right message for you and your clients.
Your office space will be considered, discussed, and experienced by your clients. It’ll either build trust or diminish trust. It is never neutral.
Discussing the percentage a firm spends on office space, without context and an understanding of how the space serves the business’s objectives, isn’t particularly useful.
Office space is more than a place to gather your team or meet clients. Office space is a message, a feeling, a conversation, and a factor in building and sustaining trust.