The Great Debate: Should You Use an Open Office Layout?

The majority of companies in the United States use open office layouts. Whether that design includes communal work tables or low-partition workstations, these offices are a far cry from the partitioned offices of the past.

“Silicon Valley firms were among the first to champion open workspaces, where employees sit shoulder to shoulder at communal desks,” explains an office design analysis in Forbes. “They tore down walls and eliminated private offices as outdated symbols of corporate hierarchy. An open layout seemed to convey a modern, break-all-the-rules attitude. It also provided a stark contrast to the soulless cubicle farms skewered by Dilbert comics and films like Office Space.”

The Benefits of an Open Office

It’s understandable why many businesses have embraced the open office layout. With walls and other partitions removed, it’s easier for your employees to connect. Better collaboration is often the objective, which makes sense from a practical standpoint. When you can look over to a colleague’s desk and immediately see that he’s sitting there, it seems you’d be more likely to stroll over for a conversation.

“It really creates an environment where people can collaborate; they can innovate together,” said Lori Goler, chief people officer at Facebook, which is known for promoting open office concepts. “There’s a lot of spontaneity in the way people bump into each other, just a really fun collaborative creative space.”

In conjunction with the collaboration, many businesses employ an open office in hopes that it will increase socializing and improve employee morale. Traditional workplace designs run the risk of reinforcing hierarchies, with corner offices for the elite, modest offices for the leaders, and cubicles for the working drones. By leveling the playing field, it’s easy to see how an office could become more cohesive.

Additionally, open offices are more cost-effective. They allow you to fit more people into a smaller space, with less furniture required. This savings makes open offices compelling for small businesses operating on tighter budgets.

The Drawbacks of an Open Office

Once you know the desired benefits of an open office, it’s important to review their effectiveness in practice. Many employees actually report issues with such layouts, ranging from obnoxiously loud coworkers to stinky lunches being eaten much too close for comfort.

Researchers from the Harvard Business School conducted what is widely considered the preeminent analysis of open offices. They traced employee movements with electronic badges, recorded office conversations with microphones, and kept tabs on interoffice email usage.

The result? The open offices in the study did not achieve the collaboration hoped for. Instead, face-to-face interactions plummeted by 70%. Conversely, email use went up 50%. It appeared that the extreme openness of the layout led to employee withdrawal. The only way to cope was less personal interaction.

“I don’t know that I had a clear hypothesis about this research question at the start,” explains the study’s coauthor, Associate Professor Ethan Bernstein. “You hear so much said about how much people don’t like open offices, but there’s also so much said about the vibrancy of an environment when you open space and data up, about the collisions and interactions that will happen there. For me, the promise of open offices was at least as compelling as the traps. Would everyone bustle with productive collisions or simply put their big headphones on and become numb to the space?”

It seems that Professor Bernstein’s theories regarding the inherent traps associated with open offices are legitimate. Participants in the studies did tend to put on headphones, hunch toward their computers, and try to block everything else out. Not only was this an effort to eliminate abundant distractions, but workers also felt the need to look busy all the time because they were in full view of their leaders and coworkers.

What Office Layout Should You Use?

While the Harvard Business School research exposed potential problems associated with the open office layout, these findings don’t mean it’s necessarily a bad option for your small business. Every office includes unique individuals who interact in dynamic ways.

If you’re wondering what layout would work best for your office, here are some considerations:

What do your people want?

You may have your ideas about what the office needs, but always make sure  your employees have a voice. After all, the quickest way to hurt morale is to impose major changes without using the type of collaboration your office layout would hope to spur.

How can you improve interaction?

Even if an open layout isn’t the best fit for your business, perhaps you can incorporate some of the positive elements. You can start by improving the socializing in your office by simply scheduling more opportunities for your people to get together.

Are you using sound masking?

If you have an open office concept and noise is an issue, you need to implement some form of sound masking. White noise helps minimize distracting conversations and sounds. The result can be happier, more productive people.

How flexible are things for your employees?

You can also reduce distractions and frustration among your people by offering increased flexibility. At the most basic level, you may let them customize their schedules (such as coming in earlier in the morning to get more unfettered work time). You can also think about letting them work a 4/10 schedule or even work from home once a week.

Whether you think cubicles are essential or can’t wait to make your office as open as an African savanna, it’s important to keep your people top of mind. What will help them feel most connected? What will help them be most productive? What will help them be most happy? Answer these questions first and your own business priorities will ultimately be served.

10 Considerations When Shopping for a Commercial Mortgage

The primary purpose of a commercial mortgage is to help small business owners add “property owner” to their titles. This accomplishment is worthwhile, as it negates the need for you to pay rent to someone else. As a wise person once said, “Paying rent is like throwing your dollars into a bottomless void.”

When you own a property, your payments build in a way that gives you positive options in the future. You’ll have more control of the property, build your retirement portfolio, and create the opportunity to collect rent from others.

A commercial mortgage can be used for many kinds of property, including warehouses, offices, apartment complexes, stores, and restaurants. And the scope extends beyond just purchasing a property. You can also use this type of financing for new construction, renovating an outdated structure, removing yourself from a lease, or refinancing for a better repayment term.

Regardless of the details, these projects typically require financing that can help you convert your equity into cash.

“Commercial real estate isn’t cheap,” say the entrepreneurial experts from Small Biz Rising. “If you’re a small business owner who’s considering buying or further developing commercial real estate—whether that’s an office building, a shopping center, a hotel, or another business-related property—odds are you’ll need to secure financing from an outside lender. In most scenarios, that usually means applying for a commercial mortgage loan.”

In the financing world, there’s a spectrum of difficulty when it comes to qualifying for and obtaining various loan products. The good news is that commercial mortgages fall on the easier side of things. While SBA loans require piles of paperwork and have strict requirements, a commercial mortgage is a much smoother ride.

One of the main reasons for this ease is that you will secure the loan by using the property as collateral. As long as the property’s value appraises for a sufficient amount, you’ll bypass some of the hurdles associated with typical loans.

However, a commercial mortgage isn’t always a sure thing. Small business loans are always competitive, with lenders looking at a variety of factors before making approval decisions. What’s important is that you provide all the relevant documents, including property blueprints, purchase contracts, scope of work analysis, project budget, and a property market analysis.

Beyond the nuts and bolts of the real estate project, your finances will play a role in the approval decision. So don’t put too much emphasis on the property and lose track of the business side of the equation.

“You’ll need to gather an assortment of documents, including current business and personal tax returns, business-related financial records, personal and business credit score information, bank statements for personal and business accounts, asset and liability statements, profiles of business partners and directors, business plans, and possibly more, depending on the lender,” says Small Biz Rising.

While we’re on the topic of what you need for a commercial mortgage, here are 10 more considerations. Some are major details and others are fairly minor, but they combine to make your application more desirable to a lender.

These loans are big.

Real estate isn’t cheap, so your commercial mortgage will pack a punch. At their smallest, you’ll find amounts around $250,000. But the maximum can go up to $5,000,000 to fund larger projects.

Interest rates are favorable.

With your property serving as collateral to secure the loan, lenders will often feel comfortable offering you interest rates as low as 4.25%.

Repayment terms are also favorable.

Real estate projects are rarely quick. Luckily, neither are the repayment terms. Don’t be surprised to find terms extending up to 25 years.

Your plan can really open doors.

Business plans are always important when seeking financing, but they take on a whole new level of importance with commercial mortgages. Take the time to make sure yours clearly demonstrates your expertise and investment in the project.

Being an owner means added responsibility.

Remember that owning property means you’re responsible for the maintenance. And as sure as the sun will rise, issues will arise. It’s wise to account for upkeep expenses as you budget for your project.

Your business structure matters.

Sole proprietorships can be a solid structure for a business, but not when you’re seeking a commercial mortgage. It’s best for you to form a business with limited liability, such as a limited partnership, LLC, S, or C corporation.

Your past transactions are relevant.

Lenders will look beyond the real estate project to assess how likely you are to fulfill your repayment obligations. Plan on them evaluating your personal finances.

You need to be the majority in the property.

While commercial mortgages are versatile, they still have their limits. For example, you will need to occupy the majority of the building in order to qualify. Even occupying 50% isn’t enough.

Pay attention to the LTV.

Lenders will want you to put up a substantial amount in conjunction with any loan. A common range for the maximum loan-to-value ratio is 65-75%.

These loans can move slowly.

It’s true that commercial mortgage applications are easier than many other types of financing, but that doesn’t mean it’s always a walk in the park. In some cases, it can take a few months for one of these loans to fund.

Construction projects often boil down to a vast array of details. When you pay attention to the nuances and carefully manage your operations, you set yourself up for sustainable success.

On the other hand, if you neglect the smaller aspects of your project, the consequences can be swift. For this reason, take the time up front to organize yourself before you begin any applications. By getting your house in order first, you’ll be in a prime position to smoothly navigate the application process that follows.

Most importantly, this preparation and organization will shine through in your application. And robust business plans and comprehensive applications are proven to work wonders as lenders make their approval decisions.

A Guide to Commercial Real Estate Insurance for Your Business

In most major markets, commercial real estate leases in heavily-trafficked neighborhoods can explode a company’s monthly overhead. Besides the cost of the space itself, you may be on the hook for utilities, shared common area costs, security, supplies, and staff. But one cost that’s easily overlooked may be the most important: commercial property insurance.

For those in manufacturing, retail, and non-profits, this is a critical aspect in protecting your business from unforeseen accidents and incidents. While each industry (and the accompanying assets associated with each business) demand different costs for commercial property insurance, it’s important not to overlook this facet of commercial real estate leases. And as with auto or home insurance, it doesn’t hurt to shop around before securing a policy. 

Before you start your search for a suitable commercial property insurance policy, you should inform yourself with the ins and outs to ensure you know what to expect from your specific business requirements and to protect your company from undue burden.

Explaining the Basics of Commercial Property Insurance 

As with residential insurance, commercial property insurance covers a wide variety of danger and accidents, but it’s not a blanket protection. Most commercial property insurance policies cover common accidents, like theft, water damage, natural disasters, vandalism, and fires, but most importantly, these policies insure your property and resources within the building itself. In addition, they protect property your customers and employees bring into the store, signage, and branding items located within. However, it doesn’t protect you against lawsuits, so business owners should invest in general liability insurance to protect yourself against expensive legal fees related to your business. 

Who Should Secure Commercial Property Insurance?

Any business with a physical location should invest in commercial property insurance to protect the building itself, but even those who own their business and work from a home office should purchase commercial property insurance as well. 

Whether you have a commercial real estate lease or own the building outright (or are paying a mortgage), you’ll need commercial property insurance to cover the building. If you’re renting the property, the owner will transfer liability to you based on the square footage included in the lease. Before you can even sign a commercial real estate lease, you need to provide proof of commercial property insurance showing coverage amounts and the scope of the policy. 

Breaking Down Costs and Benefits

Depending on the value of your assets, including specialized equipment, computer systems, furniture, etc., your annual rate for commercial property insurance will differ. However, small businesses, such as coffee shops, boutique clothing stores, and bookstores, can expect to pay between $500-1000 per year. These rates are based on the construction materials of the building, distance to a local fire department station, and the nature of the business. Also, like residential property insurance, the rates will differ based on the value of the property and its contents- the larger your business, square footage, and the more valuable your assets, the higher your deductible will be.

To protect against accidental fires, water damage, flooding, and other natural disasters as well as man-made damages like vandalism and theft, commercial property insurance is an essential – and sometimes mandatory, as stated above – aspect of owning and operating a business of any size or scope. 

What’s Lessors Risk Insurance – and Why Does it Matter?

Lessors risk insurance is only applicable for building owners who maintain a minority of the property’s square footage and sublease the remaining area to other occupants. While building owners require commercial property insurance from tenants, lessors risk policies are an essential component of owning and operating a commercial building. These policies are less expensive than commercial property insurance, but still insure the property and its assets. 

What to Keep in Mind When Shopping for Commercial Property Insurance

As previously mentioned, commercial property insurance only covers certain aspects in the insurance world and shouldn’t be used as a blanket protection. If you’re about to start a business or open your first physical location, keep the following additional policies in mind to maximize your protection going forward:

Property Insurance

Whether you own the building you occupy or are leasing a space, you likely own several thousand dollars worth of business property, including computer systems, tools, equipment, and inventory to ensure continuity of business. Property insurance protects these assets against fires, theft, and other forms of damage. Optional features of these types of policies may also cover the loss of earnings as a result of incidents – which should be strongly considered by those seeking commercial property insurance policies. 

General Liability Insurance

This is the most basic and essential insurance policy in the commercial world, offering protections against damages and legal fees related to bodily harm or property damage to a third party on or off your company’s physical territory. General liability insurance is a crucial addition to commercial property insurance and should not be overlooked when considering a new facility for your company. 

Commercial Auto Insurance

For any company with vehicles under its name for employee use, commercial auto insurance is essential. Any vehicle that transports employees, assets, or proprietary information should be insured under these policies to protect against theft, accidents, and acts of God. Even if your company compensates employees for mileage and gasoline for their personal vehicles during business hours, you should invest in non-owned auto liability insurance in the event that an employee doesn’t have adequate insurance in the event of an incident. 

Business Owner’s Policies

These policies, otherwise known as BOPs, offer a bundle of business-related insurance policies, including business interruption, commercial auto, liability, crime/theft, and property insurance. Your rate will depend on your needs, but these are packaged to ensure business owners receive the best rate without having to invest in multiple policies from different providers. 

Professional Liability Insurance 

A professional liability insurance policy protects the company against any failure to render professional services – and isn’t included in a general liability insurance policy. Lawyers, accountants, consultants, and any other professional services provider should invest in this type of policy in addition to commercial property insurance. 

Data and Computer Systems Insurance

When a company collects privileged data, it has a legal responsibility to protect it. Should a data breach occur, this type of insurance would protect the company against damages and legal costs associated with any data loss, breach, or accidental disclosure of such information. 

Directors and Officers Insurance

This policy type protects employees at the highest levels of the company – C-level employees – against actions that could affect the profits of the company itself. Should their performance or actions while employed by the company demonstrate a legal risk or expose the company to a lawsuit, this policy would protect the company against damages and cover legal costs. 

No matter where you decide to set up shop, it’s important to factor in the costs of insuring your commercial real estate lease and property in order to protect your company from accidents, theft, and lawsuits – no matter your industry or area of focus.

Tax Season is Upon Us. Are Your Books in Order?

If not, you’re in luck! We’ve partnered with Bench to help connect tenants with better tools to run their business. OfficeSpace.com users can now get a free one-month trial and an additional 20% off the first 6 months of bookkeeping. 

If you feel behind on your bookkeeping you’re not alone. Most entrepreneurs struggle to keep up with their books throughout the year. That adds a lot of stress come tax season, but it also makes it a lot harder to uncover ever tax deduction you deserve.

That’s why we’ve partnered with Bench to offer business owners (tenants) with an easier solution – and at a discounted price. OfficeSpace.com visitors Bench provides a seamless way to manage tax season, as well as your finances throughout the year.

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Listings Spotlight: 7 Spaces That Will Give You Serious Office Envy

Thousands of listings get added to OfficeSpace.com daily, and we get the pleasure of seeing cool office space photos from all over the country. So naturally we thought: why not spread the office envy? This week’s round up features industrial columns, exposed brick walls, bright red accent walls and so much more! Whether you’re in the market for a new space or simply looking for some workplace design tips, these offices are bound to spur inspiration.

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What to Consider When Moving Into A New (Or Your First) Office [Infographic]

Infographic of What to Consider When Moving Into A New (Or Your First) Office

Moving into a new office can be a challenge both logistically and energetically. Finding an office that suits your business needs is only the first part of the process — moving in and readjusting to the new space can take some effort as well.

By having a detailed checklist of factors relating to your relocation, you can save yourself a lot of the hassle that can come up with new moves, especially if this is your first office.

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Market Zoom: 10 Big Phoenix Office Deals That Closed in 2018 (So Far)

Office deals in Phoenix in the first quarter of 2018 were white hot, with a number of large sales and leases taking place. According to CBRE, the net absorption in the Phoenix office market reached 154,716 square feet with nearly 1.3 million square feet of gross absorption. 

Let’s take a closer look at a few of the big Phoenix office deals that closed at the beginning of 2018. 

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It Just Got Even Easier to Add Listings to OfficeSpace.com

While it has always been free and easy to add your listings to OfficeSpace.com, we’re excited to announce that it just got even easier!

Over the last couple of weeks, you may have been contacted about sending us your flyers, personal websites, or adding us to your e-blast. We now have a dedicated team that will update your listings at no cost or disruption to you. Simply send us your flyers, email us your company websites, or add us to your e-blasts – we’ll take care of the rest.

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New Partnership Brings Commercial Property Data to EDOs

We’re excited to announce that OfficeSpace.com has joined forces with Community Systems, a leading technology company dedicated to the economic development industry. Through this partnership, OfficeSpace.com‘s commercial listings will now be exclusively featured on economic development organization (EDO) websites across the country and visible to thousands of site selectors, brokers, and companies seeking commercial property data nationwide. 

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