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Saturday, November 14, 2009

Live Events Division Office On the Move?

It is highly likely that we will move the division headquarters of Thomas Nelson Live Events sometime this summer. While that's not guaranteed, that seems to be the direction in which we're heading. Some might wonder why, in the current economic climate, we would do such a thing. After all, isn't that inconsistent with our measures to cut costs and preserve cash? Here's what we're doing and why.

Since the merger of the Facilities and HR departments I've been getting an education on commercial space. New space is often referred to as "Class A" space in that its new, well apportioned with a good location and solid management. Class B space is Class A space that has aged well, but no longer has the first class look of new top-quality space. Class C space is run down and tired, old and/or poorly maintained.

The Live Events division space in Plano occupies offices that its been leasing for 9 1/2 years of a 10 year lease. That space was probably Class B when it was leased by the previous owners of the company. The lease rate was very reasonable, but was a la carte. Everything is an add-on, including maintenance, janitorial, security, etc... We also get assessed for common-use major maintenance, such as when the HVAC system had to be replaced for the building. Over the years that we've occupied this space the actual "all-in" occupancy cost has been the equivalent in the Plano market of low-end Class A space.

During the period of our lease the absentee landlord has declined to put requested repairs and upkeep into that space. Last week I noticed that almost every wallpaper seam in the one larger conference room was loose. A letter sent by our broker 2 1/2 years ago requesting over a dozen "immediate" repairs has resulted in none of those repairs being made. The result of this neglect is that, according to our brokers, this space has now become Class C space at a Class A price.

Because of these factors, and a half-hearted renewal proposal from the landlord's property manager, we began looking for space a few months ago. What we discovered was that the vacancy rate in the north Dallas market (Plano, Richardson, Allen, etc...) is extremely high with some buildings having space that's been empty for 2-3 years. Our first round of price quotes indicates that we can upgrade these offices from Class C to upper-end Class B space for 30 - 40% less lease. We're also insisting on a comprehensive lease so that our division with the smallest percentage of male employees is no longer responsible for their own maintenance.

Over the next few weeks we'll issue a Request for Proposal (RFP) to and receive responses from six finalists. We've arrived at these six from an initial review of 80 commercial buildings in the Plano area. The current landlord is welcome to bid as well and its not inconceivable that they could wake up. Given past history, I seriously doubt it but anythings possible.

So that's the inside scoop for those of you in Plano who asked me if you're "really going to move this time." That's also the facts for anyone wondering if we've lost our mind. Our goal is a significant reduction in cost and simultaneously a significant increase in the quality of the work environment and workplace satisfaction. We'll be pushing hard on this for an April/May decision and a possible move in late summer.

1 comment:

David P. Leach said...

Sounds like you need a good house near the office. :-)