Small businesses downsize real estate, save money

AP News
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Posted: Nov 11, 2009 5:05 PM

There's a downsizing trend under way at many small businesses: Moving to smaller offices because of shrinking staffs and as more workers telecommute.

Owners say they're saving money on real estate, office furniture and other expenses by letting employees work from home or by using independent contractors who don't work on-site. And those who have cut staffers obviously don't need to provide space for them.

Adrienne Giannone, CEO of Edge Electronics, has turned seven salespeople in Texas, Florida and California into telecommuters, enabling her to shut those offices. That helped her to expand her headquarters space in Bohemia, on New York's Long Island, and hire more employees there.

"I'd rather keep my people and not spend the money on the bricks and mortar," said Giannone, whose company sells electronics components and displays.

The workers weren't sure at first about working from home, but Giannone said they soon realized they were saving money and time by not commuting. "There's a big savings overall," she said.

Like many other owners, Giannone found that the Internet made it easy to keep in close touch with far-flung workers.

Many kinds of businesses can downsize their real estate by having more people work off-site. Employees whose job is to handle customer service calls can do that at home. So can writers or graphic artists. Anyone whose work is done in client offices probably doesn't need a permanent desk either, and should be able to share with other staffers who are also moving about.

The constant improvements over the years in technology have helped many kinds of businesses use less real estate. Law firms, for example, don't need to have the huge libraries filled with books that were crucial before cases and commentaries became available online. Machines like photocopiers and computers have become more compact. And software has made it possible for businesses to dispense with the typists and stenographers who were once office mainstays.

The latest downsizing trend, however, has been driven mainly by staff cuts, telecommuting and using workers other than full-timers.

Phil Nourie has a staff of five to 10 people in the New York office of his marketing and corporate communications company, Park Lane Communications. He decided to use independent contractors for the rest of his staffing needs, and a big reason why was the cost of real estate.

"It's extraordinarily expensive, even though New York City has come down dramatically" in terms of rents," Nourie said. "It really is tough on a small business to watch $3,000 to $5,000 a month go out the window."

If everyone worked in the office, "we would need double or triple what we have," he said.

Nourie pointed out that rent isn't the only financial consideration in deciding whether to have staff on-site or not. Every employee needs a phone, computer, Internet connection, desk or cubicle and chair. The more staffers you have, the more printers and other peripherals you'll also need.

Nourie learned from making the mistake of taking on too much space in a previous business. "I realized that we're going to have people who can work from home, that work wherever, that don't need client interface," he said.

Real estate companies say they're seeing more businesses looking to downsize, and calculating how much square footage they really need if they have employees who aren't in the office full-time.

"Business owners are getting a bit more savvy about how to get better use of their real estate dollars," said Diane Henry, senior managing broker with Red Real Estate in Manhattan. She said owners are realizing, "I'm paying for way too much space, and I need to pare it down to what we actually need."

Henry says she sees more companies setting aside space for what are called floater stations, or work areas shared by more than one staffer. She also sees companies that have downsized their staff, either by using telecommuters or independent contractors, subleasing their space to help recoup some of the excess rent they're paying.