Facility Solutions: Are you ready to change?
Credit unions can create a flexible occupancy plan for headquarters and the branch network that increases the ease of change while supporting rational financial objectives.
A business’s ability to quickly respond to change is required to be successful in our world of disruption and new opportunities. Agility is defined as the ability of a business system to rapidly respond to change by adapting its initial stable configuration. Every element of an organization must be able to respond to change so it supports rather than gets in the way of evolving business goals and methodologies. This includes facilities.
Staff occupancy remains the second highest and least flexible cost for most credit unions. Owned facilities may require departments with critical adjacency needs to move to other buildings, reducing efficiency and productivity. An owned building may not be expandable. It may be difficult to sell for book value due to location. Or, it may provide flexible short- and long-range occupancy at a cost much less than leasing. Many credit unions would prefer to not have their headquarters or branches on the books. A few have formed a credit union service organization to own their buildings and remove the burden.
Leasing can be a flexible solution, but it comes with pros and cons. When you chart occupancy cost over 20 years, the cost of leasing starts below owning and then crosses above owning at about seven years as lease rates steadily increase while owned rates remain generally the same with the exception of capital improvements.
continue reading »