FACILITIES PLANNING FOR REAL ESTATE

SELECTING A LOCATION

The success or not of an established real estate agency’s location can be measured by the number of years it has been sited at its present location. The importance of location is largely a factor of the agency’s target market. It is axiomatic that an agency should be sited as centrally to its target market as possible. That is, allowing the greatest access for potential buyers and sellers. A new agency opened by a salesman employed by another agency may be sited according to the salesman’s experience of where most listings or enquiries were coming from.

Siting a new agency office is only done after determining the new agent’s potential market. Once the market is determined, the new agent finds the best site within that market’s catchment. These can be considered as the macro and micro factors of location. For most potential agencies the market is a collection of buyers and sellers. However, the agency’s “bread and butter” are the tenants. Determine where the most potential buyers and sellers are located and who are not adequately served by existing real estate agents. It is necessary to have an appreciation of demographics as described in the module Property Research and Analysis. Prima facie, new agencies are better sited where new buyers and sellers are, on the expanding outskirts of the city.

If you intend to specialise in a market segment such as industrial you may find it is not necessary to site within industrial areas rather but where the corporate headquarters are. This will probably be a central location. This also makes sense if you intend to cover all industrial areas throughout the city.

Before setting up a new agency ascertain the latest demographic trends for your particular sector from ABS data (see module Property Research and Analysis). ABS’s supermap is particularly useful in this regard.

• ACCESS: the office should be on the ground floor with good access. It is dangerous to marginalise yourself on the basis that a peripheral office is cheaper. It is not cheaper if you do not attract passing trade. It must be the ground floor to improve access but also enable a useful display of listed properties on the streetfront. Window displays are most important if your office attracts a large number of passers by or congregating public (eg a bus terminal). All the rules that apply to any good retail location also applies to a real estate agent’s office. For example, the a central corner site in a major shopping centre is the best site not only for most retail trades but also an agent’s office. For these reasons, street frontage is more important than depth. Good positions are opposite railway stations, next to a large retail store or in a regional shopping centre. An agent siting in the CBD and who deals mainly with commercial premises will find that ground level space is too expensive and there is less disadvantage in taking a higher level office as this is expected by your clients in the city environment.

• make sure that the new office is large enough. There is a rule in industry that a new agency should take 50% more office space than he/she currently needs. If the new agency becomes successful, the agent does not want to have to move to new premises as this could result in loss of site goodwill. An agent’s work requires him/her to have access to the office seven days a week and at odd hours. Therefore, he/she should make sure that he/she can gain access to the office after hours. This rule favours siting in strip shopping centres where the lessee is not bound by shopping centre management rules.

• since most agencies are sited in a busy commercial centre it is prudent to enquire of the planning authority whether or not there are plans to change the nature of the centre. For example, they may intend to promote another rival centre, in which case the new office may suffer in the long run. On the other hand, the authority’s future plans may be beneficial to the new office. It would be prudent for the agent to have a clause inserted in the lease, terminating the lease if something untoward happens to the centre.

• the new office should have good parking facilities nearby as most potential home buyers have cars. Ideally, there should be a large public carpark at the rear of the office. Avoid busstops or other crowded pedestrian areas as this will deter potential buyers.

The new agent should look into the peculiarities of the city or town in which he/she wishes to start business. For example, the sunny side of the street is preferred in high and cold tableland towns while the shady side of the street is the superior location in hot western towns. Starting a business in a country town is always riskier than in a city because the town is dependent on a small number of industries for their survival. For example, the closure of a mine in mining town in the Hunter Valley of NSW would have a major detrimental effect on economics of the town. The ripple effect would affect the viability of the new agency.

MARKET CATCHMENTS

The proposed office will draw on buyers and sellers in a catchment area surrounding the office. There are two kinds of catchments:

• PRIMARY: the buyers and sellers within walking distance of your office and who will enter your office as a “passer by”. These are the safest part of the catchment as they are unlikely to be drawn away to a rival agent outside the primary catchment.

• SECONDARY: The secondary catchment are buyers and sellers within car travel distance from the office. This catchment is riskier than the primary catchment as they can easily be drawn away by a rival agency in their primary catchment or another agent where his/her secondary catchment intrudes onto yours.

A proper analysis includes the demographic features of the populations in each catchment type.

RISK

The question of risk is important because the new agent may find two potential offices with the same number of buyers and sellers. However, the office that has the greatest primary catchment is preferable as it has less risk. The other reason why the greatest primary catchment is preferable is that there are fewer costs involved in promotion, advertising, meeting and transporting clients than in the secondary catchment area. For example, you may have to refuse listings outside your area because it is not economical to handle them. An advantage of multilisting and franchising is that it enables the new agent to spread his/her business over a much larger area and thus reduces risk.

NEW OFFICE ANALYSIS

The new agent should obtain a good map of the locality in which he/she plans to operate. The size of the map will depend on the locality. Greater detail will be required for a small inner city area than for an outer suburb. The following factors should be plotted on the map:

• the offices of your competitors;

• key population congregation points such as bus terminals, railway stations and shopping centres;

• areas of potential expansion; new and potential suburbs;

• demographic factors, particularly household income, age and family size;

• single houses as opposed to density development; and

• average price of houses sold and rate of sale (per month).

The above data can be plotted using different colours or hachuring techniques if it is in black and white. This will enable easy interpretation. A visual analysis of such a map will show any market gap area, that is, an area that is not within the catchments of existing agents or is underrepresented by the existing agents. Once this is found, the new agent should search for a suitable office using the other locational factors described above in the market gap area.

An alternative method is to plot sale sites from the real estate section of the local newspaper. This is an indicator of market activity against agent. The plotting of sales and corresponding agents on a map as above will show any market gap area.

EXERCISE ONE

Using the above analysis as a guide, how do the real estate agents in your district or locality compare? To answer this question ascertain the following information:

1. How many agents are there?

2. Based on the services they provide, are there any apparent gaps in the market?

3. How do they attract primary and secondary area clientsassing? For example, is the display board an important part of the agency system?

4. What are the advantages and disadvantages of the location from an agency point of view?

5. Would you site a new office there? Discuss

ESTABLISHMENT COSTS

The factor of locational analysis for a new agent is to compare sites in the market gap area based on establishment and ongoing costs. If all other factors are about equal then the best site is the one with the lowest establishment and running costs. The following table gives a typical breakdown of establishment costs:

TABLE 1

TYPICAL ESTABLISHMENT COSTS OF A NEW AGENCY

TABLE 2

INCOME AND RUNNING COSTS FOR A TYPICAL AGENCY

Turnover: about 300 000

Personnel

1 Principal

1 Salesperson

1 Property manager

1 Administrative/Clerical

COSTS

* these costs are site sensitive

The ongoing costs of running the office are more important than the establishment costs. The new agent should aim to reduce the largest costs particularly; fitting out, furniture, computer systems. For example, it may be good policy to buy and use second furniture and equipment in the initial ages of the agency. Fitting may be quite sensitive to location as the potential possible office may already be well fitted out. That is, there will be a great saving in costs if the new agent leases a previous real estate agent’s office. However, table 1 shows that there are few setting up costs that are site sensitive so that in the long run the costs of setting up and running the office are less important than other factors such as the size of the market catchments. However, if the other factors of location are about equal then the office with the lowest startup and ongoing costs should be chosen.

The ongoing costs are site sensitive with regard to communication costs. This includes promotion (for example, letterbox drops), travel and telephone/fax costs if a number of calls attract the STD rate. These costs would underline the importance of locating in a strong primary catchment area.

EXERCISE 2

Interview your local and friendly real estate agent to ascertain the following:

• Type of business eg residential sales, property management

• Why did he/she locate where he/she did?

• What are the advantages and disadvantages of where he/she located?

Compare these answers to your assessment of the locality or area in Exercise1.

DETERMINE THE OFFICE LAYOUT FOR A REAL ESTATE AGENCY OFFICE

"To enhance a real estate business operation and present a favourable and professional image to the general public, the office should both look the part and be functional as well” - A Fleming

Once an office is selected, the new agent must consider the office layout. Layout of an office is most important but in practice it receives little attention. The office layout affects staff , clients and customers. It should be a function of client type, locality and the agency’s main business. For example, an industrial agency in a business area would have a different layout than a small suburban agency dealing exclusively with residential properties. Similarly, a business that sells only, will have different requirements from a combined selling and management office, or an auction office. The particular needs of the business will determine how the available space is used and the ultimate layout

First impressions are most important. Therefore, to create a good first impression the office and related systems must be neat and well organised. As noted before, the office should be about 50% more than is currently needed. This will provide for growth potential without having to relocate. Most offices have an “open plan” so that clients at the front reception can view the majority of the office.

The agency office consists of four or six areas:

1. Public reception area

2. Receptionist and computer operator’s office.

3. Working area for staff

4. Conference or meeting room

5. Manager's office

6. Tearoom

7. Store room and garage.

Each area should be planned according to the following objectives:

• To create an effective workflow interface in the office. A feeling of action

• To create a comfortable atmosphere for employees to work in

• To create a favourable impression to customers and clients

• To allow for maximum flexibility that will allow changes according to different client and staff demands.

• To use all space to best advantage. There should be no 'empty' spaces in the office.

RECEPTION

The size of the office should be based on need and not prestige. The receptionist who has a computer workstation, a counter for the public and the largest number of filing cabinets will require the largest work space. There should also be room for an assistant during busy periods.

The foyer should be comfortable and near the conference or meeting room. However, the seats should not be too close to the receptionist. There should be sufficient counter and reception space to avoid crowding of customers. This apply particularly, where the business has a large rental roll.

WORKING AREA FOR STAFF

On the other hand, salesstaff and property managers who spend little time in the office will need the smallest workspaces. The manager will only need a small office if there is a good size meeting room nearby. The general meeting room needs to be large to enable the manager and salestaff to spread out maps and plans. Both the meeting room and the manager’s office should be designed to allow confidential discussions.

The existing floor area should be subdivided according to the above needs. Start with the receptionist’s needs and then work down according to need. From this you can calculate the minimum sized office you require for your business. It does not pay to skimp on any of the areas. The reception area should have chairs for clients waiting to see staff members. Also in the reception area there should be a small coffee table complete with up-to-date magazines (new agents should learn from their own experiences in dentists’ and doctors’ waiting rooms!) and sale brochures.

OTHER CONSIDERATIONS

Office furniture and equipment should be bought according to Occupational Health & Safety guidelines (see the module; Workplace Planning and Computer Fundamentals). The photocopier and FAX machine should be centrally located and easily available for all staff. If the photocopier is in a separate room, it should meet Occupational Health & Safety ventilation standards. Other factors that should be considered by the new agent are:

• The toilet facilities should be clean and modern

• Security is most important as there are usually keys to clients’ houses in the office. These must be locked away in a safe manner. Of course any cash kept on the premises must be locked in a safe and should not be visible to members of the public.

• The office should be kept clean at all times and preferably by professional cleaners rather than relying on members of staff.

• If the office is two stories, try and avoid having clients climbing the stairs.

The outside of the office is most important. It must be properly signwriten for both promotional and legal reasons. For example, the law requires that the agent’s name be displayed in a prominent place on the outside of the premises. For example, s112 of the Agents Act 1968 in the ACT does not require the sign to be of a particular size but it must include the words “licensed agent”. The new agent will need planning permission to erect signs, the height and size of lettering will be covered by a local code. Most franchises have a distinguishing colour scheme which of course the new agent must follow if he/she is a franchisee. However, if the new agent is a sole operator he/she may devise a different and distinguishing colour scheme compared to the existing agencies nearby. This scheme will be carried over into promotional material and letterheads.

DECOR

The decor is most important, and needs to be within the image that the new agent wishes to promote. Most likely a new and modern decor is the most appropriate to distinguish the office from established competitors. That is, the new agent is promoting the image of a “new and fresh face” in the area. Again, OH&S standards should be used to determine lighting and air conditioning standards (see module; Workplace Planning).

Real estate agencies are often criticised as being too garish. This is caused not only by garish colour schemes but the overcrowding of display windows. There is no easy answer to this as many of the more garish franchise offices are for example, quite successful and the garishness attracts attention which is the first requirement of new business. However, there are examples of successful agencies who have prospered on a tasteful “low key” decor and promotional layout. If the new agent is surrounded by garish agencies then the market gap may be to promote a more “upmarket” and lowkey agency. There are a number of examples where this has been successful. It also enables the sole operator to compete against established and franchise decors and schemes because they are locked into a universal national decor and scheme that may be quite inappropriate for the particular area.

The outside signs should clearly identify:

• the name of the business

• the agent is a licensed agent (with license number if required by law)

• phone, fax and internet numbers

• street number.

The colour scheme inside should be neutral and the same throughout the office. This will generate a feeling of action.

THE DISPLAY WINDOW

The display window is the cheapest and most effective way of advertising listings. A number of potential buyers “windowshop” agents before entering the office. If new buyers intend to settle in a particular area they will windowshop the main street of that area. This supports the need for a central office with good access. The best displays will have the following features:

• Neat and tidy. Use only one style of display cards.

• Line drawings are preferable to photos. However, if the display are photos they should be of high quality and in colour. Typed copy is superior to hand written copy.

• Full information should be provided. Try avoid “price on application”. Show a good cross section of properties.

• Dimensions must be shown in metrics. If you are in an area where the market place still talks in imperial units (for example, in some small country towns) show the imperial units in brackets after the metric measurements. An agent that advertises only in imperial units is promoting a very old fashioned image and limiting his/her market penetration.

• Avoid “already sold” or “sold” displays. However, the alternative view is that sold stickers show activity and success. Fleming recommends a ratio of 1:6.

Internal lighting will attract attention to the display. The lights are controlled by a time switch that should turn off about 10 o’clock at night.

SELF ASSESSMENT

Using the criteria concerning appearance, display areas, image and general promotional material covered above, evaluate the agents in your area/locality against a score out of 5.

Did you find that some agencies are outstanding while others have a very low score? Discuss.

LAYOUT AND DESIGN

The layout and design of an office is largely determined by the factors covered above. It is useful to design the layout on graph paper beforehand. This can include the use of paper cut out tables, chairs and filing systems that can be moved around the paper office until the best layout is found. However, all paper layouts are subject to final acceptance on the ground but such preplanning may save expense. For example, if the reception counter and dividing walls are installed in the wrong place.

Some textbooks show “ideal” layouts but the ideal is so much dependent on fixed variables such as the shape and size of the office, that is difficult to determine an “ideal”. However, initial and basic decisions will need to be made such as:

• “open” plan versus “closed” plan. That is, an open space with a number of staff in the same room as opposed to a number of rooms for each staff member. The trend is towards “open” planning as it encourages a team approach amongst the staff and results in a more modern looking office. It also encourages the sharing of information.

• separate desks or desk sharing. This is the concept of a work station rather than an individual staff member’s own desk. The workstation approach would be most appropriate for itinerant staff such as salespersons and property managers. There is a more modern tendency to encourage field staff to work more from their own cars and homes (based on the IBM model).

The decisions made on the above will largely determine the office layout and system requirements.

STATUTORY RESPONSIBILITIES

The new agent will subject to statutory responsibilities that will also affect the layout. If he/she follows Occupational Health & Safety covered in the modules; Workplace Planning and Computer Fundamentals then he/she will meet the statutory requirements under special legislation. For example, the relevant agent’s act as to the display of names and licensing details, Companies Act, Business Names Act and special acts applying to employee conditions (for example, the Factory, Shops and Industries Act, 1962 in NSW) and also the award that employees are working under.

WORK

Interview the friendly real estate that you interviewed above. Sketch the layout of his/her office. There is not need to be too accurate. Briefly, why did he/she lay the office out the way he/she did?

Does the agent think it can be improved? Why?

or

Record an interview with the agent covering the factors and analysis above. You may submit the tape as your assignment.

SELECT THE APPROPRIATE COMMUNICATIONS AND INFORMATION TECHNOLOGY EQUIPMENT FOR A REAL ESTATE AGENCY OFFICE.

Typical office equipment include:

• computers, laser printer, photocopier, facsimile, 3 or more line phone system and alarm system;

• safe, lockable filing cabinet, desks, chairs, staff movements board;

• extras include greenery, coffee table; and

• carpets, tiling, furniture, partitioning.

Today, office equipment revolves almost exclusively around the purchase of an expensive dedicated computer system that covers all aspects of agency and property management - see the module; Real Estate Computing. This is the decision of most agents. However, the alternative is rarely considered where a member of staff is trained on the use of and setting of spreadsheets and databases for the particular use of the agency. The use of such transparent systems such as spreadsheets is not only cheaper but can be customised to the particular needs of the agency. The other advantage is “transparency” as a universal system does not lock agency into a particular system. There have been examples where dedicated software firms have held large agencies to “economic ransom” once the agency offices have become so dependent on that particular software.

TELEPHONES, FAX AND PHOTOCOPIERS

The other area that has been subject to great change has been in the use of the telephones and facsimile machines. The telephone has always been one of the most important pieces of office equipment and the telephone style of a new agency’s receptionist is one of the most important images of the new agency and helps to contribute towards business goodwill.

It is now imperative that the agent, salesperson and property manager each have a mobile phone. This has the advantage of almost continuous communication between field staff, the office and clients. The ability of a potential buyer being able to always obtain instantaneous access to the person he/she really wants is a major plus to the business.

The facsimile machine has also made a great difference to the operation of a agency. The new agent should not skimp on costs and features fro these machines. The features that should be included in such a machine are:

• use plain paper

• have a telephone system

• have a telephone answering system

• be able to act as a photocopier

• have the ability to connect to the computer system.

The other necessary item is a dedicated photocopier. This is important and necessary other and above the use of the facsimile machine for photocopying. A good dedicated photocopier will produce high quality copies that can be used for short run printing. Obviously, long run printing is better done at a print shop but if the agent only requires about 50/100 handouts for an opening inspection it is a lot quicker and easier to be able to do this quickly on a photocopier. The other important use of the photocopier is to copy important documents, invoices, flyers and receipts for accounting/ taxation purposes.

For all of these reasons it is important not to buy too cheaply as quality machines will pay for themselves in the long run.

FURNITURE

Unlike the computer and other advanced technological systems described above, furniture and office equipment need not be the “state of the art”. Therefore, the new agent to reduce costs by looking for clean and quality secondhand furniture.

Again, the furniture should revolve around the computer system so that the computer system will require dedicated workstations that have good ergonomic qualities. The large amount of time spent by staff before the computer underlines and emphasises the need for specialist computer furniture.

However, even if buying secondhand office furniture it is most important to keep a uniform style and colour scheme that should complement the office decor and colour schemes. This is one reason why “neutral” colours (such as grey) are most popular.

FILING AND STORAGE SYSTEMS

Ever since computers and electronic data began to make inroads into the office environment, there have been confident predictions that the 'paperless office' is just around the corner. So far, this concept has failed to materialise in any significant way. Indeed, as companies introduce more computers they tend to use more paper rather than less.

To be of any value, the numerous reports and other paperwork generated within the modern agency office must be stored in an efficient and accessible manner. Agents are also subject statutory rules. For example, Division 3 of the Agents Act (ACT) requires that records must be stored in the office for 6 years from the 30 September of the last entry (s60(1)). There has been increasing interest in office filing, storage and records management sys­tems in recent times if for no other reason than the increasing cost of rental office space.

Most real agencies develop filing and storage arrangements over a number of years with a 'stopgap' approach of adding an extra bay of shelving or more filing cabinets as existing capacity is filled. This is the advantage that a new agent enjoys, the opportunity to plan and implement new office storage systems. In these circumstances, proper planning and consideration can result in a system which will provide increased efficiency and cost-saving benefits for years to come. The other advantage of a new office system is that the components will be compatible with each other leading to greater efficiency.

For a new agency office, there is often a tendency to assign low priority to filing and storage arrangements. While large sums of money may be spent in other areas, it may be decided to just "make do" with the existing storage units. Although this may appear a first to be a low cost solution, it is not economical for the movement of an existing agency. For an exiting agency, consideration should be given to a number of important factors before making a final decision:

• If existing units are to be moved, they will have to be dismantled, transported to the new site, possibly repainted, and then rebuilt. This process can take four to five days to complete.

• The files or other items stored in the units will have to be removed, packed into cartons, transported, stored until the units are rebuilt and then replaced. This can add another two to three days.

• During the period of 'down time' the stored items will be difficult - if not impossible to access.

• The items removed from the storage units in preparation for the move will occupy a surprisingly large amount of floorspace. For example, a small Base Mounted Mobile measuring 2.5 metres x 1.2 metres with four bays provides 33.6 lineal metres of shelf space. If the files and other items stored in this space are temporarily stored on the floor, they will occupy nearly 15 metres of floorspace five times that occupied by the Base Mounted Mobile.

Installing new storage units at the new location makes it possible to remove items from the existing storage units and relocate them in their new storage area without delay. This means that this aspect of the move can be completed within a couple of days rather than a couple of weeks, and without intermediate storage problems.

Before deciding on the storage system for new or existing offices it's important to carefully consider which records, files and other items really need to be stored in the office environment. With high rental costs, it's essential to maximise the efficient use of expensive office space. Particular attention should be given to the culling of non-essential records. In addition, the use of 'off site' storage facilities for archival type material should be considered. However, this is subject to statutory rules that require important data be stored at the registered office of the agent.

When planning and setting up a new filing and storage system, the following considerations should be taken into account:

• FLEXIBILITY:

The system chosen should be able to grow as the business grows. The best filing system is one that can be easily expanded and adapted as storage needs change.

• QUALITY:

As considered above, the cheapest option may be attractive at first, it may not be the most cost effective solution in the long run. An efficient, high quality system will serve a business well for many years to come. As far as the question of risk is concerned, a good system will depreciate less than a poor system so that if the agent does have to sell the business he/she should receive a large ratio of the purchase price back on sale.

• ACCESS AND SECURITY:

The varying needs for access to files and other items stored in the system should be examined. Access requirements are an important consideration in determin­ing the types of storage units to be used. The location and type of storage units will affect the ease of access. Open storage units are ideal when frequent access is required; closed, lockable units limit access and increase security. (With the modern trend to high levels of building security, lockable storage units may be an unnecessary expense in some instances).

• AESTHETICS:

The system chosen should blend into the office environment rather than standing out. The use of neutral colours and varying heights to take advantage of the building's natural light will assist with this.

• PRE PLANNING:

A new storage system should be thought about well ahead of time. Often the new software' components (files, labels, etc) can be set up well before the actual move to help ensure a smooth changeover.

Fully coordinated systems are available from office furniture and filing systems suppliers to handle all office storage and filing needs. This makes the job of the new agent a lot easier. All he/she has to do is pick the system plan most suitable for his/her needs. For example, one “off the floor” system consists of a range of standard, modular units designed to combine efficient storage with an attractive appearance. It offers open storage for frequent access, visual storage (glass doors) for medium access, closed units for security and mobile units for high density storage.

A wide range of heights, depths, lengths, configurations and accessories allows for the planning of 'tailor made' storage designs. The system incorporates advanced lateral files, that clip under the shelf return and need no additional support frames. They are made from polypropylene and the files come in four modem, coordinated pastel colours, for ease of identification. Other accessories include a shelf filing system for high density storage, polypropylene data binders, computer tape storage systems and shelf dividers.

Modular systems like this adapt to changing needs through a system of compatible components. By simply adding extra bays or changing component configurations, they can satisfy whatever office needs dictate.

ASSESSMENT

Again, interview the friendly real estate that you interviewed above. List and briefly describe the equipment, filing systems, computer system and furniture in his/her office. Briefly, why did he/she buy/lease this equipment and systems.

Does the agent think the equipment, furniture and systems can be improved? Why? Does he/she prefer to buy or lease the equipment etc? Why?

or

Interview 2 companies that specialise in providing office storage facilities covering the factors above. You may submit an audio tape of your interview.

ACQUIRE APPROPRIATE FACILITIES AND EQUIPMENT FOR A REAL ESTATE AGENCY OFFICE

There are two systems of financing office equipment, furniture and systems:

LEASE OR BUY?

The major advantage of leasing is that the lease repayments (rent) are wholly tax deductible. Leasing encourages a culture of “turning” other the leased items at the end of the lease period. Therefore, the agent enjoys the advantages of having access to newer equipment rather than hanging onto obsolete equipment which may be the culture in buying.

The agent however, should make sure that the lease period is not too long as he/she may end paying quite high rent on obsolete equipment. He/she should also look at what happens at the end of the lease period. Does he/she have the right to buy the equipment at “salvage value”. Further, it may be expensive to have to return the equipment at the end of the lease if the lessor is not locally based.

The buy arrangement is not as advantageous as leasing from a taxation point of view. The agent when buying can only claim the interest part of the repayments on borrowed monies. However, she/he have greater control over the equipment when he/she owns it. For example, the agent may be able to upgrade or modify the equipment etc during its economic life. Further, the agent has full control and the flexibility to sell obsolete equipment and buy the new technology.