A nonprofit organization is an office user unlike any other, one that usually commands the lowest rents in a property or that is able to negotiate generous concession packages. But tenant reps will have to take a customized approach, based on deep market knowledge, to nail down the deals that these firms don’t just want—they need.
Typically, the driving fundamental of a deal is the economic impact. Nonprofits have razor-thin margins and, ideally, every spare dollar is put toward the organization’s mission. For that reason, a broker representing a nonprofit tenant needs to be able to hunt around for the best deal.
This has only become a more pressing concern in recent years as federal, state and local funding is often held up by political budget impasses. Nonprofits generally get the funding due to them, but it can be delayed, impacting fixed expenses like real estate.
“Budgets are not always in line with office market rates,” said Aubrey Van Reken-Englund, a vice president based out of the Oakbrook Terrace, Illinois office of NAI Hiffman. “It can be a struggle to talk to a nonprofit about what their options are when they don’t understand that rates have gone up even though their budgets haven’t.”
Van Reken-Englund has completed over 200,000 square feet of deals for nonprofit clients, valued at over $21 million. A few of her longstanding clients with multiple transactions include Special Olympics IL, SASED (School Association for Special Education) and DuPage Senior Citizens Council (Meals on Wheels DuPage & Kane County), for which she sits on the board and serves as treasurer.
She recently negotiated a lease on behalf of Northeastern Illinois Agency on Aging, securing the eight-year, 8,800-square-foot lease at 1910 S. Highland Avenue in Lombard, Illinois with several above-market leasing concessions added in. These included a $26,000 moving allowance, $10,500 cash donation from the landlord, 2,000 square feet of total premise rent-free for the initial 24 months and the landlord agreed to build out a 50-person training room at no additional cost.
Nonprofits do have broadly common physical space needs. They typically need room for a lot of storage. Because of their tighter budgets, they need very efficient layouts. To accommodate educational sessions or to train volunteers, they also tend to require access to sizable conferencing space.
Where that space is can be another matter. While the mantra of location, location, location has driven every real estate deal since the inventions of the contract and ink to sign it, there is some wiggle room with nonprofits who are more willing to relocate to save money.
In nearly every case, board approval is needed to sign off on any transaction so Van Reken-Englund recommends getting them involved in the process as early as possible. One thing that she has found is that her nonprofit tenants—which make up about 20 percent of her total client base—are more likely to obtain concessions than their private-sector counterparts.
“You have to ask to receive and I really push these landlords to get these deals,” said Van Reken-Englund. “I take pride in securing above-market concessions to my nonprofit clients.”
For example, she and her partner recently completed a 10-year deal in Naperville, Illinois for a 501c3 tenant. They negotiated a $28-per-square-foot concession package—an approximately $350,000 savings for the client—that featured a moving allowance, furniture allowance, free rent and a cash donation from the landlord. All before including the turnkey tenant improvement allowance.
Because of her long-term work with DuPage Senior Citizens Council, Van Reken-Englund has a good handle on how nonprofits operate, what their annual budget situations look like and other inner workings and financial components. But the reverse has been true too—the more she works with these clients, the more she becomes engaged in their missions.
“I tend to get invested in these organizations,” Van Reken-Englund said. “It usually starts with the real estate and then and then they pull at my heartstrings. It just feels good to give back.”