Sharing Spaces & Costs – Cooperation allows room for growth

By Patrick Sullivan – December 2, 2014

Jessica Pliska started The Opportunity Network (OppNet) in her living room in 2003. The organization then bounced around a few office spaces. A grant from the Edwin Gould Foundation in New York City led to an ongoing relationship, which in turn secured OppNet resources and free rent in the Thoreau Center for Sustainability in New York City, where the organization has been headquartered since 2011.

“When we came to Gould, we were six people,” said Pliska, CEO and founder. “By the end of this fiscal year we’re going to have 20. We’ve grown from (an annual budget of) $888,000 to $3.07 million.”

The Thoreau Center houses 20 nonprofits, including OppNet. The Gould Foundation supports four nonprofits with free rent and resources.

A shared space can be more than just four walls and a roof. Nonprofits can share back-end office processes such as IT, phone systems, copiers and other office infrastructure. It’s rare to get free rent, but if you can secure it, expect serious cost savings. “We’re talking at least a quarter million dollars a year,” said Pliska.

Sharing space with other nonprofits can go far beyond monetary benefits and into the realm of partnerships, knowledge sharing and relationship building. “I sit next door to an executive director of another organization,” said Pliska. “We got a grant to create a program that’s a pipeline to take students from their eighth-grade program to our ninth-grade program.” Setting up the program together was easy due to the two organizations’ close proximity and familiarity with one another, Pliska said.

One of the nonprofits in a shared space often will be a convener. That doesn’t necessarily mean owner. It could be a master lease-holder. “We are both (tenant and site administrator),” said Kelley Kuhn, vice president and chief strategy officer for the Michigan Nonprofit Association in Lansing, Mich. “We don’t own the building, a local developer does. We have a master lease with them that put us as a tenant. Under that are five other nonprofit leases.”

The Michigan shared space, housed in a converted armory, is home to nonprofits with a common mission. “There’s three statewide organizations and three local organizations,” said Kuhn. What all six have in common is that they all serve other nonprofits. The local organizations, “by nature they were working together already as funding resources for nonprofits in the Lansing area,” said Kuhn. “The CEOs find it convenient that they can go from one floor to another (and meet with each other).”For the three state associations, Kuhn said the close proximity allows leaders to be more nimble. “When public policy issues are moving quickly, we can walk across the hallway and talk to our clients,” Kuhn said.

Kuhn said she’s not sure how much money the MNA has saved by sharing the space, which they’ve done since 2010. The cost savings mainly were found when the space was being set up, said Kuhn.

“Some (organizations’) phone bills dropped between $100 and $200 a month,” she said. “When the space was being wired, had we had to wire each office it would have been triple the bill. There were cost savings in the initial move-in because costs could be split six ways.“

Sarah Eisinger, executive director of Nonprofit Centers, a network of shared spaces around the U.S., said tenants at Nonprofit Centers on average save about 7 percent on annual operating costs. “But it’s also about effectiveness and efficiency and the ability to meet your mission,” she said.

A 2011 study conducted by The Nonprofit Centers, based in Denver, Colo., showed that the 170 centers in the network were split pretty evenly by type. Nearly one-third were generalist multi-sector centers. Another one-third are centers based around a theme such as social justice or sustainability, and one-stop service centers. About 5 percent were incubators, like those run by the Gould Foundation and the New York City-based Beespace.

“There’s cost savings, but it’s more about value and amplifying (tenants’) missions,” said Eisinger. “If they provide one slice of the pie of human service provision, maybe a mental health organization or a food pantry, by joining with other organizations with other services they can better coordinate their services and improve outcomes.”

The Colorado Nonprofit Association (CNA) is the master tenant for a themed, shared space (not part of the Nonprofit Centers Network). Like the Michigan Nonprofit Association, CNA and its tenants all serve other nonprofits. President and CEO Renny Fagan said deciding to enter a shared space is similar to other business decisions. “It takes effort, but it has the possibility for a big return,” he said.

Stacy Caldwell, CEO of Tahoe Truckee Community Foundation (TTCF), found out leaders at three nonprofits were thinking of leaving the area due to poor options for working space. She knew she had to act. TTCF purchased and renovated a run-down motel in the Tahoe area and invited the three organizations to have their headquarters there. The center opened this past June.

“It’s not just about the co-working space. They also agreed to integrate services,” said Caldwell. The three tenants at what’s now known as Community House work in the realms of hunger relief, violence prevention and family stability. “Crisis rarely happens in one area of your life, so a lot of community members might be going (to Community House) for food, but we find out there’s more issues.”

Crucial to service delivery is an integrated service coordinator, an employee who ensures that services between the three agencies are carried out efficiently and effectively. The coordinator also plays a key role in day-to-day operations of the center, said Caldwell.

Rent has not changed for the occupants. In fact, they’re getting more space and more resources for the same amount of money. “We went through this process to try to keep their rent as is,” Caldwell said. “While they’re paying the same in cash flow, they’re getting more space. We’ve locked them in for five-year leases with three terms to renew, so cash flow is stable in that respect.”

The Community House tenants share a phone system, copiers, printers and an Internet connection, in addition to the integration services officer. Eisinger said benefits often extend beyond money saved. “Efficiency and common sense tells us that not every organization needs its own pantry, its own receptionist, its own conference room,” she said.

The Nonprofit Centers’ report showed low vacancy and little turnover. Fewer than 20 percent of the organizations surveyed had vacancy of more than 10 percent. More than half had no turnover during the survey period, and less than 12 percent had turnover of more than 10 percent.

Leases at Nonprofit Centers vary from center to center. Eisinger said one-year leases are common for small organizations, while larger organizations often have three-, five- or 10-year leases.

“Shorter leases provide more flexibility for tenants that might not have stable funding streams,” she explained. “Flexibility also helps them expand or contract, if necessary. Short leases are also great for start-ups that might be in expansion mode fairly quickly. On the flip side, short leases don’t provide a lot of stability. Tenants need a trusting relationship with a landlord since they don’t want to be moving every year. Longer leases provide tenant organizations with certainty and stability and they provide landlords with certainty of cash flow.”

MNA and its tenants are locked into 15-year leases. Kuhn said it was important to the partners to make a long-term commitment. “Programmatic changes take a long time to get rolling,” she said. “This term allows us to cultivate relationships that bring opportunities for programmatic changes. Our partnership creates lots of unanticipated opportunities,” she said, and a long-term commitment allows for the stability to fully take advantage of those opportunities.

Most spaces have a committee system in place, with two common panels being a CEO committee and an operations committee. The CEO committee at the MNA’s cooperative handles “building upgrades and bigger decisions that involve financial resources from the partners,” said Kuhn.

Operations committees usually determine day-to-day concerns, “how do we get along in an efficient way,” said Fagan, “safety plans, kitchen cleanup, equipment we need to buy and upgrade, management of the place.”

Playing nice can be a challenge if you’re used to being on your own. Scheduling is a common concern for shared space occupancy, especially around conference rooms and other meeting spaces. Nearly nine of 10 respondents to the Nonprofit Centers survey stated that access to conference rooms was moderately or significantly important.

“How do you even establish protocols with some small things, in the sense of fairness?” said Kuhn. “Someone leaves the conference room in disaster, those are the kinds of things you have to work through when you put humans in a space together.”

Caldwell said it could be difficult managing disparate organizations with their own missions and agendas, no matter how closely they work together. “From the nonprofit standpoint, you have to acknowledge that everyone’s coming to the table with good intentions and their unique mission in mind,” she said. “You have to really understand they’re trying to make the best decisions for their nonprofits. Making sure from the get-go you have good, clear protocols with executive directors and board representatives so communications flow simultaneously and all get the same message is a really important piece.”

Nonprofits getting into a shared space situation might be acting as landlords for the first time, and might experience unanticipated challenges around managing a building. MNA’s shared space is housed in a converted National Guard armory, and Kuhn described the building as a community asset.

“The local community really identified with this building and saw that it was coming back to life,” she said. “We had to get used to the fact that people wanted to showcase the space.” Kuhn was surprised at first at the number of people wanting to just come in and look around. “It wasn’t so bad because it got a lot of visibility (for the nonprofit tenants) and we got to meet a lot of people, but you had to get used to those kinds of cultural shifts.”

For Caldwell, one of the biggest challenges was navigating the heavy regulations for building in the Lake Tahoe area. “Because Tahoe is so precious, building inside the basin has a lot of regulations. What would be a normal development project somewhere else comes with a lot of regulations to uphold.”

Pliska’s situation is not permanent, she said. She’ll need to find a new space once the organization hits a critical mass. Planning for that is going to be her biggest challenge.

“When you have something like this it really forces you to be strategic and thoughtful early,” she said. “When you get this incredible gift, the short- and mid-term are in your sights but you have to plan for your growth with special care given this huge variable (rent-free existence) that will go away. The challenge for us is leveraging this incredible resource for as long as we can while making sure it doesn’t inhibit us when we fly the coop.”

The Nonprofit Times – Sharing Spaces, Costs – by Patrick Sullivan