High Churn Rates in Nonprofit Organizations Have More Than Doubled in the Last Five Years

Three out of 10 nonprofits now have an annual churn rate of 10% or greater

Toronto – October 27, 2016 – A new research report by CBRE Limited (‘CBRE’) has discovered that the number of nonprofit organizations in Canada experiencing high employee churn rates has more than doubled compared to five years ago. According to the findings of the Nonprofit Sector in Canada: Real Estate Benchmark Survey Report, three out of 10 nonprofits (30%) reported an annual churn rate of 10% or above in 2016. This is over double the amount of nonprofits that reported high churns rates in 2011, when only 14% of organizations reported a rate of over 10%. 

“Higher or increasing churn rates are typically associated with a strengthening economy, which leads to new job creation and greater opportunities to switch jobs. However, Canadian GDP growth was substantially higher in 2011 than in 2016, so it’s clear that the nonprofit world in Canada is caught up in the ever increasing war for talent, driving up churn rates. Leading organizations have realized the workplace is no longer just a venue for staff to complete their tasks, it can be a powerful tool to promote your culture and attract and retain talent. The results of our study are clear, many nonprofits are not effectively utilizing this tool to make sure they secure and keep the best talent,” said Catherine Bongard, Sales Representative of CBRE’s Nonprofit Practice Group. ​

According to the report, a substantial portion of the nonprofits surveyed recognize the deficiencies of their space. 28% disagree or strongly disagree that their workplace inspires creative thinking. These deficiencies also stem from inefficient use of space. Compared to the private sector’s average allocation of 150 sq. ft. per person, larger nonprofits (greater than 20 employees) allot 202 sq. ft. and smaller nonprofits (less than 20 employees) allot 417 sq. ft. per person. Such a high allocation per person reduces an organizations ability to provide the collaboration areas and spaces that the millennial workforce so highly prizes in the workspace.

“When we consider that payroll often accounts for 60-80% of most organization’s overheads, and real estate expenses around 10%, making small capital investments to upgrade spaces into the modern office environment can greatly increase talent retention and acquisition. This can have a real impact on your bottom line. Moving to brand new offices is not a viable option for many nonprofits, but our study shows that many are not using their space efficiently enough. As a result, they are losing out on being able to implement the collaborative and communal areas that both inspire creative thinking and create a sense of community that has been proven to make people less likely to want to leave an organization. 

“Although the nonprofit sector is making small strides towards this model, further action needs to be taken in order to bring down churn rates,” added Bongard.

Many office space decisions are made based on expanding staff and accommodating growth. In fact, 32% of those nonprofits that recently moved locations did so due to an increase in staff and another 32% moved to gain greater space efficiency. To accommodate said growth, the report finds that leasing is the most popular option among nonprofit organizations, with an 8:1 ratio of those that lease versus those that own their space. Short-term leasing options are dominant with 55% reporting leases of 3-5 years, allowing for more flexibility. Long-term leases of 10 years or more remain a viable option for 27% of nonprofits, largely to maximize on concessions and reduce out-of-pocket project costs. 

Those that own their real estate face challenges with the quality of their space in terms of managing maintenance and repairs of the infrastructure, and their ability to attract and retain talent. Nonprofits that lease on the other hand, can partner with their landlords to achieve the same goals for a fraction of the cost. 

“The nonprofit sector in Canada has been slow to recognize that their real estate can play an important role in advancing their goals, but this is beginning to change with around 30% actively looking at how they can reconfigure their space. There is still an education process for many nonprofits about the value it can bring but, ultimately, it’s about creating an environment that allows your people to do their best work,” concluded Bongard.

For further insights and commentary, download CBRE’s Nonprofit Sector in Canada: Real Estate Benchmark Survey Report. 

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About CBRE

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and​ occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

In Canada, CBRE Limited employs approximately 1,890 people in 20 locations from coast to coast. Please visit our website at www.cbre.ca​.​