LOS ANGELES—Efficiency is becoming the new buzzword for California businesses. The state is en route to raise minimum wage to $15 per hour by the year 2022, with $1 per hour incremental increases each year, which will result in rising operating expenses for all California businesses. As a result, business owners and operators are finding ways to increase productivity and operations without necessarily cutting jobs.

“Whenever there is a modification to any business—in this sense an increase in operations cost, business owners and operators will immediately look at ways to offset those costs, and the first word is efficiency,” Chris Beck, managing director at NGKF, tells GlobeSt.com.

This isn't the first universal increase in operating expenses for businesses. The Affordable Care Act also increased operating expenses, but businesses were able to adjust their other expenses to accommodate the change. Beck imagines that the ACA will serve as a sort of template for the minimum wage hike. “This isn't the only recent expense that businesses have seen,” he says. “A lot of businesses have already gone through this with the Affordable Care Act, which was a major increase in operational expenses for most operators, and they were able to increase their efficiencies. This is a similar increase in operational expenses that all businesses have to endure, no matter what form of commercial real estate that you occupy.”

Beck stresses that increasing operating efficiencies by lowering costs doesn't necessarily mean cutting jobs. He says that businesses may look at things like utilities or power sources to cut back. “This may force some industries to be more environmentally friendly to cut costs,” he explains. “It could be a minor tweak to increase your bottom line.”

The impact of the wage increase likely will be more of an adjustment than a catastrophe, and it may actually have a positive impact on commercial real estate brokers who will be available to guide and consult clients through the adjustment process. “When operational costs go up, businesses have to look at ways to increase efficiencies. Because you are seeing a slow implementation of this, it is giving businesses times to adjust,” says Beck. “The focus here is really on efficiencies for businesses across sector lines. Because of the gradual implantation, businesses are allowed to appropriately forecast, plan and create more efficiencies within the operation to offset an increase in operational expenses. That is a critical point.”

Instant Insights /

Efficiency: The New Buzz Word for California Businesses

Related Stories

Recommended For You