"Associations tend to own their headquarters more often than organizations in the for-profit sector,” according to a real estate research study (“Associations Study,” 3 November 2003, Delta Associates) done of associations in the Washington, DC metropolitan area. If you are an association manager whose association does not own its own space you most probably have had to answer, or are now trying to answer the question: “Why not?”

Before any executive can or should answer this question there are three perspectives that merit examination.

The first lies in what motivates volunteers and those who provide the financial and in-kind support from industry and the profession that help drive associations and professional societies. Some of this motivation lies in self-interest--the desire to network and to otherwise use the association to advance one’s business or professional interests. Some stems from altruism, a desire to “give back.” And some comes from a desire to leave a legacy. How much does this third motivation particularly underlie associations’ drive to acquire real estate? If Washington, DC is known in part as the association capital of the world, it is also known as a city of memorials and monuments. Is this perhaps an area where Washington’s two characteristics overlap—the association as monument? It is perhaps this perspective that according to the Delta Associates study drives the majority of Washington-based associations to purchase prestigious Class A or B space over Class C—an expensive proposition but one that is entirely fitting for the creation of a monument or memorial!

The second perspective of the question of course lies in the economic advantages of acquiring real estate. In Washington, there are few other investments that have provided as good a return as real estate and this is usually given as the principal reason why associations that have the means to do so should own their own. Homeowners certainly understand that as and when their families grow up and leave the house and as they contemplate retirement, the sale of their primary residence can and should provide a good, tax-exempt nest egg. The profitable example of real estate developers has also illustrated that it has been hard to lose money in that market over the long term. If these things should be true for homeowners and real estate developers, why should real estate investment not be good for associations also?

But there is a third perspective that is often overlooked in an association’s eagerness to find ways to invest surplus cash reserves--and that is how the ownership of a building matches the association’s mission. Every homeowner and building manager knows the persistent amount of time, effort and financial resources a building requires on an on-going basis. How does taking on this responsibility help the association achieve its mission? More often than not the honest answer is that it does not.

In this regard, Delta Associates makes an interesting observation in its study. “Well-run for-profit firms are focused on the bottom line, and are likely to accrue a greater return on investment through other means than by purchasing (and someday selling) owner-occupied office space….” In this era of lean, stripped down companies that have defined their market and are focused on their business with laser-like precision, property ownership usually does not fit into the picture. Is there a lesson to be learned in this by the association community?

Associations flush with cash and enthusiasm for the tangible success they have had often do not give this third perspective the attention it deserves when contemplating investment into the real estate market. Unlike regular homeowners, associations do not usually use their home as a nest egg on which “to retire;” and when associations do retire they are not usually happy affairs. “Retirement” in this case more often means that the association has lost touch with the market it was intended to represent—usually because the economy changed and the association failed to. In such cases associations that have to sell their property usually have to do so at “fire sale” prices.

If your association finds itself attracted by the siren call of bricks and mortar it may be the time to look even more critically into the ways (including both usual and out-of-the box) in which it can and should serve the needs of an ever-changing market. And if you are still committed to building, at the very least you should take care to ensure that the monument you build does not become a memorial to the high water mark your association has reached!