May 12, 2015
Firms have always had concerns about the efficient use of their offices, and for good reason. After staff, real estate is their most expensive and valuable asset. Twenty or more years ago, before the Internet began to unravel the bonds that tied us full time to the workplace, most people had fixed hours in one place of work and a dedicated workstation, the size of which was often determined by their status within the organisation rather than anything else. Even those workers who spent large amounts of time away from the office usually had their own desk to call home. In the mid 1990s, that started to change. Not only did the uptake of the Internet and the adoption of mobile phones and laptops allow staff to work from anywhere, there was growing awareness of exactly how they used space within the office itself.
Pioneers such as Frank Duffy and his firm DEGW began to measure how much time people spent at their desks over the course of the day and began to posit alternatives to dedicated workstations. For the first time, the workplace was seen as a cluster of settings through which people moved depending on what they were doing. As a result the office was treated as the stage rather than the play. New desk sharing practices such as hot desking, hotelling were increasingly adopted and in their wake trailed new conceptions of the office as a club, which people visited, booked and used as they would a public space.
A quarter of a century on, such radical ideas are now mainstream and we not only enjoy nearly three decades of accumulated wisdom and sophistication but also now have the tools to measure and manage the way we use the workplace in real time. This not only helps firms to keep down costs and better manage their real estate it also creates workplaces that are better able to serve the people that use them and adapt to new technologies and working practices.
One of the more intriguing characteristics of the implementation of new approaches to how people work and how organisations own and use physical and digital space is how it plays out across different sectors and different regions. There are complex forces at work here which mean that while individuals and employers encounter what are intrinsically the same recessionary, commercial and technological regardless of where they work, they are also addressing them within a specific cultural, social, economic and legislative context. So how they play out can vary significantly.
A changing focus for property worldwide
A complex debate has grown up around the way in which organisations use commercial property, not least when it comes to implementing more agile and collaborative forms of working. The major complicating factor is how to square off a relatively fixed resource like a building with the demands of its occupants, which can change from day to day. Add in the need to keep costs down and you are left with a heady mix that drives organisations to get more out of their assets, not just cut costs. It all begins with a greater understanding of how your asset is used and the identification of those opportunities to get more from it.
The office is an obvious target for this. According to the British Council for Offices, the UK spent an estimated £28.5 billion on offices in 2012 – outstripping business expenditure on legal services (£24.3bn), accounting (£14bn) and insurance services (£23.8bn). Yet despite this, nearly three fifths (57 per cent) of 250 senior executives from large organisations in a poll carried out by the Centre for Economics and Business Research (Cebr) and Populus found that property issues are still not regularly discussed in the boardroom and responsibility for property is still likely to fall outside management teams. The research found businesses take a very cost-centric view towards the workplace. Although almost three-quarters of organisations were constantly analysing and assessing whether their space is being used efficiently, cost was still found to be the most important factor in assessing the office’s performance (73 per cent)1.
With 68 per cent of organisations surveyed likely to review how their office space is used in response to organisational growth and change, the British Council for Offices in its report argued that there is now a significant opportunity for businesses to use their property to bring significant benefits to their overall performance.
Many are already seizing the initiative, as is shown by the sharp reduction in the amount of office space used by corporate occupiers as they adopt more agile working practices. An October 2014 study from facilities management services provider MITIE2 found that between the years of 2008 and 2014 firms reduced their floor space by an average of 45 per cent. The results of the report, based on interviews with property directors, mirror those of the Occupier Density Survey3 published by the BCO, which also found a marked reduction.
The authors of the MITIE report conclude that the economic downturn has been the main catalyst for the reduction in property used by occupiers. The main way firms have accommodated the fall is with the uptake of agile working practices, the changing role of the corporate HQ as a ‘mother ship’ for client facing activities and collaborative work and a closer working relationship between IT, FM and HR to accommodate more agile working.
Of course the UK is not alone in responding to the forces at work here. According to CoreNet Global worldwide office space standards are now moving closer to the norm seen in the UK. In late 2013, the average amount of space per office worker globally had dropped to 150 sq. ft (14 sq.m.) , from 225 sq. ft. (21 sq.m.). CoreNet also reports that with increasing employment levels, there is scope for a ‘property paradox’ in which more workers are using less individual space and more shared space for collaborative working. Just over half of the respondents to the survey predict that an average of 100 sq. ft. or less per worker as the norm in five years.
In 2014, CoreNet Global published a report with property consultancy Cushman and Wakefield called the Workplace Transformation Survey, which explored some of the consequences of these changes4. The report is based on a questionnaire of over 500 occupiers and other participants from around the world taking part in events in Los Angeles, Amsterdam and Shanghai. It found that nearly two thirds of respondents claim that their organisations are either in the process of implementing a workplace change programme (35-40 percent) or planning to implement one (25-27 percent).
The growth of agile working
Even before the UK Government extended the right of all employees to request flexible working in July 2014, the uptake of agile working practices had been profound. In 2014, the Office for National Statistics released new figures, which show that flexible working is at a record high in the UK5. The headline figure from the ONS is that 14 per cent of the workforce now either work at home full time (5 per cent) or use their home as a base (8.9 per cent). This represents a 1.3 million increase over the six years since the onset of the recession yet it is only a small part of the overall picture because it does not take into account our new relationship with work. For example, a 2014 study from the Institute of Leadership and Management6 found that nearly half of managers work an extra day each week outside of their contracted hours, while an eighth put in an extra two days. More than 90 per cent of managers now work outside normal office hours, over three quarters (76 per cent) ‘routinely’ work at home or stay late at work, over a third work at weekends and nearly half (48 per cent) regularly work through their lunch-break.
Again, this pattern of increasingly agile working practices is repeated across the world. In Singapore, the Ministry of Manpower released figures at the end of 20147 that claim around half (47 percent) of firms offer employees at least one formal flexible working arrangement, up from 38 per cent in 2011. Australia has introduced its own legislation offering certain workers the right to request flexible working. The US does not offer workers such rights but interest remains very high. The Alfred P. Sloan Foundation’s Workplace, Work Force, and Working Families Program found that nearly 80 percent of American workers want more flexibility at work and has set itself the goal of promoting agile working as the default working practice in the US8.
This in turn is changing the places we work. Serviced offices and co-working spaces are flourishing and hotels are joining cafes as the providers of impromptu workspaces for the new army of peripatetic workers. A study by the German Fraunhofer Institute9 has found that hotels are significantly increasing the amount of working and meeting space they provide in their facilities in cities across Europe with three quarters of British employees saying they work while staying or waiting in a hotel.
Example 1: The UK Public Sector Estate
The UK’s public sector has been one of the first to seize on the opportunity offered by agile working to reshape its property. Since 2010, Central Government has sold off some £1 billion of what it consider underutilised space and is encouraging departments to share offices. For example, the Department for Communities and Local Government (DCLG) has now moved in to share its offices with the Home Office in Westminster. The department’s former home will now be redeveloped into commercial property and retail space. A report from the National Audit Office claims the DCLG move will save taxpayers an estimated £220m over the remaining lifetime of the current private finance initiative contract.
The same thinking is being applied at local authority level too. Earlier in 2014, the government announced that it was to extend its groundbreaking One Public Estate scheme10 that aims to divest and consolidate government-owned land and property to cut public sector spending and boost economic growth and regeneration. The government claims the initial phase of the scheme, announced in 2013, would save £21m in running costs and £88m in capital receipts, generate around £40m for local economies and create an estimated 5,500 jobs and 7,500 homes over the next five years. Cabinet Office minister Francis Maude claimed the scheme would free up buildings in addition to the 1,250 that the government has got out of since 2010.
The sheer extent of the savings associated with the new approach across all the public sector is laid bare in the State of the Estate report for 201411 detailing the size and cost, efficiency of use and sustainability of central government buildings. The report claims that since 2010, the estate has divested some 2,000 properties (28 percent of the total), reduced the footprint of the estate by 2 million sq. m. (a 20 percent reduction). The report also lays out the effects of cultural changes including the use of shared space and the uptake of flexible working including a reduction in space standards to 11.3 sq m per full time employee (FTE), down from 13.0 sq m in 2010 and a space allocation of 10.7 sq m per workstation down from 12.3 sq m in 2010. The report claims that these standards compare very favourably with standard practice in the private sector (12.6 sq m per FTE and 12.9 sq m per workstation). The report claims that the resultant savings include £1.4 billion capital receipts from freehold disposals in total since 2010 and £625 million savings in 2013/14 from sales and the reduction in the annual running cost of the estate
There is still more that could be done however. For example, a Freedom of Information (FOI) request submitted by Condeco in 2014 found that since 1998, a worrying 58 per cent of London boroughs have seen their property vacancy rates either increase or stay the same. What is most concerning for businesses in London is that this rising figure, coming at a time when commercial rents are soaring, has gone unchecked since 2006, the time at which the DCLG stopped collating the data because of budgetary cuts. It’s a real opportunity for the Government to free up valuable space and change the dynamics of the overheating property market in the capital.
Agile working is about more than cutting costs of course. Both the public and private sectors are keen to take advantage of its greater responsiveness to change and ability to create multi-disciplinary teams, foster collaborative work, create a better work-life balance and generally enhance wellness and productivity as well as organisational performance.
Example 2: The Global Financial Services Industry
Underutilised space remains a major challenge for the financial services sector worldwide. A study by Architectural practice HOK found that space is underutilised across the sector by nearly a half. The authors of the HOK Benchmarking Report12 claim that because ‘companies are eager to understand the link between their work environments and organisational performance, the space standards and findings in this report can provide a baseline to help corporate real estate and facilities professionals identify and respond to opportunities for improvement.’
One of the report’s key findings is that growth often can be accommodated within existing space, which is consistently underutilised by an average of 48 per cent. When undertaking renovation projects, firms should consider the creation of multi-purpose environments that encourage more efficient, collaborative and innovative use of space.
Similar conclusions are evident in a report from property company DTZ. The study, Future Financial Workplace13 based on interviews with banks found that many had already opened up their office buildings to allow clients and other stakeholders as well as employees to use some facilities.
The report also says banks and financial institutions are looking at alternatives to their traditional tower blocks because they want a move away from departmentally work to agile teams and mobility. The report also found that there is an increasing demand for meeting space that is appropriately sized and flexible and a greater ability to cope with changes in occupancy rates of spaces.
The way we measure space is central to how we resolve building tensions. For many years, the method of measuring space had been for the company to use its organisation chart to allocate dedicated workstations to individuals, usually on the basis of their status. However this is a rigid way of making decisions about the office, restricts the ability of the firm to enjoy the benefits of agile working takes little account of what people do on a day to day basis and means that even small organisational changes such as a promotion can lead to costly and disruptive changes in office layout.
Technology has changed this, not only allowing us to work in new ways but also measure how we use space and make better-informed decisions about office design and management. Early facilities management technologies helped with this to some degree, but we are now in a new era that offers us sophisticated measurement tools like occupancy sensors, developed to align with new agile working practices and the empowerment of individuals.
Paul Statham is the managing director of Condeco, a global workplace management software and systems provider. www.condecosoftware.com. This feature appears in the new issue of Work&Place. Condeco is the main sponsor of the forthcoming Smartworking Summit in London.