Will businesses reduce their office footprint in 2021?
11 January 2021: With homeworking the new norm, speculation is rife that the days of the vanity corporate HQ could be numbered. Even the longer-term prospect of hybrid models of working is prompting questions about office space and opportunities to downsize.
Back in September 2020, more than half of UK directors said they planned to cut back-office space as staff move more permanently to working from home, according to a survey conducted by the Institute of Directors. It found that lockdown had resulted in many people embracing homeworking as the default option: more than four in 10 said one of the main reasons was that working from home was proving more effective than their previous set-up.
Paul Howells, CEO of investment and property development company Accumulate Capital, says the pandemic is causing businesses to look at offices and commercial property in a different way. “The increase in remote working will likely see businesses look to smaller, more flexible workspaces. The days when a company would own or rent an office with a desk in it for every member of staff are coming to an end – in reality, this trend was already taking shape, but the coronavirus crisis has greatly accelerated it.”
At the same time, the government’s National Infrastructure Strategy supports a move away from traditional business hubs such as London. It promises significant investment in areas of the UK that have received less support in the past, including gigabit broadband rollout, the transformation of bus and bicycle infrastructure and local authority levelling up funds.
If your business is rethinking its office strategy, what are the key considerations to make sure you don’t make a decision that you come to regret down the line? David Laws, a partner at commercial property consultancy Matthews & Goodman, says the most important thing is not to panic and rush into making knee-jerk decisions based on the here and now.
In particular, there is an important differentiation to make between envisaged downsizing as the result of fundamental changes to your business and short-term shifts. “If the market has evolved and your service or product is no longer in demand, then that requires a strategic review of the business and, as a consequence, a profound review of your occupational requirements,” Laws says.
Laws highlights several key areas that underpin any workplace occupancy strategy:
Lease terms: Are you nearing a lease break or lease end window? Are you allowed to sub-let surplus space to a third party? Can the landlord accommodate your business in a smaller space, in another building they own? How willing is the landlord to entertain the idea of you moving out or relocating to another part of the building? They might want the space for another tenant, which is growing rather than downsizing and therefore represents a better prospect.
How you intend to use the space: Will you be introducing a blended workplace strategy where employees have a choice of working from home, working in the office a few days a week or ‘Working From Anywhere’ (WFA)?
How do you conduct your business: related to the above point, why will employees come into the office? If it’s primarily for meetings, you need to reconfigure the office to reduce the desk space and increase the number of meeting rooms and/or informal collaboration spaces.
Location: does the location of the office still meet your brand, recruitment, strategic goals?
Budget: is downsizing an operational-led issue (ie the number of employees or number coming into the office has reduced, or how you conduct business has changed), or is it simply too expensive in terms of price per square foot?
Remote working has costs as well as benefits
Closing or downsizing your office offers the potential for savings, not only in terms of rent but also in associated costs such as utility bills, office supplies and travel allowance for staff. However, you will need to factor in additional costs that moving to a more remote working model may incur, such as required investment in IT infrastructure, says David Morel, CEO of Tiger Recruitment.
There’s little point making overall savings only to lose revenue because employee productivity is suffering, and they aren’t achieving their objectives. “Beyond productivity, it’s important to consider the impact of more remote working and less office time on employee satisfaction and mental health. People may have managed well during the pandemic, but how will they cope if the arrangement becomes more permanent?” Morel asks.
Ultimately, the size and location of your workplace is a tactical issue, adds Laws. “The critical strategic decision driver is the business plan, in particular the company’s strategic and financial goals, as well as its ‘brand’ ambitions and aspirations. The location, size and occupational plan is determined by this. But above all, when it comes to developing occupational strategies, always think in terms of three and five-year planning.”
Whatever your decision, organisations need a more comprehensive understanding of their employees’ experience to accurately model their post-pandemic work landscape and experts warn that keeping employees in the loop about how the home/office working set up will likely evolve is essential to avoiding a crisis of trust.
“In times of change, employees need to know what to expect from their workplace when the turbulence ends,” says Dr Peggie Rothe, Chief Insights & Research Officer at employee workplace experience expert Leesman. “Without this clarity, employers risk losing those employees that they have spent years developing.”
Andrew Glynn, senior partner at law firm TLT, says despite concerns that lockdown has had negative effects on culture, learning, mentoring and wellbeing, its analysis and discussions with clients indicate a desire to downsize office space by anything up to a third.
“Few want to work from home exclusively but most want to spend a material part of their working week doing so. If we are to deliver on those expectations, the nature and scale of our office footprint is bound to be impacted,” Glynn says. Whether it’s time to completely redesign office space to cater for a new normal or replicate what we already have only on a reduced footprint, only time will tell.