The impact of Covid-19 on many UK workplaces has been deep and lasting. A Q2 survey of white-collar workers in London by the Centre for Cities revealed that the average respondent was commuting to the office only 2.3 days a week, for instance. The think-tank found that they were spending 41% less time at HQ in total than they had been before the pandemic.
Andrew Farah is CEO of Density, a US software firm specialising in workplace utilisation. He observes that the emergence of hybrid working since the lockdowns were relaxed has been a “seismic shift” that’s left much office space underused. His firm’s research suggests that most premises could accommodate four times more activity than they do.
“We still see big meeting rooms with just one person on a Zoom call and lots of communal spaces that are barely getting used,” Farah reports.
From a finance chief’s point of view, that represents a serious waste of resources.
Why not everyone is downsizing
Simply moving to smaller premises has been an obvious and popular cost-cutting solution for several companies. One of the most notable firms to have made this choice has been HSBC, which announced plans in June to abandon its skyscraper at London’s Canary Wharf for a smaller HQ in the Square Mile.
A flurry of similar moves sparked fears in the real-estate sector about a collapse in the office market, but the reality has been more nuanced. After all, seeking a new lease right now, even for smaller premises, may not end up saving CFOs as much money as they might hope.
Richard Proctor, partner and head of London tenant representation at real-estate giant Knight Frank, reports that businesses are “addressing the efficiency of their existing real-estate commitments. We’re not seeing a mass release of space, while occupiers assess what space they need and how best it can be used strategically to attract and retain talent.”
This efficiency drive has been a long time coming. Research published back in Q4 2018 by workspace consultancy Abintra claimed that firms in England and Wales were collectively wasting £10bn a year by failing to utilise the office space at their disposal. As the cost-of-doing-business crisis wears on, it’s no wonder that finance chiefs are looking to make their workplaces work harder for them as they exhaust other cost-cutting options.
“We’ve seen CFOs adjust their focus from reducing costs to optimising every square foot of office space,” Farah reports.
What options are there to save on office costs?
In many cases where businesses aren’t downsizing or sub-letting, they’re thinking more flexibly about their property assets, according to Proctor.
“A trend we’re seeing is that some occupiers are renewing leases on shorter terms,” he reports. “This enables them to keep their options open as they refine their real-estate strategies for the longer run.”
Other firms are considering refurbishments to introduce new amenities and/or more flexible collaborative spaces. That may come at a considerable cost, but the investment could well prove worthwhile if it ensures better utilisation over a longer period. Standard Chartered, for instance, is revamping its global HQ in London. The banking group’s CFO, Andy Halford, predicts that the enhancements will result in a “modern workplace that aligns with our hybrid working model”.
Citigroup is also refurbishing its premises in the capital. The US banking giant believes that this will “maximise collaborative workspaces, supported by technology, to enable us to work flexibly and with maximum agility”.
The right office setup will be unique to your firm
Guy Holden is MD for European advisory and transaction services at CBRE Group, a US provider of commercial real-estate services. He says that, while numerous firms “have rethought the use of their offices since the pandemic, driven mostly by their version of hybrid working, it has become clear that “one size does not fit all”.
Holden explains: “Everyone is working on their own version of flexibility. Now that employees have a real sense of what that can look like, we see this as a long-term shift in practice. If both employees and employers want something really good, as everyone now does, then real estate has become more important in business decision-making than it ever was.”
In July, London-based international law firm HFW relocated to a smaller HQ, which fits well with the working practices it has adopted in recent years, according to managing partner Jeremy Shebson.
“Our new offices have been designed to provide greater flexibility and promote formal and informal connections,” he says. Although the floor area is 25% smaller than HFW’s old base, the new layout is “much more efficient. And, because of our agile working policy in London, which is for people to be here at least three days a week, we actually still have room to continue growing.”
Why boosting employee engagement with the office matters
Farah observes that “the companies we see doing well in the hybrid working world have two things in common: they are constantly adapting to a workforce that’s still evolving its office preferences and they insist on collecting better data” about how space is being used.
Farah’s advice to most employers in this respect would be to boost the managerial presence in their offices and create more space for focused work. He reports that one Fortune 500 company recently chose to “hibernate” two under-utilised floors at its HQ, cutting occupation costs while “increasing worker engagement” in other parts of the building.
Holden argues that “we must quash this myth that offices are no longer needed – it’s quite the opposite. The office’s ability to increase collaboration, improve productivity and foster company culture should not be underplayed.”
How to make visiting the office worth the commute
Boosting utilisation levels is all about giving people what they want from their workplace, according to Shebson. HFW’s management team asked staff to share their preferences on aspects such as furniture, paint colours and even coffee beans in the new office, as well as consulting them on how they wanted to work.
“For example, rather than having a fixed desk, everyone can choose from a range of settings, including open-plan team spaces and smaller ‘focus rooms’, based on how they want to work that day,” he says. “That’s been a really big positive change.”
And, as finance chiefs reassess every element of their premises, they’ll undoubtedly need to work closely with their C-suite colleagues.
“For many CFOs, the ultimate aim is to transform the office from a financial burden to a strategic asset,” Farah says. A project with such an ambitious goal should never be attempted by any one function working on its own.