By Alex Birch, Co-Founder XY Sense
By now, we’ve all seen various prophecies of doom and gloom regarding corporate office space and the entire commercial real estate industry.
You know the kind.
The ‘office is dead, remote working is here to stay’…“Bustling skyscrapers and office parks packed with workers could be a relic of the pre-pandemic world.” (CNN)
According to a survey released by KPMG this week, more than two-thirds (69%) of large company CEOs plan to downsize their office space in response to the pandemic. And it’s hard not to see why with survey after survey indicating a preference from corporate white collar workers to continue to work from home and the cost of offices sitting empty starting to bite.
So is a mass downsizing event looming on the horizon? Probably not.
While it’s true that office markets in Australia and around the USA are recording negative net absorption (more commercial space was vacated/supplied in a particular market than leased or absorbed by commercial tenants), there are actually surprisingly few reports (yet) of major firms choosing to downsize due to COVID-19. Indeed, the opposite appears to be true in big tech with Facebook, IBM, Apple and Amazon all expanding their real estate footprints in a new renter’s market.
Downsizing is complicated after all, with multi-year (sometimes decades long) leases already in place for tenants in most major cities and eye-watering relocation costs and complexities to consider. It’s just not a simple process. But as the KPMG study indicates above, there is mounting pressure for property and workplace experience teams to simultaneously reduce real estate costs and support COVID-safe office re-entries.
If you’re one of those leaders out there considering reducing your footprint by upwards of 30% in the coming months I’ve got a few things to say to you…
Whoa that’s a lot!
Do you know (I mean really know) how much space you’re still going to need post-pandemic?
Is people’s WFH sentiment mid pandemic really going to be the same as after?
Let’s slow down and take the reigns before the horse bolts
I thought I’d put together this article to expand on the above points and explore the ‘measure before you act’ cycle we’ve recently been discussing with clients and partners at XY Sense to help them use data to cut through the COVID downsizing hype and navigate this new strategic terrain.
Here goes – the three things you should do BEFORE you downsize your office:
1. Prepare to collect data on your new normal
Before making drastic space cutback decisions that could impact employee experience for years to come, let’s take an evidence-based approach and understand what’s really going with office space use.
As lockdowns begin to lift in major cities around the world and employees slowly gain more confidence in commuting, we’re going to see a shift in the utilisation of our currently empty offices. With flexible working considered the new normal, the challenge will be for organisations to properly capture empirical data on the now more transient nature of people coming into an office. How often are they coming in? What types of work are they doing when they do visit an office? What spaces are they using?
When considering downsizing or re-configuring office space for this new world of work, it’s never been more important to understand how your space is actually being used.
A manager counting heads or bags on desks on a random Friday probably isn’t going to cover it when you’re submitting a multi-million dollar business case. There are some manual ways you can hack together an indicative view of occupancy (think speed-gate counters, wifi-based employee tracking or lighting-sensor readings).
A warning that it can be time-consuming and hair wrenchingly frustrating to pull these disparate raw data sources together into anything resembling a utilisation insight. That is, being able to go beyond just counting people in a space and understanding how they’re actually using space. I’d know, as my experience with the drawbacks of these solutions led me to leaving my previous company to design and engineer a superior, computer-vision sensor and analytics application at XY Sense.
Whether you’re opting for a real-time, computer-vision solution like XY Sense or more tactically pulling together data from existing sources or surveys, as an organisation you need to be prepared to collect data on your office’s new normal.
You want to be set up, whether it’s with speed-gates and surveys or advanced sensors, to capture data from the first weeks of re-entry for at least six months in order to understand the new frequency of people coming into offices and how both their capacity and space needs have changed post-pandemic.
Note: We believe in the value of collecting data on your new-normal so much, we’re actually offering a six-month free subscription to the XY Sense platform for customers who sign-up in the next couple of months.
2.Support hack-able office space iterations & multi-purpose spaces
Passively collecting data is one thing but the office ‘as we know it’ is going to need to change in order to support both COVID safety precautions and new co-located working behaviours/space requirements for people when they do choose to commute in.
Yes, we might need fewer dedicated desks because people are working from home more but we also need more space between desks for social distancing and probably more collaborative and multi-purpose spaces to support what I anticipate will be one of the main reasons people will commute into offices; face to face team work and client interactions.
The net effect? Companies will probably require almost the same amount of space, or slightly less. It will just need to be deployed differently.
I realise I’m going out on a bit of a limb here when others are predicting massive drops in space requirements but if the purpose of the office is (as I believe) to create an enabling environment for an organisation’s people, productivity and culture then I don’t see how rapid and drastic space cuts are a smart option in the longer term.
So, how can you possibly get the right footprint and configuration in a world of new unknowns?
I recently caught up with Angela Ferguson who leads the excellent team over at Future Space who reminded me of the opportunity that ‘hack-able’ office spaces could present to teams thinking about adapting the size/layouts of their offices in response to COVID.
For those that aren’t familiar with the concept, hack-able or pushable workplaces involve avoiding fixed office furniture (think desks and whiteboards on wheels, bi-fold doors) to create deliberately multi-purpose spaces for teams. Teams and individuals ‘hack’ the space according to their needs, so that at 9am team members could be sitting across two tables doing individual focus work and by 11am the desks have been moved and a whiteboard wheeled in for a release planning brainstorm.
While speaking to Angela, it struck me that the concept of a ‘hackable’ office furniture combined with an advanced sensor solution like XY Sense could actually enable a data-driven, iterative process for companies considering both real-estate footprint right-sizing and the re-design of corporate offices to support the workplace of the future.
Unlike device-based occupancy tracking or basic people counting technologies above doors, XY Sense can measure people’s usage of space independent of fixed furniture with positional accuracy down to under 30cm. It can capture people standing around a whiteboard on walls, working from a couch or ducking into a temporary phone booth. This means that you can experiment with and measure new space configurations without intensive capital works.
Instead of committing to a building-wide new fitouts to support COVID-safety or guessing how many meeting rooms you’ll need in a more collaborative corporate HQ, an experiment with hackable furniture and sensors across a few floors could help you rapidly understand both the right amount of space and the right configuration of spaces.
Imagine that, ‘hacking’ not just your office fitout but your post-pandemic CRE strategy.
3.Take a long hard look at your business strategy
There is something to be said about old-school industry truisms, perhaps especially during a time fraught with uncertainty and anxiety.
As Chris Zlocki from Colliers so eloquently puts it. “We like to remind people of the golden rule of CRE: don’t let a real estate decision drive business strategy. Whether it is remote work, the reconfiguration of your office, future workplace standards, distributed work patterns or questions of relocation, every project should be analysed for its fit relative to implementation as well as its alignment to the business.”
In uncertain times like these, it can be tempting for the c-suite to jump straight to downsizing as a cost-reduction lever but when workplace and property leaders are given a seat at the table rather simply reacting (and potentially evacuating space you’ll regret later), it’s always worth revisiting the business’s core strategy and asking some tough questions of peers in the leadership group.
Yes, qualitative surveys of workers from around the world are indicating that people wish to work from home more but will they feel that way in three or six months time? What role could very valid pandemic anxieties play in biasing the data one way or the other?
Along what timeframe do we feel we have enough information/data to act? What data do we need to act with confidence? Could we regret giving up that space if our business strategy to grow remains largely intact?
It’s my firm belief that organisations should measure their new normal (this will vary for every organisation given local/regional lockdowns and virus stages) for at least six months before making a downsizing or space decision that could be incredibly challenging to unravel once it’s set in motion.
Changing offices changes culture and has the potential to impact staff retention and ultimately revenue.
Treating CRE downsizing as an isolated cost reduction lever could lead to longer term pain.
A concluding thought or two
Recently, I’ve been reminded by some peers that after the tragic 9/11 attacks, many pundits (as now) were predicting the end of high-rise corporate office towers. The workplace has certainly changed a massive amount in the twenty years since 9/11 but the office has remained a fixture of our working lives. For my part, I believe it will continue to do so. Just in an evolved way.
So, what’s the best way to respond to the great downsizing hype of 2020? It’s simple. With patience, and data.
Get prepared to measure before you act on your new company’s new office utilisation normal. You’ll not only reduce risk and increase savings by more accurately right-sizing commercial real-estate footprints but also have the potential to use data to deliver on the promise of the post-pandemic working environment for your number one business asset, your people.
Now is your opportunity to not simply down-size. But to measure and evolve your workplace.