Post-Pandemic Space Reductions Can Create Financial Opportunities

By rethinking how employees work companies can reduce the amount of office space they need, driving lower costs and a better employee experience.

For many organizations, the results of the pandemic-driven shift to remote work have been better than expected. This has prompted leaders across industries to rethink how and where their employees work for the longer term, with 76% of CEOs in a recent Deloitte poll indicating that their organizations would need less space moving forward. This in turn can drive significant cost savings in both operating costs and capital expenditures. Real estate and facilities, often one of an organization’s top three expenses, can represent 2% to 5% of organizational revenue. The extent of the potential savings depends on several factors, including:

• What is the employer’s position on remote work? Employers that permit remote work will need to decide how frequently employees need to be in the office, which will shape leadership decisions on how much space the organization needs. Employers typically fall into one of three categories; traditional, progressive, or visionary depending on the percentage of time a worker can work remotely. A higher percentage of remote work is linked to larger opportunities for savings through reduced footprint requirements.
• Historically, many organizations would open a physical location to attract new employees in a particular market. With the greater acceptance of remote working, organizations are now increasingly looking to attract talent in markets where they do not have physical space. The extent to which leaders seek talent in such markets will also influence the amount of space an organization must maintain.

When addressing the issue of how much space an organization needs to operate with a remote-enabled workforce, one critical dependency has been identified. Accurate, organized and consistently collected data is a key enabler when seeking to optimize the built environment. To answer the question of how to build the workplace of tomorrow, organizations must first understand how their spaces are used today.

In practice, employers often find themselves using multiple disconnected systems to track a variety of data points around space configuration and employee behavior. Without established polices supporting sound data governance and a central database to store information, it is extremely difficult to efficiently understand how real estate is being used to add value to an organization.

Key questions an organization should answer through its real estate data strategy are:

• Location Characteristics: Is a given location owned or leased? What is the business function of the location? When are leases expiring in the portfolio? What options does the organization hold with respect to renewing or exiting a space?
• Employee Utilization: How many employees are assigned to a location? What are their roles? How often are they in the office? What spaces are they using to perform their work?
• Space Categorization: What types of spaces exist within a location (i.e. workstations, conference rooms, telephone booths, enclosed offices, dining facilities, etc.)? How often are different space types used during the work week? What is the total footprint for each space type within a location?
• Portfolio Costs: What are the occupancy costs associated with a location? What are the costs of capital projects planned for the next three years? How has the cost base for the portfolio changed over time?

Enterprise portfolio data represents a key competitive advantage in a post-pandemic world. Real estate data is the foundational element of effective cost reduction planning. Transparency in the form of internal benchmarking often brings to light portfolio inefficiencies both in terms of cost and usage.

Operational and executive management teams that can leverage accurate information are empowered to make better and more informed decisions. This results in actionable recommendations that can lower the overall cost of occupancy by eliminating unnecessary space.