Occupational costs of offices
Change is one thing we have all got used to in the last 12 months. It’s been the one constant theme.
The latest big blue-chip organisation to announce changes to its ways of working is HSBC. According to reports by the BBC, top managers at its Canary Wharf HQ are losing their offices and will have to hot-desk in an open-plan floor.
It comes as HSBC plans to reduce its office space by 40% in the post-pandemic era.
HSBC boss Noel Quinn is reported in the Financial Times saying the old ways of working had been ‘a waste of real estate’, adding ‘Our offices were empty half the time because we were travelling around the world.’
A quick glance through the Sunday broadsheets shows that change is very much in the ascendancy but it’s not all about moving to a working from home model (WFH).
Let’s take Nationwide, which recently announced that it would give all office employees a choice over whether they would work from home or in an office.
This decision was made in the knowledge of an internal survey, which suggested 57% of employees would prefer to work from home full-time, with 36% suggesting they would prefer a hybrid-model.
Comparatively, the CEO’s of both Barclays and Goldman Sachs have suggested their strong preference is for employees to return to the office – calling the WFH movement ‘unsustainable’, predominantly citing the lack of collaboration and shaping of cultures that WFH so aggressively impinges upon.
There are plentiful examples of organisations having made decisions on one side of the fence or the other. And to suggest there are only two sides to the fence would be a serious misjudgement, with the ‘third’ side being the hybrid model, of either allowing employees to choose their time and place of work, or requiring them to be in an office setting for part of the week.
To take an example, BP is looking at a 40:60 split on office and home working for the majority of their employees.
And finally, there’s the Government’s view that seems to be shifting as lockdown restrictions ease and the vaccine rollout continues at its startling pace.
Both the Prime Minister and the Chancellor of the Exchequer seem to be pushing for a return to the office: the former in a slightly more informal manner suggesting that employees would be glad to get back into offices, whilst the latter puts the same message in a distinctly more pointed tone suggesting that employees may vote with their feet and leave organisations should they be forced to continue WFH.
With the WFM and hybrid approaches comes other challenges. There are technical requirements like accessing confidential IT information at home, practical problems – the bad back from sitting at the kitchen table, and the cultural problems – the missed water-cooler and corridor conversations.
This is without starting to mention any potential impacts both positive and negative on productivity, efficiency and employee wellbeing.
And at this point the large occupational costs of offices also come into focus.
In discussions with our clients, we continue to assess the current shifts on real estate needs. For those clients that rely on in-person collaboration, for example software designers where face-to-face interaction is vital, the need for a working space has not diminished. However, the question is whether that need is constant. Can teams be split into different working patterns, thereby reducing their footprint requirements?
Conversely, some clients have found that many roles that can be successfully executed virtually from home – often roles such as ‘support’ functions in finance and HR. In these cases, the need for the same level of office space has been greatly reduced.
Both points negate any discussion on cost, and that cost does not just reflect a rental level. It also reflects service charges, rates, additional maintenance and insurance costs, and an increased dilapidations liability at the end of a lease term.
A detailed and specific analysis must be made when considering such decisions. And the outcomes of any such analysis must be considered in relation to what can be achieved – affected by factors such as market forces, availability, landlord relationships and remaining lease term.
Only once all factors are taken into account can a considered view be taken, at the heart of which is the ultimate direction for the business.
