The four themes shaping office space decisions

We interviewed almost 400 global business leaders to understand how they’re adapting their real estate strategies for the years to come. The below insights are based upon their responses. To discover the data behind the story, get the full picture in (Y)OUR SPACE.

If there were ever a perfect example of ‘no one size fits all’, it’s this: Over the next three years, 35% of the global occupiers we surveyed expect to see a reduction in the size of their global portfolios – and the very same percentage of respondents expect to see their portfolio size remain the same. And yet, some 30% of businesses actually expect to increase their global office space footprint on the back of growth, transformation, and entry into new markets.

A further piece of the evidence is this: At a global level, 27% of respondents believe that Covid-19 will influence their real estate strategy forever, but for those companies whose global headquarters are within Asia Pacific, this number falls to just 12%.

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Not only is the amount of space businesses need changing – but the type, function and quality of that space is changing, too. Here’s what’s driving office space decisions.

Considering cost

Simply seeing real estate as a cost rather than an investment that supports wider business strategy is ultimately a false economy. But of course, there is little doubt that cost-savings targets will motivate real estate transformations against a challenging financial backdrop. Indeed, the headlines surrounding some FTSE companies slashing their office spaces have largely focused on both reported losses and the employee-led adoption of hybrid working policies.

Our survey echoes this cost-consciousness. Although more than a third of respondents have no cost saving target for real estate, the same proportion is seeking to reduce real estate costs by more than 10%, with 54% of all respondents noting that their cost saving targets have increased since the onset of the pandemic.

Changing models of work

As briefly mentioned above, new models of work may actually serve to support this cost saving agenda, be it through the provision of more space in lower cost ‘spoke’ locations, or the adoption of hybrid working. The former could involve banks turning their branches into High Street office spaces, and the latter would essentially mean using less space more efficiently – through the use of team or department-wide rotas, for example.

This interplay between costs and changing workstyles also appears to be at the heart of prospective HQ relocations. 38% of our respondents rate the likelihood of relocating their HQ within the next three years as either ‘definite’, ‘very likely’ or ‘fairly likely’ with only 15% viewing such a move as impossible. As businesses reset their real estate portfolios, the relocation of hub offices will be actively considered, with two dominant drivers at play: 59% see the opportunity for cost savings to be a noteworthy driver, whilst 54% see relocation as a potential outcome of new working styles and an associated change in the quantum and quality of space their business requires.

Real estate matters

This balancing act has resurfaced a crucial question: What function does real estate play? After the novelty of working from home wore off, absence certainly made the heart grow fonder. As concerns about productivity and staff wellbeing (particularly for younger staff) increased, so too did the strength of voice from business leaders restating the case for the office. JPMorgan Chase, Barclays and Goldman Sachs have even recently warned of remote working’s pitfalls, for example.

Although there is a recognition that the office may not be a fixed, five-days a week requirement, it has been firmly positioned as a valuable contributor to organisational culture; client interaction; staff development; recruitment; on-boarding; collaboration and socialisation. This tone is supported by our survey results. 90% of respondents regard real estate as an important device that supports, facilitates or portrays business strategy – an increase, despite the challenges of the last twelve months, on the 85% subscribing to this point of view in our original survey back in 2018. Real estate continues to support corporate brand and image, cost reduction and employee wellbeing.

The flight to quality

Our survey results have also pointed to a clear appetite for the workplace to be elevated in quality, amenities and space for collaboration, the goal being to attract existing employees who have choices as to where they work and to prospective employees who see the working environment as a differentiator amongst potential employers.

55% of survey respondents believe that there will be an increase in the proportion of collaborative space found within their portfolios over the next three years. The office will further its role in bringing people together to interact, collaborate and, yes, to socialise. This again is at the very heart of the creation, curation and sustenance of a corporate culture. It creates a strong distinction between the function of the office and the role of more remote settings, which will be more focused on individual work.

We’re already seeing this amenity-rich demand play out on the ground. Energy giant BP recently signed up for 50,000 sq ft of amenity-rich flexible office space with provider TOG, while investment bank Peel Hunt’s new workspace includes a wellbeing room and a 110-seat auditorium for training and development.

Likewise, Stéphane de Montlivault, the Asia Pacific president for elevator firm Otis Worldwide, recently announced its workplaces would become “more modular”, with a greater focus on technology (via desk-booking systems) and collaboration. Indeed, as we explore in our ‘Smart’ section, technology will play a vital role in shaping the future office experience, optimising space utilisation and even energy efficiency.

To explore what the future of work means for your business and understand how you can optimise your real estate strategy, step into (Y)OUR SPACE, or get in touch with a member of our team.

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