Out of office: Time to rethink your real estate?

The pandemic-driven shift to remote work has left many office buildings sitting empty. Today, real estate portfolios hang in the balance as leaders weigh their options of requiring workers to return to the office, making remote work permanent or adopting a hybrid model. 

The question I hear most often from executives today: What do we do with all this unused office space? It’s no surprise considering real estate is typically the largest annual operating expense after people.

Some large employers already are making moves to downsize their space when their lease ends. United Airlines announced in 2021 it would be giving up 150,000 square feet (17% of its space) in Willis Tower in Chicago.  Other companies are subletting their unused office space.

For some it’s a matter of reconfiguring their office space to fit new ways of working; or accommodating a hybrid workforce, which 83% of workers prefer, according to Accenture’s Future of Work research. 

Start from the ground up

Where to begin? We start at zero. Zero-based cost transformation provides the strategy, insights and tools needed to rethink costs, including real estate. Start by imagining you have no real estate. A clean sheet. What do you need to support your business today and in the future?

Getting it right requires a holistic approach. Beyond cost, you must consider the ideal employee experience while balancing priorities and making tradeoffs to support the future you envision. Think about the “what” and “why” of the work before the “where.” There is no one-size-fits-all solution. The workplace model should align with your business goals and workforce behaviors, supported by enabling technologies. Then, you can determine the real estate needed to make that a reality.

Once you’ve selected a workplace model (in-office, hybrid, remote), there are other considerations including cost and the best use of resources. You need to determine how to configure the space to create the optimal work environment for your business. You need to identify what technology is needed to support a seamless experience for all workers, on site or remote. The design of the space should facilitate collaboration and build a sense of community, ready to accommodate a hybrid workforce with a fluctuating number of employees on site on any given day.

The value of real estate rationalization

Making the most of these real estate assets hinges on several factors that require careful consideration including analyzing space utilization and workplace strategy; reviewing lease terms and deal structures; positioning and monetizing assets; examining integrated real estate and facilities management services; and validating real estate data.

You can achieve significant benefits when you focus on what your real estate should be based on your current and future business realities – not what it has been in the past. Real estate optimization has typically resulted in annual real estate operating expense reductions in the 12% to 20%+ range but increases in remote work add more opportunities to optimize. Our analysis found that businesses could reduce their office space footprint by up to 40% by carefully rightsizing their real estate based on future headcount, growth projections and workforce models.

The payoff

Real estate decisions require a comprehensive approach – from optimizing cost structures to reimagining the space and considering ways of working today. Starting from zero allows you to right-size real estate investments and map employee satisfaction into your model – a key factor for future competitiveness. The impact workplace decisions have on the employee experience is a critical factor, especially amid the Great Resignation and labor shortage. Stay tuned as we take a closer look at the employee factor in an upcoming blog post.

Reach out to learn more about how you can analyze your real estate needs to support your business today.