The Changing Face of Office Space

The changing face of the corporate world is having a huge impact on the types of working environments required and therefore the demand for different accommodation products and lease terms.  The effect of the speed of change, the economic cycle, political environment, interest rates, oil prices and market fluctuation are all forcing organisations to change their staffing levels dramatically at short notice, as can be seen by the recent statements from most of the investment banks and financial institutions in the UK in the wake of the 2008 credit crunch.  This has made occupiers increasingly migrate to office portfolios with a variety of timescale exposures allowing them to reduce their accommodation quickly inline with staffing numbers.

At an ever growing pace, organisations in both the public and private sectors are also adopting the principle of work as a task and not as a place, and are therefore moving towards new ways of working (NWW) practices including home working, remote/mobile working, desk sharing and hotelling or hotdesking.  The extent of the take up in NWW varies between organisations, but one thing is for sure, it is going to increase and occupiers are now looking for flexible accommodation solutions which provide the opportunity to exit space as staff adopt NWW.

Above I have mentioned the driver for a mixed portfolio with varying timescale exposures, but what does that really mean? Well, it comprises accommodation with varying levels of flexibility.  For example, many organisation may wish to keep some core HQ space as a freehold building, with some neighbouring office accommodation providing long term leased accommodation.  The organisation may then choose to occupy some marginally more expensive accommodation with 3 or 5 year break options, some medium term serviced office accommodation and finally some short term serviced office accommodation with 1 year or even monthly leases.  With this mix of accommodation resources, the organisation can always match its accommodation provision to its requirement, allowing rapid increases and decreases of staff without wasting resources.  The ratio between these provisions varies depending on an organisation's requirements, and Actium Consult specialise in developing estate strategies to provide the optimal mix to suit the organisation and its future corporate objectives.   This form of mixed accommodation provision removes from the organisation the responsibility of having to sub-let space and therefore of inadvertently becoming a landlord or recording liabilities in the form of FRS12 provisions.

Similarly, the drive to implement NWW has resulted in organisations wishing to have a spread of accommodation across a city or even the country.  By doing this the organisation has multiple offices providing an enhanced public perception of the company and allowing staff to touchdown in the office nearest to them or between meetings.

The use of serviced offices by organisations has therefore increased significantly as they provide a ready made network of flexible offices, touchdown, meeting and conference facilities across large geographical regions.  They also provide flexible accommodation solutions from 1 month to 5 years with clear pricing structures allowing occupiers to identify the cost of their flexibility, weighed against the cost of a conventional lease structure including internal facilities management, services, dilapidations and fit-out.  The table below highlights the total office cost (including rent, rates, hard and soft FM) of conventional offices based on 10 year leases across 4 different UK locations, compared to the cost per workstation of serviced offices  based on a 1 year term and a minimum of 20 workstations.

Source: Actium Consult Total Office Cost Survey 2008/Instant Offices 2008 database

On the basis of the above comparison serviced offices based on a fixed 12 month contract compare favourably with the TOCS total cost of conventional office space. However, these require adjustment to reflect the fact that the TOCS figures are based on a brand new 5,000 sq m office with 500 workstations, and include facilities for touchdown, ancillary space and most importantly meeting space which are not included in the serviced office cost. The TOCS assumption also assumes large open plan floor plates which are rarely available in serviced offices. Having said that, the affordable nature of serviced offices does provide an occupier with vastly increased flexibility for small to medium sized teams at prices below conventional office solutions.

Serviced offices are also usually located in prime City central sites, providing an occupier with affordable access to prime sites for key staff members.  This is particularly the case in London where office costs are often over double the rest of the UK, but where some organisations need to be seen to have a presence.  Additionally, some need to have a base close to parliament, the high courts or the financial centre of the City.

In summary the key changes in office space that have occurred over the last 10 years have been as follows:

• Businesses want a quicker escape route from conventional lease structures which can be provided by serviced office solutions
• Businesses are increasingly opting for the reduced management requirement from short or medium term serviced office solutions
• Organisations are becoming increasingly knowledgeable about their total office costs
• Organisations are slowly realising that NWW is a very quick way to save money and also have a happier workforce

Source: Ainsley Moore Actium Consult 2008