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Are you failing to unlock the hidden value in surplus office space? You might regret it
Big businesses are wasting an estimated £10bn a year on under-used office space at a time when there is a greater need than ever to reduce overheads and better control costs.
The current trading climate, fuelled by factors ranging from energy price increases to the cost-of-living crisis, means that as business owners it’s essential to examine all areas of the organisation for operational efficiency. Reassessing and repurposing surplus office space could prove a golden opportunity to reduce overheads, recoup costs and boost revenue.
The under-utilisation of office space for many organisations comes as no surprise. The impact of the pandemic, as well as the current financial crisis, has seen some businesses already downsizing headcount and looking to reduce their exposure to rental costs. That has left empty space where staff used to sit. That is coupled with a change in working practices brought on by the necessary move to remote working during the pandemic – and the slower return to the office post-pandemic.
For many organisations clarity over the future of how and where staff will work is still lacking, making predicting the use of office space in both the short and long-term a challenge. However, the reality is that you can’t afford to sit and wait to understand the what ifs. Instead, you need to take a proactive approach to unlocking the hidden value in surplus office space if you are to protect your business.
The demand is there for extra space
While some businesses are looking to jettison excess space, the wider demand for office space is still evident. Take-up in the Central London office market for example, is being driven by the financial and legal sectors although the healthcare, corporate and technology sectors were also strong in the second quarter, according to a recent DeVono report on the topic of workspace transformation.
In Central London, for example, office availability has been fairly constant at around the 23 million sq ft level for the past three quarters, according to research from DeVono. However, the second quarter of 2022 saw the first quarterly decline since the final quarter of 2019. Four of eight office markets in the city have seen availability levels fall.
But quality is key
That doesn’t necessarily mean that companies are going on an all-guns blazing approach to expanding space. Far from it. With the future of working practices still not 100% clear for many companies, the more immediate requirement will be an investment in quality space rather than a race for square footage. The recent Future of Work survey 2022 from JLL found that 77% of those surveyed said that investing in quality space was a greater priority than expanding their total footprint.
So, in the short-term there is a need for operational agility, resilience, and efficiency within your office portfolio. Longer-term however, there is a need to better understand how office space fits within your business and whether it still suits and offers what you and your workforce needs.
As uncertainty and changes in working practises continue, the ability to flex office space is key, with 43% of companies with more than 5,000 employees (and 37% of those with under 5,000 employees) surveyed by JLL planning to accelerate investment in flexible space, such as serviced offices or co-working spaces over the next three years. More than half (51%) will lease such flexible space through a third-party provider.
How to unlock surplus space potential
For those businesses sitting on excess quality space one of the most effective ways of maximising extra space and reducing pressure on company finances is through subleasing.
Although as the tenant you are still responsible overall for the payment of rent, businesses rates and service changes, the subtenant will be contributing to these overheads for their share of the space, reducing the pressures on your business as a result.
Although it’s effective as an additional revenue stream you will need to first consider whether the space needs to be refurbished before subleasing. This can help to improve its attractiveness to new sublet tenants wishing to take space but will obviously increase costs. This will then need to be factored into your plans for the space to understand whether this strategy is the right one for your business.
The opportunity for redesign
But subletting isn’t the only option, especially if your company is one for whom the existing surplus space could be developed into something more appropriate for your use.
Redesigning surplus office space can enable companies to provide workspace better suited to staff and their new working habits, for example. This helps to maximise the potential of both staff and space and could be the incentive your business needs to attract more people back to the office.
It helps you to create an environment that your staff will want to return to, helping to tempt them back from solely remote working, for example. And it enables you to provide an employee experience that not only engages existing staff but helps you to attract new staff too. Creating a unique experience is critical as the days of 9-5 office working become confined to the history books.
A redesign could also incorporate greater use of collaboration areas, with JLL predicting that allocated collaboration areas are set to more than double, up from around 10% to 25%.
Restacking office space
Another opportunity, similar to an office redesign and often a precursor to identifying and enabling space for subletting, is restacking your office space. This is a process that allows you to adjust your office layout and space to better suit your actual needs and enhance productivity.
Typically, the restacking process is undertaken for office space spread over several floors, allowing the consolidation of space by identifying inefficiencies and reallocating it to something more appropriate.
Unlike a redesign, which is an aesthetic, change this is a wider strategic change that redefines the actual space and helps you to reallocate it.
Why the time to act is now
The role of the office, the space within it and the culture it helps to create, is changing and your business needs to keep up with such change. Sitting on redundant space in the current climate is foolhardy. Instead, it’s time to look at how to maximise its opportunity, repurposing space through redesign, restacking or subletting to create the office of the future – while also helping to secure your business’s future too.
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