UK: PROPERTY AND RELOCATION - WATCH THIS SPACE.

UK: PROPERTY AND RELOCATION - WATCH THIS SPACE. - The need for office space is diminishing as companies realise the startling effect flexible working practices and, in particular, hot-desking can have both on efficiency and on the bottom line.

by Erik Brown.
Last Updated: 31 Aug 2010

The need for office space is diminishing as companies realise the startling effect flexible working practices and, in particular, hot-desking can have both on efficiency and on the bottom line.

In the past six months, it has become acceptable for leading figures in the UK property supply industry to talk openly about 'the decreasing need for offices in the future'.

This is, for them, the latest post-recession shocker. Like teenagers trading horror stories around a camp fire, property people tested themselves after the recession first by facing up to the frightening oversupply of office space in central London, and then with the appalling idea that some of it will never be occupied again and might just as well be converted into flats or demolished. But the idea that the overall requirement for office space is diminishing is the most terrifying story so far.

It is based, not on detailed forecasts, but on a series of simple observations: many multinational companies are downsizing; the knowledge-based companies of the future will be smaller; the pace of technological change (according to author and guru Professor Charles B Handy and others) militates against a long-term commitment to large, expensive office spaces; flexible working and space efficiency practices mean that companies can do more with the space they already have, and can offload the space they don't need.

The first three points may be open to debate: the fourth is the killer, because it isn't. Mercury, Digital and IBM have all used flexible working practices to control - and, in some cases, to slash - property costs. And they're being very open about it.

Property professionals are nothing if not adaptable, and they have scrutinised space-efficiency case studies for potential value. In particular, hot-desking (also known as space sharing) has been adopted as a sub-set of space planning - and is increasingly being offered as an alternative for those companies that are contemplating relocation. So, what's it all about?

The truth is that office space is used inefficiently. At the most obvious level, the nation's office stock is hardly used at all overnight, at weekends or on public holidays. If manufacturing industry had adopted the same policy, UK Inc would have gone out of business years ago. But flexible working - and hot-desking, in particular - takes the argument one step further by attacking daytime inefficiency.

Although this approach requires a fairly radical shift in culture, the benefits can be startling. IBM, for example, once had 1,100 desks in 270,000 sq.ft of office space on London's South Bank. It lost 50 people and introduced desk sharing. Now it has 670 desks in 180,000 sq.ft. The saving in rent - translated straight to the bottom line - is £2 million a year. Overall, IBM has cut its office occupation costs by 40% over the past three years.

Property director Mike Brooks says the process began when the IBM board in the UK asked him how he could reduce property costs by £10 million. He and his team took six weeks to come up with a menu of options. 'There were about 15 items on the list,' he says. 'Space-sharing was one of them, but there were other things like reducing the size of the workstation "footprint". An essential part of that was a mandatory reduction - except in very special cases - of the amount of personal storage space available to employees.' The attack on storage space was critical. When IBM moved out of its former Chiswick headquarters (147,000 sq.ft in west London) the property team counted the number of five-foot-high double cupboards housed in the building - there were 3,000 of them. And when IBM staff moved out of leased space in the Shell building on London's South Bank, they left half-full cupboards behind them - because they knew they were moving to offices where storage space would be limited. 'You should have seen the junk people left behind,' Brooks says, smiling. 'It was amazing.' In every case, the cupboards had extended the area occupied by each workstation. Getting rid of them didn't reduce the amount of space available for work, but it did cut costs.

Brooks's team took a critical look at non-work spaces, too. Restaurant areas were cut back, or redeployed, and customer service areas were reduced. As a result, the ground-floor restaurant in IBM's new flagship building at Bedfont Lakes near London's Heathrow airport looks, feels and works like a hotel foyer - busy at lunchtime, but a handy place for informal meetings during the rest of the day. Interestingly, IBM is also generating a little extra income by leasing its restaurant to other companies on the Bedfont Lakes site.

In the past, IBM - in common with many other companies - had calculated the maximum possible usage pattern for its buildings, and then resolved any likely problems by providing more space than was needed. Brooks says that it was like a high street branch of a clearing bank deciding that it had to have enough cash in the vaults to cope with every one of its customers demanding a £10,000 withdrawal.

Now, the company is actually providing less space than is necessary at peak times, and managing out whatever problems that causes. It turns passive, expensive property occupation into a process-driven business requiring careful management.

Hot-desking was one of the key elements in Brooks's programme. Effectively, it took expensive, highly-territorial, inflexible office space and made it work like a well-equipped educational establishment. The analogy is a reasonably accurate one, and worth extending. Most school children know about hot-desking because they do it all the time from Monday to Friday. They carry with them only those documents they will need for the tasks they have to perform each day; their personal storage space is limited; and every time they go to a new classroom, they occupy a desk that somebody else was probably using only a short time previously. They have no ownership: the desks are the school's assets, not theirs. IBM set out to achieve something along similar lines.

But it wasn't achieved without cost, says Brooks. 'Everything costs. At the South Bank, we had to move almost every one of those 1,050 people; some of them twice; a few, maybe three times. It was like cutting down a jigsaw puzzle. Every time you created space, you had to shuffle everybody up.'

For the property team, the process involved a careful study of each business group - recording desk usage every half an hour. 'You had to understand the pattern of usage,' Brooks says. 'Some people need a desk of their own. But where people are mobile the actual utilisation in a working day is only about 30%.' This study had nothing to do with measuring the efficiency of the individual, but because hot-desking is based on improved telecommunications and computing technology it can increase departmental efficiency. And the loss of space reduces internal rents charged by the property department.

'You're suggesting to people that you can help them operate more efficiently,' says Brooks. 'The property benefit is a spin-off. When we first started this process, we realised very quickly that there is not a financial case for saying to 20 people, "Right, you make do with 15 desks and we'll give each of you a Think Pad" or whatever the technology is. It just does not stack up. But if the technology is going to come anyway, you might as well integrate the whole thing.' Even so, he adds carefully: 'It's no accident that all of this has been happening over the past three or four years. We happen to be a company that has gone through hell and high water because the fundamental nature of our business has changed.' At Bedfont Lakes, IBM has introduced hot-desking under the SMART acronym: it stands for Space, Morale and Required Technology.

There are workstations for IBM staff who are visiting - terminals on consoles with no desk space at all, to discourage 'camping'. There are shared desks and terminals in 'touch down' areas, for resident staff with a little work to do quickly. There are areas with desks and terminals, in which employees have their own limited storage space. And there are the offices of senior executives, which are available for meetings and actually have to be booked by the executives themselves if they want to use them.

Occasionally, there is a desk and terminal used permanently by a single member of staff, and the personalisation of that space, with pictures, Post-it Notes, toys and ornaments, appears suddenly bizarre: like a Ford Escort with fluffy dice and a leopard-skin steering-wheel cover.

Other than that, and rather disappointingly, it all looks very much like any other well-organised office. And the desk-sharing is not carefully timetabled and managed, simply because it doesn't need to be.

'When we first started all this, the thing they all used to say to us was "what's going to happen when we are all in"?' says Peter Wingrave, IBM's design and construction manager.

'We now know that they're rarely all in at the same time, and on the odd occasion when they are, it's a known day and they can make adjustments. They know it is going to be busy so they work in a different space, or they come in later because they worked at home in the morning, or whatever. They adjust accordingly.' But are they happy?

'A lot of them are far more astute then they were,' says Wingrave, 'and they realise what real estate costs.

As employees, where would they rather have the money - tied up in the building, or reinvested in the company?' Which probably means that they accept it but they don't rave about it.

In fact, most of the early problems resolved themselves. Fears about the potential distances between the small, storage spaces given to individuals and available desks simply evaporated, because people naturally chose to sit at spaces close to their storage. (Although word has it that obsessive hoarders have taken to using their cars as surrogate cupboards.) Initial teething troubles with the telecoms system and local area network at Bedfont Lakes were quickly sorted out. And the only remaining issue - visibly at least - is that of territoriality.

For the SMART system to work, business groups in loose occupation of adjacent areas have to allow freedom of movement into and across those spaces. But that doesn't suit everybody - and computer-generated notices are occasionally, and illegally, pinned up advising that 'this is not a SMART area', or that this is a SMART area - but only for members of a certain group.

Brooks takes all this with good-natured humour. He can, after all, afford to: he delivered to the IBM board the £10 million saving they had asked for, three years ago - and the company's office space has almost been halved from just under four million sq.ft of space to just over two million sq.ft.

But what of the future? A recent research report produced by The Harris Research Centre for surveyors Richard Ellis revealed that 37% of the companies interviewed confirmed that 10% or more of their staff are already sharing desks. The figure is expected to rise to 41% in five years' time.

'It has been apparent to us for a long time that there has been a declining need for offices,' says Brooks, 'and that is not going to go away ... A return to decently profitable times is not necessarily going to produce an upswing in the amount of office space required.'

STAFF SHARING WORKSPACES

% of staff % of companies

desk sharing Now In five years

Less than10 63 59

10-20 4 5

21-30 6 9

31-40 1 2

41-50 6 6

51-70 8 11

70+ 11 8

Don't know 1 3

Source: Tomorrow's Workplace (a survey by The Harris Research Centre for

Richard Ellis) for Richard Ellis.

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