Office Space ROI
An office is more than just an expensive place for your people to work. At its best, your workspace can boost culture, help talent attraction & retention, allow your people to collaborate, and improve company performance.
Real estate is the second biggest expense for most companies, behind staff costs. Your workspace strategy and design can have a big impact on both. If you understand how your workspace impacts your company’s performance, you can improve your workspace effectively. As a result, you will maximise your real estate return on investment.
At Zentura, we’ve been helping companies optimise their real estate ROI for fifteen years. While a lot has changed in that time, the fundamentals of minimising real estate costs and maximising staff performance have remained the same. In this article, we’ll go over the top 5 ways you can improve the real estate ROI of your company.
When looking to maximise your real estate ROI, it’s important to make sure you are not wasting resources by having more office space than you need. Many services companies based in London spend 10-15% of their revenue on real estate. This is a huge amount, so having excess office space can cost your company millions of pounds per year. Sadly this is quite common: the average organisation has 30-50% more real estate than it needs!
If you have more office space than you need, then there are several options to reduce your real estate expenditure. You could find a smaller office space on a cheaper lease and relocate. If that’s not practical, you could reconfigure your existing space and partition some of it off. You could then turn it into a sublet space that you can rent to another company. If you have more than one office, you could even consolidate two offices into one, further saving lease costs.
So how much space do you need? A good starting point is to multiply the number of staff that will be in the space at once by the amount of space you need per employee. This is likely to be around 150sq/ft. It will vary according to the size and quantity of the workstations, private offices, and meeting rooms. To learn more about how much office space you need, as well as what can drive that number up and down, read our article “how much office space do I need?”
Minimise Operational Costs
An often overlooked part of real estate expenditure is the operational cost of your office(s). This includes electricity, water, and office consumables. This can amount to a surprising total – around 25% of your annual rent. These costs can quickly add up, so it’s important to keep them to a minimum.
When looking to reduce your office's operational costs, a lot can be done to reduce the expense without drastically changing the office. Installing a PIR system that only activates the lights in a space when staff are using it will save a lot of energy. Switching to reusable coffee and water cups will also reduce operational costs over time.
However, if your operational costs are very high, then it may be worth considering an office relocation. This is usually viable if your utility systems are very old and inefficient. For example, air conditioning often accounts for around 40% of a company’s total energy usage. Modern HVAC systems are up to 50% more efficient than systems from 10 or more years ago. This can create a 20% saving in your total office energy costs.
When looking to reduce real estate costs, it is important to keep in mind that the ultimate role of your workspace is to make your people more productive, both individually and as a team. To do that, utilising your workspace effectively is absolutely essential. Space utilisation considers how many people can work in your office, and how to make those people as productive as possible. It is by far the most common problem with offices in the post-covid era.
Finding the right level of space utilisation is a challenge. If your space is too empty, you are wasting expensive real estate. On the other hand, if your office is overcrowded, your people will be forced to work in a noisy and distracting environment. That would harm their productivity and wellbeing.
As well as dealing with how much space your company needs, space utilisation deals with how that space should be used. No longer is a compact desk farm considered to be the most effective use of office space. Your people likely spend most of the day working in small teams, so creating an office that caters to this will result in a big improvement in your real estate ROI.
Productivity is by far the biggest factor when trying to maximise your real estate return on investment. Without highly engaged and productive staff, your company will underperform, and your workspace will cost a lot more relative to your overall costs. However, UK office worker productivity has fallen 3-6% in the last 3 years. High staff productivity is essential to a good real estate ROI.
Wellbeing is a crucial part of improving the productivity of your people. Physically or mentally unhealthy people will perform far below their potential, reducing your real estate ROI. To improve well-being in your office, biophilic design is crucial. Biophilic design maximises the use of natural resources and materials in your offices, from natural light to wooden surfaces. Ergonomic furniture is also important. By keeping your people healthy, ergonomic furniture can create an average 25% improvement in productivity.
To maximise your real estate ROI, your workspace also needs to reflect the way your people work. By creating spaces within your office that meet these needs, you are giving your people the environment they need to improve their personal performance. Spaces that are designed around user experience will result in improved employee engagement. According to research by the Harvard Business Review, an engaged employee is 45% more productive than a satisfied worker. The better an organization is at engaging and inspiring its employees, the better its real estate ROI.
While personal performance is vital to your company's success, what matters most is the collective performance of your team. This makes effective collaboration an essential part of your plan to improve your workspace ROI.
The popularity of hybrid working has completely changed the way we use the office. With its lack of distractions, home working is perfect for individual work. As a result, the office is no longer the only place to work, so its role has shifted to a collaboration hub. Several studies have shown that in-person collaboration is a lot more successful than remote collaboration. According to recent research, remote meetings generate on average of 10.43 ideas, while in-person meetings generate an average of 13.36.
There is more to maximising collaboration than ordering your staff back to the office. If your office is still all desks and boardrooms, communication and collaboration will be stifled. This will make your teams less creative and efficient, which will drag down company performance. Your office needs to be designed to help your people communicate and work together. High-quality collaboration spaces that enable your team to work well together are an essential part of the modern office.
Collaboration is not one size fits all. It happens in a wide variety of ways, with different numbers of people. To cater to this, you need to make sure your space is as adaptable as possible. Your people need an easy way to congregate and share ideas, so every collaboration space looks different. By enabling your people to work effectively together, your real estate ROI will improve significantly.
Improving Your Real Estate ROI
Real estate and staff are two of the biggest costs of every company. It’s essential to maximise the contribution of both to your company’s overall performance. The most effective way to improve your real estate ROI is to maximise the personal and company-wide performance of your people. You can then look minimise your real estate costs. Trying to reduce real estate costs at the expense of staff performance will always decrease our overall real estate ROI.
To learn more about how your workspace can become a great return on your investment, read our article “what is the ROI of office fit out?”. There, we’ll explain the most important benefits of an office fit out, and how these will affect the ROI of your office fit out.
To take the next step to improve your real estate ROI, reach out to our workspace consultancy team. They’ll be able to help you create a workspace strategy that maximises the performance of your workspace and people while keeping costs to a minimum. We can help you ensure a smarter, optimised workspace with more productive people.