Guest blog by John Williams, Chief Marketing Officer, The Instant Group

In the UK and US markets, many corporate occupiers are now considering a permanent move to a more dispersed corporate real estate portfolio – or at least that is where a lot of market conjecture is heading. This (potential) model would include a central head office, complemented by satellite offices closer to where people live, framed by a more flexible working policy whereby the employee has a greater degree of choice in where and how they choose to work. Not only does this create a better work-life-balance, but this strategy often drives increased efficiencies across the portfolio, leading to long-term savings. It seems the logical conclusion to supporting internal clients around the requirement to “work nearer to home”, but the real value this approach could generate is also worthy of further exposition.

What are the cost savings?

At the most basic level, a dispersed portfolio can deliver substantial cost savings for the employer thanks to lower rental values in most secondary locations. Research conducted by The Instant Group indicates that for a hypothetical office of 60,000 sq ft catering to around 600 people in Central London, the annual saving by distributing half of the workforce to prospective suburban/secondary locations could be up to 23% per year in rental rates alone.

If the company wanted to implement an even more agile approach by incorporating flexible workspace across the portfolio, the cost saving is even greater, with a fully inclusive flexible workspace offering over a 28% discount on just the rental cost.

The chart below breaks down the costs of moving 50% of the workforce out of a central CBD office and into satellite offices. The all-inclusive rate provided by flexible workspace in this scenario is only 17% more expensive than the rates paid by a company in a central location. The significant savings are due to the reduction of CAPEX costs at the beginning and end of the lease, the agility the turnkey solutions offer, and eradicating the additional costs ahead of lease occupancy. In effect this approach flattens cost, preserves cash through the avoidance of capital investment and allows the requirement to flex upwards and downwards with headcount (something no one can really predict in this market).

Value Creation in disaggregated portfolio

*Data represents the annual cost for an office portfolio for 600 employees within London, at a figure of 1.2 people per desk.

To this point expanding the use of flexible workspace can drive further value through a portfolio – flex needs to be better considered as a real driver to managing headcount and an agile approach to strategy. The complexity of planning the use of large, legacy, leased space can result in it being under-utilised by up to 40 to 50% after only a few years of occupancy (Source: Leesman). A more flexible approach to procurement allows space to be “switched off” or expanded within a matter of weeks. This degree of agility preserves capital, which can be better invested in core business functions.

Choices, choices, choices

But cost is not always the driving factor and the benefits of offering employees greater choice in the way they choose to work gives a significant advantage when it comes to retaining and attracting top talent, with the barriers of location and accessibility broken down. We have already seen demand in the regions in the UK and the US for flex space increase – particularly within the smaller requirement brackets – driven by employees from large corporates voting with their feet and taking space independently. The recent pandemic has shown that the desire from employees to save time and money by being able to work closer to home is expected to become a significant driving factor going forward, with research starting to indicate that, without such flexibility, employers may struggle to recruit.

Equally, a dispersed portfolio with a core central office allows for a far wider catchment area for talent, something HR teams are focusing on. The benefits continue with shorter commutes providing carbon savings and, while the employee commute has so far stayed out of most companies’ Carbon Neutral commitments, it is not long before it is scrutinised.

To date, all these benefits have been hard to measure which is why basic cost often becomes the main quantifiable factor. But this is all set to change over the coming months as businesses are forced to take a serious look at the way they manage their corporate real estate strategy and identify the best approach for its people. The C-Suites of organisations around the world want visibility of these costs and the inherent value in alternative approaches to office occupancy – the sector is keen to provide answers and develop the tech and data to match this challenge. One thing is certain, businesses are going to have to work very hard to bring back the millions of homeworkers who left their offices behind in March 2020, and a dispersed portfolio is a strong contender for resolving this challenge.

About the author:

John Williams is a marketing and PR consultant with more than 15 years’ experience and particular knowledge of working within the property and financial services’ sectors. John advises a number of clients on marketing, digital marketing, social media and PR. John joined The Instant Group in 2015 to spearhead the marketing team and support the rapid growth of the business both on and offline.