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How should companies approach their office space strategy in this economic environment?
We are in the middle of the worst economic crisis of the last 100 years. It is the perfect storm where, every time you think that we are in core and about to exit, it just gets worse.
Right now we are in the middle of the worst economic crisis of the last 100 years. It is the perfect storm where every time you think that we are in core and about to exit; it just gets worse with some new unimaginable trigger to multiply the doom and gloom. Almost every country everywhere is being hit and its one thing after another, time and time again.
The most obvious thing that this recession has thought us is that the old Real Estate tactic of sending 100% of a company’s employees to a location to be chained to a desk every day and then to lock that strategy into a 5 year plan / lease is just not going to cut it these days. The glut of sublease space and mothballed buildings available today only reinforces just how out of sync most real estate strategy was over the past 10 years and its only in times like this that the importance of keeping the facility platform as fluid as the business plan is just common sense. 5 years ago over 98% of a local, national or global company’s platform was fixed in long term inflexible 3 to 10 year leases. My expectation was that this economic environment would send companies large and small scurrying to alternative workplace models such as outsourced space in business centers, more home working solutions, hoteling, reverse hoteling and hotdesking in the office and a decentralization of large HQ’s to smaller and more nimble hubs. What actually changed was “nothing at all” in most cases. Now don’t get me wrong because there has been plenty of talk about changing the way we work and incorporating perfect work life balance and maximum workplace efficiency but, on the whole, very little has actually been done to change anything.
The incredible thing is that this lack of fluid facility planning is not just restricted to the slow growth companies. Early rapid growth sized companies like Groupon and Face book still have over 90% of their space in long term leases even though they have no idea what the next 3 months hold, never mind the next 3 years. Established fortune 500 companies still cling to keeping their people in central locations and spend money on flying to face to face meetings and driving to see clients over the use of the digital technology. This same digital technology could save them millions every year but it is still not widely used. Small and medium sized companied are still taking subleases to house all their people rather than outsourcing the majority of their space to executive suites and start ups still dream of having the corner office when they finally make it rather than preserving cash flow and flexibility. New working methods such as executive suites and co-working models are still being explained away as new fads which will pass with time rather than being embraced as working methods of the future. With all we know today can we really justify continuing with the same old methods that did not work before and expecting different results.
Now we understand why the building owners are in no rush to change this long term leasing structure that they have controlled for the past 100 years and in a way we understand why some brokers would be tempted to want to keep those nice commissions that they receive for long term lease negotiations, but what we did not get is why those companies who rent space did not say enough of this madness. To find the answer we surveyed the market to ask brokers, facility managers and clients alike what their plans were for the future and why more radical change has not been made yet.
The documented results were not surprising as they stated the usual excuses from finding the right time to execute a plan to creating the appropriate workplace culture but when we dug deeper the unspoken insinuations were much more interesting. Over 80% of all companies we spoke with had discussed alternative workplace strategy in the last 12 months but only 20% had on any serious level implemented one. The unspoken message we were hearing was pushback from the CEO’s inner ego to relinquish that pleasant feeling when their dinner party friends see their name on the side of a building, the facility managers knowledge that nobody ever got fired for not changing a historic strategy, middle manager fear of the unknown and pushback from first line managers who are terrified as to how they will be able to manage this new remote business community.
Sometimes the simplest things to change are the most challenging and suddenly it is easy to imagine how difficult that change was from the typewriter to the computer, from the spoken word to the phone, from yesterday’s newspaper to the internet with tomorrow’s information curated to our very specific needs. The world is certainly turning and the only thing we know is that it can’t be stopped; only slowed down. Unless we, as advisors to industry decide to put greed and out of date advice aside and help those companies find a better way to work, then we will be as extinct as they will once that future comes rolling in. Let’s do the right thing and all have a great 2012 from the team at Your Office Agent.
Learn more about the author, Brian Mac Mahon.
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