Companies enjoying drastically reduced real estate costs, according to CEO
For organizations who switch to a hybrid work model — in which employees work sometimes from home or elsewhere, and sometimes from an office — the savings accrued can be as high as $13,000 per employee each year, according to new research.
A study of these potential savings, done by flexible workspace company IWG, showed that for companies who reduce real estate footprints and move out of downtown cores, the savings are massive.
“Businesses can save as much as about 51 per cent on their rent and their operating expenses, by both reducing their footprint by moving to more of a flexible hybrid model, and utilizing either work-from-home policies or working-closer-to-home policies with flexible workspaces, coworking memberships, etc.,” says Wayne Berger, CEO The Americas at IWG in Toronto.
For organizations, these savings not only show up on the bottom line but in the financial wellbeing of employees, according to Berger, when it comes to commuting alone. “It could be upwards of $457 a month just on commuting back and forth to a downtown office and that’s via train travel, subway travel, metro travel; up to $1,200 a month if they commute by car.”
And organizations can use this type of real-world data to enhance the employee value proposition, he says.
“What we’re seeing now is this real significant increase in costs around the commute that companies can provide back as a benefit by instituting hybrid working policies, and company employees can realize in real-time after-tax dollars that they can explicitly save by eliminating or greatly reducing their commute.”
Attraction, retention tool
Employers are facing talent shortages today, and this has become even more pronounced during the pandemic, and employing flexible work models do help keep employees employed, says Berger.
“Eighty-eight per cent of companies are instituting a hybrid or flexible working policy within their organization so they’re allowing their people more flexibility in where and when they choose to work. The remaining 12 per cent that haven’t instituted a hybrid working policy, and still kind of maintain a draconian 8:30 to five policy of being in one central office, they’re going to lose talent.”
Citing a recent survey, employers should be aware that flexibility is paramount for employees in these areas. “50 per cent of Canadian workers have communicated that they will leave their company if they’re not able to work flexibly,” says Berger.
But along with the flexibility desired, there remains a need for face time with colleagues.
“We’re social beings by nature; we value and love the opportunity to be able to work together but what people and employees want now is they want trust and they want to demonstrate that they can be as productive, if not more productive; they can be as engaged, if not more engaged, with the ability to be able to choose the workstyle so we’re seeing this really big push towards this notion around hybrid and flexible working becoming the desired way to work.”
For the Conference Board of Canada, a remote-first workplace is reaping great benefits.
‘Flight to quality’
While organizations are definitely downsizing workspaces, they are not sacrificing in terms of the condition of new workplaces that are being sought, according to Berger.
“What we’re seeing is this big flight to quality, where companies are recognizing that the workplace is becoming an indicator of choice for workers. As people are coming back to an office, employers are recognizing that the actual design of the office matters, and the level of engagement in a workspace matters. Companies who are at end-of-lease cycles, are choosing to move their office to a higher quality building.”
Design is becoming more important, he says, as employers make the switch.
“The space is becoming much more purposeful and design rich, so rationalizing, reducing real estate costs helps companies build a better space that their employees find more attractive and also gives them the ability to drive the biggest savings on their balance sheet outside of labour, which is real estate. We’re seeing a company save upwards of 50 per cent by reducing the real estate costs.”
For those organizations who are concerned about corporate ESG goals and efforts, newly flexible spaces will also greatly benefit the environment.
“By giving people the ability to work flexibly, whether it’s a couple of days a week or in a completely permanent way, they can drastically reduce CO2 emissions, which have the greatest environmental benefit overall, which helps them towards the ESG and just helps them on an environment perspective,” says Berger.
By moving offices outside of expensive downtown cores and offering hub and spoke models (which are decentralized satellite offices, supported by a centralized space), employers also are realizing costs savings and this fields is becoming “the most significant growth trend amongst Canadian companies,” he says.
“You’ll see the cost of the lease, and the cost of the operating expenses, the property taxes, the utilities, etc., are traditionally lower in a suburban location versus the downtown core so there’s a significant savings, upwards of 51 per cent, just by moving from a downtown office to a suburb. It costs less to develop a site in downtown versus in the suburbs, which in turn means a landlord needs to charge less for their lease than they would downtown.”
And these types of innovative workspaces also benefit employees, he says.
“What it does is it gives employees the ability to really live the 15-minute city, which gives people the ability to live, to work, and to access all the services and all the amenities that they need within a five to a 15-minute walk or bike ride. There’s a major opportunity that gives people the ability to have separation from home [and] have a chance to work in a well-designed workspace but do it close to home, basically eliminating the commute.”
In order for these models to be successful, HR has a big role to play, says Berger, but especially in ensuring managers are trained in the new way to work.
“Organizations need to take the time to make sure they’re training their managers and the leaders in how to lead both individuals who are both virtual and physically located at times in the same location.”
“You have to be able to engage each person in a team meeting in a different way than you would have in the past and everybody was physically together. You have to have good cadence [and] good rules of engagement: you’ve got to encourage and inspire communication back and forth, you’ve got to manage the virtual room in a different way,” he says.
And HR must ensure buy-in from senior leaders, or the effort “will collapse” says Berger.
“If an organization rolls out a hybrid working policy but yet all the people leaders go into the office every single day, then employees, whether it’s immediately or over time, will either start to go back or they’ll resent the culture and make a decision to head elsewhere because they’re going to feel that there’s inequity that’s taking place amongst individuals that are in the office, versus individuals that aren’t in the office. You have to make sure that your management team commits to supporting the policy, or else it’ll send the wrong message. It’s a shadow-the-leader element where people will do as you say, versus what you do.”