Intelligent Workspace Management for Cost Optimization
The hybrid work model emerges as a desirable employment format. One of the model’s most substantial benefits is the ability to optimize office space and effortlessly reduce corporate spending on real estate. In this article, we discuss important insights on this topic.
A Managerial Dilemma
Running a business inherently involves great expenses, including payroll expenses, manufacturing costs, taxes, and insurance. The rising prices of many services and products force organizations to spend even more. Therefore, properly controlling corporate expenditure is crucial. The challenge is finding a way to cut costs while preserving performance levels.
Even though companies differ in their needs, we see that real estate expenses are typically the second largest after labor costs (excluding inventory costs). Office space is particularly expensive; on average, keeping a single workstation can cost around $18,000 annually. This hefty sum includes rental rates, management fees, municipal taxes, insurance, electricity costs, as well as equipment and maintenance costs.
For instance, if a company’s offices contain 1000 permanent desks, the yearly cost of keeping them can skyrocket up to an astronomical sum of $18,000,000. Under certain circumstances, the costs can be even greater. What can be done to decrease spending on office space, without having to compromise on work efficiency or employee comfort?
Flexibility Is the Solution
The hybrid work model is a highly promising solution to this issue. Many organizations have already adopted this model, in which employees work remotely for some part of the workweek. In contrast to the rigid seating arrangement of the traditional office model, desk booking is standard at the hybrid office. This means that employees get to choose where and when they sit.
Research data show that the hybrid work format is popular among employees worldwide: a recent survey of more than 10,000 desk workers from the US, Australia, France, Germany, Japan, and the UK indicates that 94% want a flexible work schedule, and 80% want location flexibility at work. This flexibility proves to be worthwhile, as workers with a flexible schedule reported almost 30% higher productivity compared to those with a rigid schedule. In a similar vein, 82% of the 28,000 employees surveyed by Cisco reported that hybrid work has improved their emotional health and motivation at work.
Many employers also see the hybrid model as an appealing work arrangement. A recent survey among executives revealed that, in total, 73% of the respondents intend to implement hybrid work policies (see the 2022 data in Figure 4, “Workplace Policy Intentions”). Aside from improving employees’ well-being and increasing their productivity, the transition to hybrid work can be an excellent opportunity for employers to save costs.
In a hybrid work model, the office’s purpose is changing profoundly. It remains a vital collaboration environment, but it is no longer the exclusive place for work. Thus, work environments should be adapted accordingly. For example, personally assigned workstations would be left wastefully unused when employees work from home. A better alternative is to turn some of these permanent desks into bookable shared workstations, also known as “hot desks”. These can be digitally reserved by different employees for defined periods of on-site work.
Specialized office space management software is used to coordinate operations at the hybrid workplace. For employees it functions as an online desk booking platform, letting colleagues easily organize in-person meetings and schedule seating arrangements for the long term. For executives, the system serves as space planning software that they can use for advanced occupancy management. Specifically, it allows them to track usage patterns and easily make necessary adjustments.
What Results Can Be Achieved?
The introduction of a hybrid week and hot desks means that fewer employees need to be present on-site simultaneously. Thus, the total number of desks can be reduced. As a result, a smaller and cheaper area becomes sufficient for office work, while the work experience remains smooth. Specifically, the introduction of a single day of remote work per week enables an office area reduction of at least 20% (since only 80% of the workforce work on-site). Two days of remote work per week can enable an area reduction of at least 40%, and so on.
To illustrate the substantial savings potential, let us return to our example company. We can assume that it has one thousand personally assigned desks. If this company adopts a hybrid schedule with one day of remote work, then every day 20% of its employees will work remotely. Therefore, at least 20% less office space will be required to support usual on-site work. Accordingly, this company will be able to save more than 20% of its yearly real estate expenditure, which is over $3,600,000. Numerous companies have adopted a work week with two or more days of remote work, which allows for savings of over 40%.
A Few More Insights
Importantly, the transition to a hybrid schedule is not the only reason to consider office space adjustments. Offices are frequently underused, and this is a source of considerable losses: experts estimate that underutilized office space costs around $250 billion annually in the US alone. Various factors lead to a situation where actual office occupancy is rarely maximal: business trips, off-site meetings, employee vacations, maternity leaves, absences, and sick leaves, to name a few.
Office space optimization is a process that must be based on an analysis of the organization’s unique needs. Before committing to permanent changes, companies can try new layouts by digitally editing and “shutting down” areas.
However, space reduction is not the only optimization measure available. Sometimes, all that is required is a reorganization: if a company is looking to expand, the underused space can be redesigned to accommodate the new employees, so that no additional space needs to be rented.
In other cases, the surplus areas can be subleased. That way they will generate profits for the company instead of being a burden. No matter what course of action is chosen, the space planning software ensures that managers can easily detect underutilized areas and make necessary adjustments.
Ultimately, the transition to a hybrid work model is a strategic investment in corporate resilience: the greater autonomy that employees get at the hybrid office can make them more engaged and satisfied workers, while the resource-saving contributes greatly to the company’s financial health.