People and Spaces

How CRE savings drive better employee experiences

June 3, 2024

For most companies real estate is the 2nd largest expense on the books. Even hybrid businesses require physical locations for teams and excessive real estate costs can drain capital that could be better spent elsewhere.

With a large chunk of the budget tied up in real estate, business leaders have less discretionary spending for R&D, marketing, IT upgrades, hiring talent, and other areas that improve competitiveness.  Rightsizing real estate portfolios through cost optimization strategies can free up capital for business transformation.

Rightsizing for the future

Companies can often find themselves with excessive footprints that no longer align to the business. According to a report by the McKinsey Global Institute, office attendance has stabilized at 30% below where it was before the Covid-19 pandemic.

Utilization remains a key metric for measuring real estate portfolio performance and rightsizing requirements quickly moves the needle on this KPI. It isn’t always possible to negotiate the footprint or foot the exit agreement bill. But there are other ways to rightsize when under contract, such as subletting unused floors and buildings as a medium term solution. 

A critical step in rightsizing is an honest evaluation of how much space is truly required. Leveraging historic data, consulting with teams and reviewing the key shifts in how teams use space is essential in your review process. When organizations are data shy they can leverage on-demand networks. This not only provides access for teams but offers valuable insight into real-time use across desks, meeting rooms, event space and private offices, all of which can be used to inform future investment decisions.

We’ve written in detail about why the world’s biggest businesses are building agile portfolios. To briefly summarize, there is a growing trend towards accepting the exit agreement penalties in light of the overwhelming cost savings associated with rightsizing. 

Employee experience pillars

The employee experience encompasses every interaction an employee has with their employer, from the moment they apply for a job to the day they leave the company. It goes beyond the physical workspace and includes factors like company culture, technology, leadership, purpose, and growth opportunities. 

There are three main components that shape the employee experience:

The ‘how’ of work

The physical workspace and surroundings have a significant impact on the day-to-day employee experience. This includes the office layout, desk space, meeting rooms, break areas, and other facilities. Elements like natural light, air quality, noise levels, and ergonomics all contribute to a positive or negative physical environment. 

But, the physical environment no longer means the just office! Employees of distributed teams are working in a number of locations; home, office, coworking spaces, coffee shops and hotels. Also, the type of space teams look for might differ depending on the task at hand. Corrine Murray, during our RTO webinar, broke down work into four key components:

““individual focused tasks, asynchronous collaboration, synchronous collaboration, and socializing”

These types of work require different environments and therefore offices need to either be flexible to changing needs or leverage other spaces to supplement the real estate portfolio.

Company culture

Company culture and values establish norms for how employees interact and collaborate. Leaders play a key role in cultivating an inclusive, engaging culture where people feel motivated and empowered. From social events to diversity programs to recognition and rewards, thoughtful cultural initiatives make the workplace more enjoyable and meaningful. 

Leadership for distributed teams cannot rely on physical presence to manage performance and form culture. This is why workplace policies need to include TLAs to integrate the array of needs managers must consider. Investment in off-sites, chapters and meaningful IRL collaboration is essential to build workplace culture but this is supported by a parallel investment in ‘online’ culture. 

Technology 

Providing employees with intuitive, user-friendly tech makes it easier for them to collaborate, access information, and get their work done. Whether it's through collaboration apps, AI, automation, or virtual reality, companies are leveraging tech to remove friction from work and create more seamless experiences. 

The choice of platforms should align with the culture that's being established and the ways of working. Atalassian acquired Loom due to the importance of the tool for asynchronous team collaboration. As a remote first company Atlassian constantly looks to find innovative ways for teams to collaborate across timeframes and share information. This frames the employee experience as the majority of work is computer based. 

Essential employee experience investment

Companies today face increasing pressure to elevate the employee experience in order to attract and retain top talent. While compensation, benefits, and perks play an important role, the work environment itself is a crucial investment. Employees now expect a seamless digital experience enabled by the latest technology, as well as workspaces that are collaborative, comfortable, and inspiring.

The costs can seem daunting, but forward thinking companies are funding these investments through real estate savings. Rightsizing real estate portfolios, renegotiating leases, monetizing unused assets and leveraging flexible space can all yield significant savings. These savings can then be redirected to enhance owned workspaces, update technology, and provide meaningful connection.

Investing in the employee experience is now a business imperative.

By aligning real estate and workplace strategies, companies can elevate the employee experience in a cost-effective, sustainable way. The result is an engaged, productive workforce that delivers results.

Real estate enables experience

A company's real estate portfolio directly impacts the employee experience. With traditional office spaces, employees can often feel disconnected from leadership and each other. As highlighted by Corinne Murray in our RTO webinar:

“The bodies are there, but the experience is on the screen”

Forced mandates that aren’t aligned to a positive employee experience can result in employees spending hours commuting to an office that lacks collaboration areas, has no available leadership or where they spend their entire workday on remote calls because their team or collaboration pod is elsewhere. No employee is searching for this type of experience.

Rightsizing real estate and introducing on-demand workspace opens up new possibilities to support employees and their requirements. Here are some key ways real estate enables an improved experience:

WFH or WNH

Remote and hybrid policies allow employees to work from home offices, or a location of their choosing. This provides flexibility and eliminates commutes. It has been well documented that policies that provide workplace flexibility significantly improve the employee experience for caregivers, minorities, disabled and neurodivergent individuals.

Satellite locations

Opening satellite offices closer to where employees live cuts down on commute times. These smaller offices also create more intimate, collaborative environments. Employees feel a greater sense of community and belonging in the satellite locations. Having right sized satellite offices in strategic locations can represent significant portfolio savings.

Amenities

With reduced office overheads organizations are able to invest budget into on-site amenities. A swathe of Big Tech companies have cut back on the office perks such as free food and massages whilst simultaneously mandating RTO. By optimizing real estate investment the office experience can be elevated with amenities designed to enhance the office user experience and make it a place teams want to be. When the focus is on people it pays dividends in engagement, retention, and performance.

Data driven agility

As business needs change, companies require real estate portfolios that can adapt quickly. This agility is enabled by robust data and analytics. By gathering and analyzing data on space utilization and employee engagement, organizations gain valuable insights toward real estate optimization.

Armed with key data points, companies can make informed real estate decisions aligned to business objectives. Continuous analysis enables a feedback loop for iterative adaptation. As needs shift, the real estate portfolio can be adjusted through rightsizing, relocations, expansions, and other agile moves. Data is key to turning real estate into a strategic asset that flexes with the business.

Continuous iteration

Rather than create a rigid real estate blueprint, organizations should take an experimental approach. Test different workspace arrangements in a few locations, solicit direct feedback from employees, analyze occupancy data, and gauge impact on engagement and employee outputs. 

Companies must also establish clear metrics to evaluate the success of real estate and employee experience initiatives. By constantly evaluating their approach, measuring outcomes, and adjusting based on data, organizations can create an agile real estate strategy aligned to an exceptional employee experience.