The Future of Real Estate

From static to dynamic: Unlocking portfolio potential

March 25, 2024

The traditional model of corporate real estate, based on long-term office leases, is being challenged like never before. With the rise of remote work and distributed teams, the need for workplace flexibility has reached new heights. At the same time, businesses must adapt quickly to changing market conditions and organizational needs. 

Yet most companies are locked into costly, long-term leases for more space than they need. Prior to the pandemic, on average 30-50% of leased corporate space sat empty on any given workday. Now with remote and hybrid work, utilization rates have plunged lower and RTO mandates have come into force as a counter attack.

Businesses are saddled with excessive overhead for space that often no longer matches their requirements. Office layouts can be  outdated and  located in less optimal areas for attracting today's talent which is now more widely distributed. Organizational shifts, as leaders grapple with the new way of work, also lead to misalignment between workspace and team structures.

The traditional corporate real estate model lacks agility and financial fitness for the modern digital age. Businesses need solutions tailored to a dynamic workforce and ever-evolving demands.

Rise of the Agile Portfolio

Many companies, such as Elastic, are now shifting to more flexible real estate portfolios that incorporate a mix of spaces. This agile approach provides benefits such as:

Shift to Flex

Rather than being locked into long-term leases on large office spaces, companies can now dynamically adjust their real estate. This includes utilizing flexible space solutions like co-working offices and flex spaces on shorter terms. Co-working offices have risen in popularity, providing an on-demand way to quickly source office space in various locations. Companies can leverage co-working for temporary projects, expanding into new markets, or accommodating shifting teams.

Integrating leased, owned and Flex spaces

Agile portfolios integrate blended utilization allowing companies to optimize offices based on cost, location and team needs. The mix can be adjusted over time based on business requirements. By adopting a more agile approach companies gain flexibility, scalability and financial optimization from their real estate. The rise of flexible space solutions enables firms to rapidly respond to changing business environments. COVID taught us to expect the unexpected and flexibility is the solution in the face of uncertainty. 

Evaluating current Real Estate solutions

The first step in building an agile real estate strategy is to thoroughly evaluate the functionality, utilization, and costs of your existing real estate solutions. This involves taking a data-driven approach to understand what is and isn't working across your portfolio.

To start, analyze the functionality of your current spaces. Conduct employee surveys to gather feedback on how existing spaces are meeting employees' needs and where they are falling short. Ask questions like:

  • How suitable are the current spaces for focus work? For collaboration? For events?
  • What frustrations do you have with the current spaces?
  • What would improve your productivity and experience in the workplace?

Supplement survey data with utilization analytics. Leverage desk and meeting room sensors, WiFi connections, and other data sources to understand how existing spaces are actually being used. Look at:

  • Occupancy rates for desks, meeting rooms, and other spaces over time. 
  • Which locations and spaces see the highest demand versus lowest demand.
  • Traffic flows and space usage patterns.

Finally, benchmark the costs of your current portfolio. Analyze lease terms, rents, operating costs, and build-out expenses. Calculate cost per square foot, cost per employee, and other metrics to understand spending. Identify facilities and locations that are significantly underutilized or over budget. 

With data on space functionality, utilization, and costs in hand, you can pinpoint the biggest opportunities to optimize your portfolio. The key is taking a data-driven approach to understand what is truly working across all of your real estate solutions before defining an agile strategy.

Implementing an Agile Portfolio

To successfully transition to an Agile real estate portfolio, there are three key components to implement: adjusting the portfolio composition, introducing space management technologies, and establishing a clear change management plan.

The first step is assessing the current real estate portfolio and determining how to shift to a more optimized mix of owned, leased, and flexible workspace arrangements. The goal is to move away from a "one-size-fits-all" approach to real estate and toward a portfolio that can dynamically adjust based on changing business needs. This may involve rightsizing or exiting leased spaces that are underutilized, establishing flexible workspace agreements, or looking at owned assets that can be sold or repurposed if they no longer align strategically. 

Secondly, implementing space management technologies creates data-driven visibility into how all real estate assets are truly being used. This allows organizations to see detailed occupancy analytics for making informed portfolio decisions. Some of the key technologies to introduce include:

Office utilization heatmap

Lastly, an effective change management plan is critical when transitioning. This establishes clear communication around the "why" behind the changes and outlines how employees will be supported throughout the transition. Some best practices include:

  • Gaining executive sponsorship and establishing senior level champions
  • Rolling out training for employees on new technologies or processes
  • Conducting focus groups to gather feedback and ideas
  • Celebrating small wins and milestones along the way
  • Monitoring adoption and iterating where needed

With these three components addressed - portfolio optimization, space management technology, and change management - organizations can successfully shift to a dynamic, data-driven approach to corporate real estate.

Proactively measuring occupancy 

The key to optimizing your real estate portfolio is having detailed and accurate data on how your spaces are actually being used. This allows you to make data-driven decisions on rightsizing, renewals, new leases, flex space, and more.  

It's especially important to continually measure occupancy across all of your spaces - both owned and flex. Tracking granular utilization data lets you see patterns and changes over time. For example, you can identify certain days of the week or times of day that see peak demand for your flex spaces.

Benchmark your utilization rates against your own portfolio's history and market averages. This helps you determine if you are over- or under-allocated in certain markets or space types. Are your meeting rooms constantly booked up while your flex spaces sit empty? Usage analytics will reveal optimization opportunities.

Pay special attention to the concentration of on-demand flex space utilization. If certain locations see heavy and consistent use, it may make financial sense to secure dedicated space there. The key is translating real-time occupancy data into strategic insights.

By continually monitoring detailed occupancy analytics, you gain the visibility needed to rightsize your portfolio. This ensures you provide spaces that align to actual demand while avoiding unnecessary costs.

Data driven iteration

Once you have clear data and benchmarks around your real estate portfolio, the next step is iterating and optimizing based on those insights. This allows you to dynamically adjust your portfolio to meet changing business needs and optimize costs. 

Key aspects of this stage include:

  • Continually tracking utilization data across all real estate solutions and spaces. This allows you to see patterns and changes over time.
  • Adjusting the mix and amount of space based on utilization. If certain Flex spaces are highly utilized while dedicated offices are sitting empty, reduce the dedicated spaces and expand the flexible options.
  • Managing all leases - including direct leases, subleases, and flexible spaces - in one centralized real estate platform. This gives complete visibility and makes it easy to adjust and reconfigure.
  • Comparing ongoing occupancy costs to market rates. As leases come up for renewal, you can benchmark against market data to optimize.
  • Shifting spaces and solutions as business needs change. The beauty of an agile portfolio is you can scale up or down and rebalance across location types based on live data.
  • Continually optimizing for the best experience at the lowest cost. With a diverse portfolio and strong utilization data, you can iterate and adjust to meet evolving business goals.

Desana Case Study: Leading Sportswear Manufacturer 

With a distributed hiring model and a workforce spread across EMEA, the company faced challenges in providing quality workspace access. Additionally, the central Amsterdam team was underutilizing available spaces.

Since partnering with Desana, over 3,000 employees now have access to a single solution for flexible workspaces across EMEA, increasing collaboration and decreasing commute lengths. This strategic shift has not only enhanced productivity but also generated significant cost savings by disposing of leased offices.

Desana's data-driven approach has empowered the company to optimize workspace utilization and improve employee satisfaction. With its innovative platform and game-changing data analytics, Desana offers an enterprise-grade solution in the global flexible workspace market. By emphasizing control, choice, and significant cost savings, Desana enables companies to transform their workspace models and achieve efficient and flexible solutions.

Evaluating real estate strategy

Before jumping into an agile real estate strategy, it's important to thoroughly evaluate your existing portfolio. Asking these strategic questions, watching for signals, and mining internal data can reveal transition opportunities.

Key questions to assess your current portfolio

  • How well do our spaces support our business goals and culture? 
  • Are spaces utilized effectively or are there inefficiencies?
  • Does our portfolio allow for flexibility and adaptability?
  • Do spaces foster collaboration, innovation, and productivity?
  • How satisfied are employees with our real estate solutions?
  • Are there ways our portfolio could better serve a hybrid workforce?

Key indicators for an Agile shift 

  • High vacancy rates or unused desks
  • Remote employees feeling disconnected  
  • Low employee satisfaction scores for real estate
  • Lack of collaboration spaces
  • Leases expiring soon
  • Changing business needs requiring new space configurations 

Internal data measurements

  • Occupancy rates
  • Space utilization over time 
  • Employee commute times
  • Employee sentiment surveys
  • Real estate costs per employee
  • Energy usage per location

Next steps to optimize your portfolio

Here are some ways to get started:

  1. Begin transitioning to more flexible space options like coworking, on-demand offices, hybrid workplace solutions.
  2. Deploy technologies that provide you valuable data to optimize spaces and guide strategy.  
  3. Partner with experts in agile real estate to help develop a roadmap. They can assess needs, design a custom strategy, handle sourcing, and provide change management guidance.
  4. Audit your existing leases and consolidate with flexible options where possible. 
  5. Communicate timeline and changes to employees, and gather feedback. Agile workplace models thrive on employee choice and providing options. 
  6. Start small if needed, pilot the approach with one location or department before expanding. Use pilot results to showcase value and build on successes.

With the right strategy and expertise, optimizing for an agile portfolio is achievable for organizations of all sizes. The future of corporate real estate is flexible, and the time to start is now