Office Space: Cost Savings Hidden in Plain Sight

This blog was originally published by CXO REvolutionaries here.

Written by Craig Clay, Former Lead Connectivity Architect, Shell.

Two recent megatrends have transformed our ideas about shared office space, likely forever. First, remote work has proven more effective than expected for many job roles, even for long periods. Second, the “great resignation” has triggered a global talent search, and organizations can no longer afford to limit their search to locations where they have a physical corporate presence. As these trends increase the viability of remote and shared-space working arrangements, operational and capital expenditures on corporate-owned office space should come under the microscope.

Today’s employees want flexible working arrangements (not just remote and not just office) and shorter commute times. A survey conducted by the professional services firm PwC found that, while 29% of workers favor shifting to permanent remote work, more than half (55%) would prefer to spend at least one day in the office per week.

On the other hand, employers need a presence to build company culture and foster collaboration while still cutting costs and improving the bottom line. A few years ago, a couple of campuses or satellite offices made sense. With much-needed talent spread globally, that no longer makes sense. Nor do the associated real estate and travel expenses.

Many knowledge workers can perform their jobs remotely, at least most of the time. Geographically dispersed teams are discovering a lot can get done together with limited physical interaction. They are using digital collaboration tools that continue to evolve (e.g., virtual whiteboarding is improving), and are getting savvier with asynchronous video and audio communication.

The hybrid workforce of the future will work not only remotely from anywhere but also from co-working and non-company-owned, flexible workspaces as these grow in popularity relative to corporate offices.

A breakdown of major corporations’ workforce distributions

Co-working locations continue to grow, far exceeding company-owned and operated facilities. For instance:

• The real estate analytics firm JLL predicts that co-working spaces could account for 30% of commercial office space by 2030.
• The online publication Co-Working Resources predicts growth in the sector from about 20,000 co-working spaces worldwide in 2020 to 40,000 in 2024. They expect rapid growth of 21.3% per year from 2021 onward.

Co-working locations are typically conveniently located and available on demand. Perks commonly include high-speed internet and modern WiFi 5+ high-density deployments, print services, and high-end conference room services with up-to-date A/V solutions compatible with Microsoft Teams, Zoom, and other technologies.

Dynamic E911 services are also now available for Microsoft Teams enabling organizations to remain compliant with recent, stringent updates to emergency services regulations.

Modern secure pull-printing capabilities have also matured in recent years, eliminating the need for SD-WAN or a VPN to support a printer. The corporate network for co-working, much like at home, becomes the internet – delivered securely.

Ditch the cube, reap the rewards

In 2020, commercial real estate averaged anywhere from $81 per square foot/year in metro New York to $25 per square foot/year in Houston. The 3-30-300 rule is a common method for measuring the relationship between utilities, rent, and payroll for an organization. It states that, per square foot per year, you should expect to pay about:

• $3 in utilities
• $30 in rent
• $300 in payroll

But that’s just the tip of the iceberg. Beneath it lies maintenance, furnishings, upkeep of common areas, or other amenities. The point is that a low cost per square foot shouldn’t be taken at face value.

According to some estimates, ten workspaces that sit empty for a single year cost a business $77,350. For large organizations that have tweaked post-COVID policies to allow for more remote work, the number of empty desks on a given weekday could be orders of magnitude higher.

Organizations should also consider that, by virtue of supply vastly outstripping demand, any new real estate could prove challenging to offload later on. Opening a new office (owned or leased) can also take up to a year given tight supply chains and trouble sourcing goods and materials.

Zero trust can set you free (from the corporate office)

With zero trust, employees working in shared spaces are indistinguishable from those working from home. The castle-and-moat intranet architecture is outmoded in either case, and now the same architecture and services can support homes, hotspots, co-working spaces, and company offices.

In turn, organizations get economies of scale on network and security services, a more straightforward user experience, and improved overall security of the delivered applications. Zero trust principles connect users to any application allowed by the policies set by an organization, only after that user's identity has been verified.

The advent of zero trust means legacy solutions explicitly focused on protecting the corporate network or employees on the go can be confidently retired. In their place, organizations can rely on a modern platform that’s accessible from anywhere and capable of assessing the security of applications run from anywhere.

If a viable alternative to centralized corporate networks is available and preferable for modern businesses, they should seriously consider office space as an area for trimming the fat. Remote and hybrid work is here to stay, and co-working spaces are rising in popularity. All this should lead organizations to reevaluate how much square footage they actually need – and to capitalize on opportunities for savings afforded by zero trust.