The hybrid work environment has many companies re-evaluating the cost-effectiveness of their real estate strategy.
You may have noticed a major shift in work patterns in some industries: more telework and less five-day, in-person work environments. As a result, office spaces are being used differently than they were before 2020. Only 5% of workers are interested in returning to their offices full-time, according to a poll conducted by CareerBuilder.
So to reduce real estate costs and keep employees productive, should you consider moving to a leased space, leasing a smaller space or a combination of leased office space with a secondary flexible/co-working space? Flexible/co-working spaces are professional spaces that can come with creative desk layouts, such as non-fixed workspaces that any employee can use, and are intended to encourage new ways of collaboration. The concept first gained traction with WeWork.
If you’re considering realigning your organization’s hybrid workspace, you’ll need to hash out a plan with your leadership team for these three important areas:
- Security. How much of a burden will it be for your IT team if you move to another location or add a satellite flexible workspace to the mix? What’s the plan to keep your company transactions, records and data safe? Will any security improvements or upgrades be necessary to carry it out?
- Productivity. Does your HR leadership have any concerns about your people staying productive in a new space or spaces? What can be done to address those problems? Are there any other ideas for optimizing productivity?
- Culture. A dispersed workforce means using technology to make essential collaboration happen. But if employees have the ability to work from anywhere, there’s also a chance engagement will take a hit. How can a strong sense of community and inclusion be nurtured as your hybrid work environment evolves?
Evaluating spaces for hybrid work
In 2021 office leases cost anywhere between $8 and $23 per square foot per month (depending on location), according to the Small Business Administration.
Meanwhile, flexible workspaces often have either different types of memberships or provide a custom quote. Prices may differ depending on location, your team size, or if you need dedicated desks, private offices or larger rooms.
Besides a cost analysis of the different options you’re considering, you’ll also need to carefully consider what hybrid work conditions would be the best fit for your organization. There are pros and cons to both office and flexible spaces.
In a conventional office space:
- you control how it’s organized
- it can accommodate large numbers of people
- it’s possible to get access in case of emergency, and
- you’re responsible for expenses like utilities and cleaning.
With a flexible, or co-working, space:
- it’s an alternative hybrid workspace for telecommuters encountering distractions at home, and could be an attractive workspace option for your independent contractors
- some expenses and cleaning may be included in your membership or subscription fee (however, some co-working spaces may charge for what they consider amenities, like conference room use, parking, etc.)
- it’s ideal for smaller teams and can serve as a satellite location if your company unexpectedly outgrows its primary space
- decorating the space is already taken care of (but you don’t control how the space is organized), and
- you may be limited to when you can use the space because of set hours of operation.
Lease negotiations & the hybrid workplace
Unless you decide that going full-remote makes the most sense for getting your best work done, having a leased physical workspace – whether it’s a conventional office or a flexible space – will still be important.
Because of the unpredictable business climate, if you’re still committed to a long-term lease now may be the time to approach the landlord about granting an early termination right without penalty.
However, if you’re coming to the end of your lease term, you may be in a stronger position to re-negotiate provisions than you were at the start of the lease. Some key elements to focus on:
- Have the landlord take on more repair and maintenance responsibilities
- A lower amount for your share of the common area maintenance costs
- If there’s a percentage rent clause tied to your revenue, get rid of it
- Flexible options for expanding your office space
- Provisions that are adjustable – because circumstances can change without warning, and
- Add a subletting provision. Subleasing unused space can be another revenue stream for your firm.
When hammering out an agreement on a flexible workspace, the experts at Yardi recommend asking for front-loaded free rent, if feasible. (For example, when you pay your first month up front, plus your deposit/letter of credit, can you structure the deal where you can get a few months’ rent for free?)
Key area for spend optimization
Energy costs have to be kept under control, and that’s especially true if your hybrid work environment will be expanding to include a flexible workspace.
A solution for the office worth looking into is an artificial intelligence-enabled thermostat that can control the office climate based on factors like levels of occupancy, weather conditions, time of day and more. You can track the ROI via your year over year energy bill savings.