The dollars and sense of the current workplace design mania
The current commercial facilities’ focus on ‘the next best things’ in workplace is timely. Until recently, corporate property and the workplace environment has been the poor cousin to the other corporate support functions related to changing approaches to information technology models and human resource management.
Now, the discussions appear to have converged into a single multifaceted conversation, embracing property, people and business processes as all being key components of the workplace. But has this focus on the latest and greatest trends in the workplace gone too far, ignoring the real financial impacts and general common sense? Are key aspects of the life cycle costing analytics of corporate accommodation solutions being ignored?
Workplace design trends
Commercial office workplace designs, much like new consumer offerings in the next trendy and ultra-cool coffee shops or cocktail venues, appear to be focused on design trends with vibrant colour palettes, repurposed ‘authentic’ finishing materials and innovative work points.
These workplaces, following the design tradition of ‘form following function’, generally have many and varied work point styles, ranging from workstations, meeting rooms, collaborative hubs with beanbags, to the latest workpod furniture solutions. In an attempt to project the corporate culture and values, workplaces are balanced with corporate imagery, legacy artefacts and extensive internal landscaping.
In most prime office buildings, being green is now the new normal and is no longer the differentiating factor for buildings competing for tenants. With a new focus on employee health and well-being, the ability of the workplace to contribute to general wellness has overtaken the green building debate.
Until recently, the potential advantage of this aspect of corporate property offerings has generally been neglected. The argument in support of a great new working environment focused on wellness, cultural expression and employee engagement is compelling. But the challenge is in preparing the robust financial analysis required to support the great storyboards used to sell the sizzle of these workplace models over the projected life cycle of the occupancy of the premises.
Positive financial outcomes
With these activity-based workplace models, with no employees having fixed addresses and allocations of eight or fewer work points per team member, there is usually a compelling financial analysis that can be used in the business cases to support the concept.
From an occupancy cost perspective, this workplace approach with a smaller accommodation footprint can result in reductions in rental, energy and related costs. Dependent on the design solution, these reductions can be 20 to 30 percent. With a focus on current cost reductions, reducing accommodation wastage, related to reducing vacant desks and excessive accommodation allocations, is easily understood.
In addition, the reduction in fixed partitioning, the eradication of physical churn projects, minimalist décor and the use of repurposed finishing material, can all support the reduced accommodation life cycle financial commitment. And there is also a compelling environmental argument – the most environmentally friendly square metre of accommodation, is the square metre not leased. Projected cost reductions and energy savings are relatively easy to measure, but this is only part of the story.
Although the focus on employee wellness and sustainability quickly gets the corporate social responsibility tick, attempting to include any resultant corporate revenue enhancement in the financial analysis is more problematic.
How can the contribution of the workplace design be measured in terms of employee productivity gains? Although many attempts have been made to unravel this linkage, the measures tend to be subjective in nature. The more measureable aspects often resorted to, such as reduced sick leave or lower staff attrition, have less financial impact and are also usually open to challenge.
“Commercial office workplace designs, much like new consumer offerings in the next trendy and ultra-cool coffee shops or cocktail venues, appear to be focused on design trends with vibrant colour palettes, repurposed ‘authentic’ finishing materials and innovative work points.
More complex are the attempts to measure the extent to which great new workplaces can promote innovation and generate creative concepts. Despite this challenge, emerging workplace design philosophies continue to sell the concept of exciting collaborative spaces being the touch points for informal and chance meetings as incubator spaces for innovation and creative ideas.
How is the value of the ideas created in these workplaces converted into commercial benefit reflected in the supporting accommodation business cases? Particularly, if there are other non-workspace influencing factors that may also have contributed to the generation of these ideas. The significant understatement of the potential positive financial impact in framing new workplace business cases is an ongoing challenge for the industry.
Financial cost estimates
Conversely, too often in new accommodation business cases, there tends to be under-measurements of the true cost of new workplace models, both in terms of initial costs and over the projected life cycle of the premises, based on poor assumptions.
Typically, the initial cost of the required supporting technology installations, furnishings and the required change management is underestimated. New workplace financial analyses are generally projected for periods in excess of 10 years, often aligned to lease terms. However, it is unlikely that over these periods, the current workplace designs will continue to be seen as creative, innovative and different, particularly with the current bright colours and trendy designs.
It is unlikely, therefore, that these workplaces will stay untouched over the life of the lease term. Ongoing changes with supporting budgets will be required to refresh the furnishings and decoration to continue promoting creativity and innovation.
As part of the minimalistic design, repurposed materials, particularly timber and legacy installations are used to establish that creative and ‘different’ environment. The maintenance and management of these forms of building components require a different approach, particularly if installed external to the building.
Although these alternative finishes are currently viewed as good sustainable reuse of materials and very appropriate for the current time, this thinking may not prevail into the medium- and longer-term. These abnormal life cycle maintenance and replacement costs are seldom factored into the financial analysis.
In addition, most new design workplaces are promoted as ‘future proofed’. This is a flawed concept, technologies will continue to evolve and changes in installations will be required. New ways of working, enabled by these technologies, will require workplace and furnishing changes. With the arrival of the Internet of Things (IoT), embedded digital sensors and big data analytics, change will likely be continual and life cycle cost estimates seldom factor these changes into the financial analysis.
Future accommodation models
Disruptive business models have changed the way the world works in many businesses – the way taxies are hauled, the way holiday accommodation is booked and the way goods are bought.
What are the future disruptive business models that will evolve in the near future to provide the workplace as a service? It is likely that long-term accommodation lease commitments organised directly with building owners will be less prevalent in the near future.
Business models focused on ‘co-working’ hubs are rapidly being rolled out through various groups usually focused on specific business communities, such as start-ups, the ‘FinTech’ and creative industries. These models appear to be servicing the niche players and specific sectors and, at this stage, it is not clear how these models will evolve to service the needs of larger companies.
The potential impact of these new business models on corporate workplace portfolios underpinned by long leases will likely be significant. When new accommodation business models arrive that bridge the objectives chasm between owners (wanting long inflexible leases) and the users (needing flexibility and agility), the impact on the current new workplace models will become more evident.
And the accommodation workplace business cases will likely be structured with significant differences focused on portfolio flexibility. What will happen to the current ‘great places to work’?