Activity-based workplace formats translates to bottom-line savings, but requires the space to implement
Recently, there was an article focusing upon how much the government could save in rent through more efficient use of the office space it occupies.
But let's perhaps look a little wider than that, because over the past decade many major companies have been adopting an activity-based workplace format.
By using this campus-style approach, staff are being provided with a laptop and a locker, but are not allocated any specific desk.
In Melbourne, the trend has mainly been unfolding within the Docklands with companies like NAB, Telstra, ANZ, Suncorp and Fairfax having all relocated their main offices there. In fact, NAB is currently in the process of filling its second Docklands building — this time in Bourke Street.
So, why is the trend occurring?
Source: Jones Land LaSalle, Deloitte Access Economics, The Age.
As you can see from the above graph, workspace ratios (ie: space occupied per employee) has been progressively falling over the past 20 years. But more recently, the trend has been driven by this activity-based approach to tenancy layouts.
Clearly, these larger companies will not need to occupy as much space, if they:
No longer allow for individually-petitioned offices; and
Only provide seven desks for every 10 staff members.
What does this mean for landlords?
Effectively, you are now witnessing the concept of an open plan layout on steroids and obviously, that will translate into bottom-line savings in the annual rent bill.
When the GST was first introduced, there was an initial one-off surge in inflation and similarly, there will need to be a one-off adjustment in the space requirement in these recent new lettings for these larger companies.
As you can appreciate, there are significant upfront costs involved before tenants can achieve these resultant savings in rent. Therefore, according to Jones Lang LaSalle, the targeted "efficiencies" are realistically available only to tenancies of at least 3000 square metres.
As such, there are some existing CBD landlords who will need to cope with the initial impact of this workplace trend and in the process, creatively retro-fit the space being vacated — if their tenants do decide to relocate.
The bottom line is you need to keep in mind that just under half of all CBD tenancies are too small to derive any benefit from an activity-based layout.
Plus, there are a number of pundits who still doubt whether this new trend will deliver anywhere near the expected gains in staff productivity.
Chris Lang is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can visit his website Property Edge Australia to help you get the most out of your commercial property investing.
This article originally appeared on Commercial Property Made Easy.