Right-Sizing Commercial Real Estate Portfolios In 2021

For organizations to rebound, this is a critical year to evaluate the role of commercial office space.


https://facilityexecutive.com/2021/03/right-sizing-corporate-real-estate-portfolios-in-2021/
For organizations to rebound, this is a critical year to evaluate the role of commercial office space.
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Right-Sizing Corporate Real Estate Portfolios In 2021

For organizations to rebound from the impact of COVID-19, this is a critical year to evaluate the role of commercial office space and square footage needs.

Right-Sizing Commercial Real Estate Portfolios In 2021

By Brian Haines

As COVID-19 quickly developed into a global pandemic and caused a majority of offices to close due to lockdowns, the commercial real estate market came under intense focus in a way the industry has never seen before. Today, with many organizations understandably still evaluating new workplace models and significant cultural shifts that ensure the health, safety and wellness of their employees, corporate buildings around the globe continue to be vacant or underutilized. This is causing what will inevitably become the commercial real estate crisis of 2021 — financial uncertainty.commercial real estate

Despite the colossal challenges and disruptions that commercial real estate is facing, the future is bright. Organizations were forced to innovate and embrace the acceleration of many positive workplace trends in 2020. For example, with a year of remote work under our belts now, several companies, including my company FM:Systems, saw productivity increase. This proved to many organizations that office space can really be anywhere without negatively affecting productivity. But for how long?

As some observers anticipated, not every role or every employee is suited to be fully remote for the long haul. Recent studies are showing many fully remote workers are experiencing more burnout than in-office employees and many are missing the intangible value of face-to-face interaction that no Zoom call could ever replicate. This has led to the rise of the hybrid work model that combines the flexibility of working from home along with time in the office that can be used specifically for collaborative work — like brainstorming exercises, kicking off a new project, or simply for team bonding opportunities.

Leaning Into Uncertainty

I expect some hard conversations to happen early this year as many come to terms with what buildings are worth in a world the pandemic reshaped. But it doesn’t all have to be grim. Similar to how many of us had to abruptly adapt to a remote workforce, organizations have a chance to rethink, reapply, and reinvent their real estate to remain relevant.

For organizations to successfully rebound, 2021 will be a critical year for re-evaluating the role of their commercial office space and square footage needs:

  • Who can continue to work remotely and how often?
  • How many employees are comfortable and/or eager to return to the office?
  • How can we implement safe and healthy protocols with the space that is utilized?
  • When will all employees be vaccinated for it be safe to go back to the office, if at all?
  • How can we evaluate whether changes in the workplace are performing well or not?
  • And of course, is the expense a cost-effective way to achieve organizational goals?

One thing we can all be sure of is the office is not dead, as many headlines have touted. But the post-COVID workplace will absolutely be very different from our very recent trend of high-density, agile work environments, when only 75 to 150 square feet were allotted per person in some cases.

Bringing the hybrid work arrangement into reality could mean a reduction in office space for some organizations, but for many others it will mean an increase in corporate real estate is needed to meet the changing patterns of how work gets done and new distancing requirements.

Here are three considerations for evaluating and right-sizing corporate real estate portfolio with confidence:

1. Facilities and Corporate Teams Provide a 360-Degree View on the Financial Health of a Building. If they haven’t started already, corporate and facilities teams need to work together on which buildings serve as promising assets. While facilities teams bring the knowledge of operational costs and how to best keep the buildings open and safe, HR, IT and, executive teams have a pulse on the overall company’s mission, its employees, and what changes need to be made to provide an environment for optimal productivity and employee confidence. Work together to determine whether a facility represents a good portfolio fit by reviewing if it:

  • Represents a good value financially
  • Helps the organization deliver on its mission
  • Provides an optimal experience for its employees and visitors

Then, focus your portfolio right-sizing strategy based on where they fall on their priority and criticality ranking.

commercial real estate
Source: FM:Systems

2. Manage “Portfolio Debt” Without Disrupting Employee Productivity. No longer can you just cut costs by merely getting out of your most expensive leases. In today’s world, those may actually be your most valuable buildings. These are part of your “portfolio debt” — the facilities that can support the mission of the organization, but currently represent under-performing facilities financially due to a combination of costly operations or low utilization. Some of these buildings will continue to cater to a positive employee and visitor experience.

Imagine the library at major college campuses. Regardless of the low usage during COVID-19 and cost of unneeded heating, more than likely the library will continue to be a focal point within the university’s portfolio.

3. Use Portfolio Management Technologies to Cut Costs and Take Care of your Employees. This is not the time to save money on technology that can help you make informed real estate and space management decisions. Real estate portfolio management technologies enable safe space planning that can help organizations strategically lay out their workplace to maximize usable space while also minimizing the possibility of close or direct contact between occupants.

When the pandemic first emerged, our team was working with Health Education England (HEE), which is responsible for the education, training and workforce development for the entire health sector of England. HEE had already been using FM:Systems’ workplace occupancy sensors at its three headquarters offices for years, but quickly expanded its use in all of its 26 buildings in order to save on unnecessary costs and implement their return to work strategy backed by data. With the added level of visibility from tracking utilization rates of its full commercial real estate portfolio, they were able to easily model floor planning scenarios based on actual usage, who could return to the office, and a configuration that met local reopening guidelines.

They also implemented a space reservation system so their employees could book a desk in advance of commuting, guaranteeing they had an available, sanitized place to work for the day. This further enables facilities teams to keep track of the number of people coming and going to ensure capacity requirements aren’t exceeded. Together, these two systems helped HEE safely reopen 18 of its 26 buildings during the pandemic and successfully adopt the hybrid work model.

Regarding the additional costs for cleaning and sanitization services, portfolio real estate management technology can reduce costs by helping facility teams and sanitization personnel target their efforts, based on which workstations are actually being used. This means a return on these additional investments can be focused on ensuring the greatest opportunity for health and safety of occupants, while also minimizing sanitization costs.

With promising vaccines underway, the commercial real estate world will still be very dynamic for at least a year, if not longer. The ability to add flexibility and data to any real estate portfolio will be key to powering through 2021 and meeting the needs of our mobile and agile workforce — a lasting legacy of the pandemic.

Haines is a 20-year veteran of marketing and product management of cloud and desktop products specifically created for the building industry. He is Chief Strategy Officer of FM:Systems, which provides workplace management technology and solutions that enable facility and real estate teams to identify, plan, and deliver the ideal workplace experience. Haines writes extensively on the topic of BIM and facilities and contributes a bi-monthly column to Revit Community online and is an active blogger. He is a frequent speaker at industry events, and currently serves as vice-chair for the National Institute of Building Science (NIBS) COBie Task Group (CTG). Prior to joining FM:Systems, Brian was an industry marketing manager in the Building Industry Group at Autodesk. 

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