Do the productivity gains of having knowledge workers in one office justify the growing costs of real estate?
Companies today face unprecedented pressure to improve space utilization in their office. The causes represent a fascinating confluence of urban costs, knowledge worker needs, and available technology. We’ll examine each cause, then draw lessons from leaders in the workspace efficiency revolution.
The primary pressure is that workspace is expensive. According to the NAIC, office space per square foot has more than doubled in the U.S. since 2000, with even higher increases for tech and professional services companies that cluster near public transit in talent-rich urban areas. In fact, for companies harnessing the power of their workers’ analysis and creativity—what Peter Drucker first dubbed “knowledge work”—the cost of office space is second only to compensation.
Studies show that both desk and office space are underutilized
It’s not solely about cost, though. Companies that rely on office productivity to keep revenue flowing have begun to tailor their workspaces to create more worker interaction. They’re looking for a performance boost from face to face interaction, one that studies show can reach 20%. Designing for more interaction often means reducing individual workspace while bolstering common areas, or, more eccentrically, increasing the distance to the bathrooms—Steve Jobs’ famously effective tweak at Pixar to encourage employees to casually converse. So in addition to cutting square footage per employee, companies are also being more deliberate about workspace design.
The third cause of mounting pressure on workspace efficiency is new expectations arising from newly available technology. In decades past, tracking workspace utilization was labor-intensively manual at best, impossible at worst. Now, with the propagation of smart building technology like occupancy sensors, RFID badges, and other potential data sources for employee presence and movement, “we can’t measure that so we can’t improve it” is no longer an excuse.
Workspace utilization is indeed being measured, and the results have laid bare the underutilization of workspace. For example, Teem, a workplace software and analytics company WeWork acquired in 2018, has measured baseline conference room utilization at only 50%. And desk utilization is often reported below 50%. Globally, real estate giant JLL found that 42% of commercial office space is underused. Such low utilization is finally being seen as wasteful from both cost and corporate social responsibility perspectives.
A salaried worker wouldn’t last long at a successful company if data showed he slept during half his working hours; likewise, companies are now realizing that workspace that’s only half used is just as wasteful.
Increasing work efficiency and productivity is not a new goal. From time-motion studies at the turn of the 20th century to Lean Six Sigma starting in the 1980s, companies of all sizes have long tried to rigorously optimize output.
What’s different today is the type of worker most companies need to support. The number of knowledge workers, whose work is primarily non-routine cognitive (think engineers, consultants, lawyers), has skyrocketed by 100% since the early 1980s. In fact, knowledge workers are now the largest category of worker by a long shot.
The shift toward knowledge work has, within roughly a generation, made office environments the most common type of workspace. Improving and redesigning those workspaces for higher efficiency requires different a different set of tools. So who’s leading the way, and what are they bringing to bear?
What the data says vs. what workers report
Bringing data into the conversation is essential. CBRE found that although its Cleveland workers estimated that they were at their desks a majority of working hours, occupancy data showed that the desks were empty more than 60% of the time. People are often poor estimators, so it’s important to measure any inputs into a decision rather than relying on human estimates. Of course, that requires having the capability to measure how people use space. Fortunately, smart buildings are becoming more mainstream, measuring worker and environment data like occupancy, number of people and movement patterns, and comfort datapoints like humidity, light level, and noise level.
With your building telling you how your workspace is being used, the next step is to create a more adaptable space that meets workers’ needs in real time. Two shared space ideas have become popular ways to align supply and demand: Hot desking and hoteling. And they’re not just a startup fad: according to a recent survey, two-thirds of multinational corporations plan to implement shared workspaces by 2020.
Moving and shaking at the office
Both hot desking and hoteling forgo dedicated desks that are permanently assigned to a specific employee. Instead, workers are given the freedom to use space that’s available when they need it. The main difference between the two approaches is that hoteling allows space reservations, whereas hot desking is first-come, first-serve. Hoteling slightly sacrifices utilization to help mitigate uncertainty about being able to find a space to work, which is one of the biggest drawbacks of shared space.
Beyond sharing desk space, companies are also creating workspaces that can change their shape and utility. For example, GE Digital’s recently-remodeled San Ramon headquarters has movable meeting room walls. Track-mounted panels, which double as whiteboards, allow workers to create modular collaboration spaces of various sizes and configurations. A presentation has different space needs from a brainstorming session, for example, and by allowing workers to use the same square footage for both purposes, GE is reducing its overall space requirements while improving worker productivity. The space is more highly utilized because it’s more useful to employees, a classic win-win.
Finally, companies can complement an adaptable-space approach with a broader workspace strategy of flexible leases that allow easy expansion and contraction. This is particularly important to medium and large businesses that might not have a big enough footprint to shift headcount among many sites.
Bring it all together like Deloitte
It’s a challenge to bring together the necessary data and combination of solutions that’s right for a particular workforce. Let’s wrap up by looking at one of the most efficient knowledge worker buildings in the world, which also happens to be the world’s smartest building.
The Edge, a Deloitte HQ in Amsterdam, is a new-construction building completed in 2015. No one working within has an assigned desk—there are 1,100 workspaces that were designed to serve 1,700 workers. The shared space, helped by building intelligence we’ll mention below, has proven such a success that those same workspaces now comfortably accommodate 2,500 workers. In addition, the building devotes 25% of space to common and collaborative areas, versus 10% in a typical office building. So this is a workspace that is more efficient with individual workspace, leaving far more room for collaboration.
The building is also a net producer of energy, and its 34,000 sensors provide an accurate real-time picture of how workspace is being used. That granularity is reflected in the control systems, which allow workers to set their preferred lighting and temperature in the workspace they’re using. Similar workspace-level comfort controls have boosted worker satisfaction by 83% (GSA). And they only set it once, as The Edge assigns workspace based on several environmental factors and preferences, then automatically customizes the space to the worker’s known settings. As if that’s not enough, the building also greets workers as they arrive in the parking lot, finding them a parking space that matches the needs of their vehicle.
For Deloitte, The Edge has provided an enormous recruiting benefit, which is one of its primary business challenges. How big a benefit? Sixty-two percent of candidates specifically cite The Edge as an appealing factor.
The lesson for companies of all sizes is that with workspace becoming more expensive and needing to accommodate more collaborative knowledge workers, companies and workspace providers first need to get smarter about how space is actually used. Based on that information, they can create adaptable, modular work environments that maintain high utilization by being more useful to more workers. Finally, so much of the success depends on execution. The Edge is a great example of a cohesive package that provides more efficient workspace combined with higher worker convenience from arrival to departure. It’s that user-centric mindset that will propel the next wave of efficient workplaces.
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