Category: commercial real estate

A recent article from the NY Times about gaining savings and productivity from smaller offices.

Ever since the economy started to slow down about five years ago, companies have been looking for ways to reduce their office space costs. One option that has become more popular is reconfiguring the office to fit the same number of workers in a smaller space, and either subleasing the leftover square footage or returning it to the landlord.

Certainly, the primary motive is saving money. But some companies and architects say that having employees in closer proximity makes for a more collegial and collaborative environment — and a more productive and profitable one.

“We wanted people to be able to work wherever the work is, in whatever style,” said Mike Grindell, the executive vice president and chief administrative officer of 22squared, an advertising agency in Atlanta that recently completed a renovation.

The agency originally had three floors at 1170 Peachtree Street NE, and was subletting two-thirds of one of the floors in 2009 when it hired the large architecture company Gensler to redesign its quarters and ensure it met LEED gold energy standards. Gensler teamed with Carter USA, an Atlanta-based commercial real estate company, as project manager and Humphries & Company from nearby Smyrna, Ga., as general contractor.

At 22squared, a privately held agency with $64.7 million in 2011 revenue, the team ended up with a 50,000-square-foot space on two floors that went from an emphasis on hierarchy to one about equality. Before the renovation, natural light was reserved for private offices and conference rooms; now sunlight reigns for all.

Walls were dismantled. Employee work stations are now by windows. Private offices are at the center of the firm’s two floors. Small collaborative spaces are prevalent. White boards and glass walls for writing are everywhere. Work groups come together, dissolve, then come back together again.

By Gensler’s own measure, the revised space has delivered favorable results. Collaboration has increased by 22 percent, according to Gensler’s Workplace Performance Index, which rates workplaces and employees before and after renovations. That score brings 22squared’s rating up to par with the top performers in the advertising industry.

“You see and feel work happening all over the space,” Mr. Grindell said. “There’s better density, energy and productivity on two floors now than on two and a third before.”

Kevin Parker, the president and chief executive of Deltek, a software engineering company in Herndon, Va., said consolidation solved a number of problems at once for his company.

“We were spread out on seven floors in four buildings,” Mr. Parker said. “There was friction from meetings and driving — the buildings were within 10 square miles. With the traffic here, that’s a lifetime.”

Deltek moved into a newly configured space in an existing building last November with the goals of consolidating the company, and taking advantage of cost savings, higher productivity, and more idea generation and sharing.

Now, about 700 Deltek headquarters employees, a diverse group resulting from 11 acquisitions since 2005, are all in one redesigned, six-story building. Employees from two of the acquired companies, once archrivals who competed fiercely to provide information and analysis to companies seeking government contracts, now work side by side.

“The us-versus-them went away,” Mr. Parker said. “It’s one team, one floor. Now we’ve got some mojo.”

Because Deltek’s corporate culture is focused around special events like celebrating new sales, the new building has a vertical and horizontal hub. Circular spaces feed into it to create a sense of community.

“They can bring people together for big announcements,” said Catherine Haley, a senior principal at HOK and Deltek’s architect. “It creates visibility and the ability to network with each other.”

Even some of the country’s largest companies are cutting space. Christian Bigsby, the senior vice president for worldwide real estate and facilities at GlaxoSmithKline, said the company was engaging in what it called an opportunistic “footprint reduction program.” It began to make the investment, based on vacancy, relocations, or lease terminations, about six years ago.

Located in 90 countries with primary administrative centers in Britain, the United States and Belgium, GlaxoSmithKline is enacting the program globally.

“We can move to a smaller building with a smarter, improved working environment for reduced S.G.A. costs,” Mr. Bigsby said, using an accounting abbreviation for selling, general and administrative expenses — essentially, the overhead and indirect costs.

Before the program began, 35 percent of GlaxoSmithKline’s work activities were taking place in cubicles or offices. But those spaces took up 85 percent of the company’s office space, what Mr. Bigsby called a significant misallocation of resources. The question became: if the company provides 85 percent of its space for 35 percent of its work, where was the rest happening?

The answer: in meeting rooms, corridors, coffee stations and during travel. “Our solution is to press down the 85 percent dedicated space and increase the variety of alternative work spaces, because people’s activities did not align to the traditional spaces.” Mr. Bigsby said. “The desk space is now about half of our footprint.”

The arrangement of the workplace into neighborhoods and communities, in the form of benching for six people at a stretch, is not without a down side. On what the company calls bonus day earlier this year, Mr. Bigsby scurried to find a private space to review his salary with his superior.

“Everyone was trying to get a one-on-one,” he said. He had to settle for talking to his boss at a video conference out on the floor.

GlaxoSmithKline provides eight seats for every 10 employees, so it is possible that people might work in a different space every day.

“You get what’s available,” said Ms. Haley of HOK, who was also responsible for the Glaxo design. “If you can work on a computer in the middle seat of an airplane on a flight to Europe, then you can work at a different desk every day. It’s a hotelling desk — it’s not assigned to you.”

Bottom line, the clients say, is that the compression pays off.

“Our contract cycle used to take three to four days,” said Mr. Parker of Deltek. “Now we’ve cut it to hours.” Better yet, the firm has saved $1.5 million in rent.

At 22squared, the savings came during midnight of the recession, when the firm signed a new lease on its Atlanta office. “Let’s just say that over 11 years, it’s 15 to 20 percent better than what we had, plus a top-to-bottom total renovation,” Mr. Grindell said.

For a firm like GlaxoSmithKline, employing about 100,000 people globally, there are certain economies of scale. “We’ve reduced costs by $50 million a year just in our administrative spaces,” Mr. Bigsby said.