Workplace strategy and its importance to the future of businesses (part one)
For an emergent discipline with such obvious importance for the commercial property industry, Wikipedia remains strangely quiet on the subject of workplace strategy.
It defines it as, “the dynamic alignment of an organisation’s work patterns with the work environment to enable peak performance and reduce costs.”
Those describing themselves as ‘workplace strategists’ on the back of their success in managing a corporate relocation into ‘activity based working’ (ABW) workspaces may concur with this definition.
Yet workplace strategy’s new disciplines have far wider implications. They now direct not only the future of work itself across myriad workplaces but also the fortunes of many currently powerful property owners. And in its unfolding, even ABW may now be history, a passing fad, because what is coming with an ever tighter focus on knowledge-creating workspaces is even more challenging, especially for those owners.
Workplace strategy and the bust of the commercial workplace property boom
Those owning commercial CBD property may currently be enjoying too fat a lunch, blinding themselves to the inevitable. Current occupation of Sydney and Melbourne CBD properties is at an all-time high, with there being little stock available and historically low vacancy rates. The combined effect of low availability, tightening demand and a slowing pipeline of new supply is high rental prices.
But what goes up must come down, and the factors that will contribute to this are already manifesting.
First, tenant companies are becoming more knowledgeable about activity based working and workplace strategy. In getting better at negotiating new square metreage based on actual need, they will continue to demand less, but also demand different kinds of space.
Second, commercial property owners (CPO) generally have limited knowledge of the ways in which those businesses leasing their spaces are using them. Not being either invited or able to see through their walls limits their abilities to refine their product to address genuine needs.
The age of machine learning also presents the prospect that with digitised combatants becoming smarter in the way they do things, many office jobs will simply be automated out of the workforce.
The upshot seems likely to be a diminution in the demand for commercial office space, or the emergence of that demand in a different form.
Activity based working is yesterday’s workplace strategy news
ABW is an area in which Robin Brinkman, director office leasing at agents Knight Frank, suggests Australia pretty much leads the world. But, perversely, tenants leading the world at ABW was only the beginning of the owners’ or agents’ problems.
Even when I first interviewed him one year ago, Simon Hunt, managing director, office leasing, at Colliers International in Sydney, suggested that the downward effect on big tenant leases of customers getting smarter about their use of space was already affecting its business.
Hunt said, “The bigger tenants are becoming smaller. They are moving from A to B, and a lot of the big legal and accounting firms are taking 10 to 15 percent less space.
“There are brand new players, such as WeWork and different models, LiquidSpace, third spaces, flexible spaces, membership spaces, and you can spill out into those areas.
“Therefore tenants are saying, I might not need all the meeting space on this floor … so I might take a little less space.”
The upside, he said, is that, “Occupiers might be getting smaller, but there are more tenants just coming up in Australia. There are more businesses now.”
Indeed, ABW is already yesterday’s war, but more businesses don’t automatically add up to more of the same demand.
The new players are already taking the cream
In April, Business Insider reported that global technology and innovation company IBM agreed to sign a membership deal for all desks in co-working operator WeWork’s 88 University Place New York building. It was set to move up to 600 employees there, with it essentially becoming IBM’s corporate office, but designed and managed by WeWork.
It is co-working, not ABW, that is tomorrow’s battle for CPOs.
The commercial workplace market is shifting
The emerging business model of those looking for space is now moving in pretty much the opposite direction to those established institutions previously best able to supply it. Currently, in an age fostering the many variants of co-working, this change may be happening only at the margins.
But where incumbent landlords want to lock customers into the longest lease term possible for the greatest amount of space, the space-takers now want precisely the opposite. They want to buy the smallest amount of space, a single desk with commitments not exceeding the month.
In this shift, the customers can only win.
This article is continued in part two, available on FM next week.
Graham Lauren is a director of Shiro Architects in Sydney and is building a specialist knowledge-architecture briefing practice. This piece was first published on medium.com/workplace-strategy.
Image copyright: pressmaster / 123RF Stock Photo