Underutilized real estate leads to millions of dollars wasted each year; with the 4-day workweek gaining traction, CRE investors and landlords could lose millions in underutilized space.
This article was originally published by Allwork.Space.
The pandemic has shown that it is possible to change the way we work. Hybrid and remote working, and now the 4-day workweek, are gaining support.
Companies that have implemented shorter working weeks have seen increased productivity output from employees, increased satisfaction, and better levels of service.
As the 4-day workweek gains traction, it could have a big impact on real estate investors.
The shortened workweek showed improved wellbeing for workers, better work-life balance, and improved collaboration. Importantly, there was no loss of revenue for the companies involved. But it’s yet to be seen what the impact that the shortened workweek will have on commercial real estate (CRE).
The shortened workweek has been a success
4-Day Week co-founder Andrew Barnes, a New Zealand real estate investor and the founder of New Zealand’s largest trust company, Perpetual Guardian, believes that workers should take a day off for the rest of their working careers.
During Perpetual Guardian’s trial of the 4-day workweek, Barnes found that employee productivity increased – although they were in the office for one day less.
“When we started, everybody’s initial reaction was, ‘How am I ever going to do my work in four days rather than five?’ The trial indicates that not only could they do their work in four days, but they could do it better in four days,” Barnes wrote in a white paper detailing the experiment’s success.
As companies consider the idea of a 4-day workweek, CRE leaders must find innovative ways to attract new tenants as well as ensure they aren’t taking a loss.
If people are working one day less a week, what impact will this have on existing office space?
While companies might save on resources like water and electricity, the fact remains that they will still be paying full price for the office real estate.
As real estate prices continue to climb, organizations would be wise to analyze how they’re using their space – especially considering that real estate is one of the most significant expenses for companies.
Underutilized real estate leads to millions of dollars wasted each year; one of the most common underutilized spaces being meeting rooms.
According to a report by Density, one 375 square foot conference room in New York City could cost the equivalent of $2,705.31 per month, based on CBRE’s $86.57 square foot average.
If a meeting room designed for 16 people is being used by just one person, that would mean that only 1/16th of the space is being used, leaving 15/16th underutilized. Using the CBRE estimate of $86.57 per square foot, that would represent around $30,000 a year in misused real estate.
But what if an entire office building is being underutilized? This could potentially be an issue for companies implementing a 4-day workweek.
While organizations can save thousands on utilities by implementing the shortened workweek, they could also lose thousands or millions in underutilized space.
Organizations that allow all office employees to take off Fridays will likely only need to reduce their office footprint by less than 5%. If companies rotate the day people get off in order to keep operating 5 days a week, they will likely need to reduce their office footprint by a larger percentage.
If companies increasingly move toward more flexible models, they might seek to unload office space as workers split their time and share desks and resources. This will result in slowed leasing activity at office buildings.
Companies are rethinking what it means to work on a full-time basis, and CRE investors will need to prepare. Office landlords might need to get a lot more flexible as employers explore different arrangements that benefit not only their staff, but also their company’s revenue.
What are the solutions for wasted office space due to a shortened work week?
To sustain property values, CRE leaders must make sure their properties meet tenants’ desire for flexibility, according to Forbes.
Some companies have opted to create or join shared office spaces, the idea being to cut the costs of maintaining and managing an office space.
Companies should take into account the CRE cost implications of adopting a 4-day work week when comparing it to how much a company gains in productivity, and how much it saves in talent attraction and retention efforts.
To offset loss, companies could find new uses for their office space that sits empty an additional day of the week. For example, organizations could use the space to host events like classes, workshops, or facilities where people can take tests (college admission tests).
Maintaining an empty office space has been overwhelming for small businesses, and each company needs to evaluate the cost of losing a day in the office. In some cases, it may be worth it.