Why businesses shouldn’t downsize their office to save on rent

Written by Angela Ferguson


Collecting employee data to inform office design

The world of work is changing, why businesses shouldn’t downsize their office to save on rent.

The Covid19 pandemic saw people across the world begin to ‘work from home’. Prior to this, WFH was widely perceived as a bludge, yet suddenly in 2020 it became mandatory, and people were expected to turn their homes into efficient and effective workplaces. Now that it was proven people can work efficiently from anywhere hybrid working has become the new normal and workplace design in commercial real estate was under threat.

If there is one key takeaway from business owners in this period of change, it is that we don’t know what the future holds. While it may sound like a cliché, we can strategise, plan, and attempt to predict till the cows come home, but we cannot be certain of what our industry or market will look like in a year’s time.

This is the same for the future of work, it is constantly evolving and changing. From the global uptake of Zoom to Accenture using the Metaverse to onboard employees, the changes in behaviour and the way we work are profound. And what we do know for certain is that the way the workplace looks and performs today will not be the same in 6 months or a year’s time, so the amount of office space a business needs will continue to change.

It may be easy to want to jump the gun and downsize your office space, as fewer employees spend an entire week in the office. Yet, it is worthwhile first modifying your existing space to be more appealing and future-proofed for staff, as the long-term impact of this on staff retention will likely outweigh the cost of rent; around 80% of an organisation’s costs are related to people (ie: wages, etc) whilst the fit out cost is typically around 2-3% of these overall costs.

Data shows what businesses should be considering before downsizing the office.

A 2021 survey conducted by Dexus, a real estate investment trust that manages landmark Sydney office blocks, found that 20% of its clients need more office space and nearly 80% of people want to work in the office three days or more a week.

While there is still significant reluctance to return to the office full-time, companies must figure out the best hybrid working scenario which aligns with employee needs and company culture. For many businesses this looks like the TWAT model (Tuesday, Wednesday, and Thursday) in the office. Which means the shift to hybrid is limited as majority of staff will intend to be in the office on the same days.

A recent 2022 study done from the Harvard Business Review revealed that although WFH was on the rise there has not been an equivalent drop of office space demand with cuts as little as 1- 2% on average.

Here are three factors driving this and what you need to consider before deciding whether to downsize:

1. The new destination workplace requires switching up your space

The office now provides a different experience to work than what employees will get at home. Our client research has identified that people want to come to the office to collaborate and socialise, and this will be prioritised over focussed, individual work, which can be mostly executed at home. (The office does still need to support focussed work however).

Statistics show, that the requirements for rows of desks have dropped and the new ‘destination workplace’ has flexible working arrangements offering options of collaborative settings, focus areas and group touchdowns – these generally require more space than rows of workstations.

Altering the type of settings and environment your office provides will be more useful for employees than moving to a smaller, more constricted space. The best way to start this process is to ask your employees what they want from the office, engage them in the process, and provide opportunities to test and learn. This will be key to determining the most appropriate future space, in terms of quality and quantity.

2. Upsize on human connection

Smaller office space comes with limited capacity. If you downsize to an office that cannot host all your employees, this will restrict company-wide collaboration, meetings, and events. The office plays an important role in creating and supporting human connection, it fosters team culture and morale which is particularly important as employees look to prioritise wellbeing in their experience of work.

To learn more visit our article: 4 Design tips to Support Mental Health in Hybrid Workplaces.

3. Allow room for growth

Downsizing to a small space can sometimes reduce opportunities for growth and signal a narrow, fixed mindset. Our physical environment can have a very tangible impact on our mental headspace, just as many found the impact of WFH full-time difficult after during extended periods.

Allowing yourself the space, at least until you are certain what the future holds for your organisation, can create expansive thinking and strategy, and support important goals around growth, prosperity, and longevity.

To learn more about how Future X Collective can help you obtain the correct data to create a thriving environment for your people, contact one of our workplace strategy experts today.