INSIGHTS EDITION 1 • SEPTEMBER 2008
The Creative Challenge of Recession for Workplace and Real Estate, by Andrew Laing and Despina Katsikakis
Everyone is asking “Are we in a recession?” Certainly several of the world’s major economies are slowing down. The global credit crisis, falling house prices in key markets, shocking fuel price rises, and the specter of high inflation have all combined to create a climate of caution if not real economic decline.
Yet in surprising ways, the slowdown is a stimulus to creative thinking about the design and use of buildings and the productivity of the workplace. We like recessions! They make us and our clients think harder and work harder to design and manage real estate and the workplace as though they really mattered. (We of course are convinced that they matter a lot in good times as well as in bad). In boom times, it is far too easy for real estate and workspace to be treated merely as assets that are speculated in and traded lucratively as commodities, as exchange value. In good times, office space is taken for granted, a residual of the business plan: focus on finding more space to accommodate the growing headcount!
In 2007, DEGW Group Chairman Despina Katsikakis spoke to the international real estate community at MIPIM in France, stating that we in the developed world are suffering from the twin ills of over-development and underutilization of space. While technology enables effective mobility and flexibility of working practices, the planning of commercial office space does not adequately reflect either of these now-established trends. She went on to say that we need to use our existing buildings and infrastructure in radically different ways by leveraging new ways of working to create sustainable places, and constructing new buildings only when necessary: doing more with less.
We have to start asking the fundamental questions:
- Why are we continuing to build millions of square feet of new office towers in cities all over the world
that are likely to be empty or highly underutilized?
- Why is there not more pressure to make better use of existing older building stock?
- Why is the shape and functionality of the extended suburban city form that we have taken for granted in the twentieth century not being redesigned?
- What kinds of buildings will accommodate a more hybrid pattern of use corresponding to an increase in higher-density and mixed-use urban fabric?
- What are the alternatives to the lifestyle and consumer assumptions that support the unsustainable environmental impacts of our normal way of designing, using office buildings, and planning the shape of cities?
During growth periods, the supply side is king – the demand for space drives higher rents and property yields. Most organizations, as they grow their businesses and their headcounts, fail to think deeply and creatively about the real value of real estate and workspace for their performance. In a recessionary period, organizations that view real estate and workspace as unimportant contributors to business suffer the most: they discover the hard way that the wrong space and the wrong buildings can destroy them.
The up side of a recession is that we and our clients can clearly see the advantage of challenging the conventional wisdom of the supply-side-driven real estate and workplace industry.
Thinking creatively about real estate and work space
In the current economic reality, it becomes obvious that those businesses which have already thought seriously about how they use workspace and leverage their real estate are much more capable of surviving and flourishing.
Many of our clients in North America and worldwide have already taken this more intelligent approach to the workplace and delivered signifi cant business performance. Most notably, Accenture, Capital One, Cisco, Deutsche Bank, GlaxoSmithKline, Johnson & Johnson, Lilly, and Nielsen, among others, are piloting new ways of working and mobility solutions, and implementing large-scale, roll-out programs.
In other words, they are already doing more with less. They are sharing workspace in expensive downtown office centers. They support remote and distributed work. They reduce the need for standardized work days and nine-to-five commuting patterns. They intensify how space is used over time and make sure their buildings hum with activity. These innovations are of course cost-saving - but they are also optimizers of business and workforce performance. If designed and managed well, they are also enhancers of user satisfaction.
Sustainability and environmental issues
In an under-recognized aspect of new ways of working, these innovations also minimize carbon footprint in ways that go beyond the technicalities of the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System. Combined, these ways of thinking about real estate and the
workplace enable organizations to enter a downturn in the business cycle with much greater agility and flexibility.
The risk of recession exposes the fragile logic of a supply-side-driven industry that is disconnected from organizational and environmental concerns. At a time of risk such as now, there is greater opportunity than ever to challenge the status quo. DEGW’s work has always been environmentally responsible, focusing on helping clients to make the most efficient and effective use of their real estate portfolios. Today, many of our clients are intelligent organizations increasingly focused on corporate responsibility and making radical changes to their real estate as a result.
Leaders in organizations find that there is a much greater appetite for change and a willingness to experiment. The younger generations in the workforce are eager to engage in a workplace that is aggressively positive on environmental issues, that embraces new technologies and mobile ways of working, and that strongly reinforces a vibrant company culture.
In conclusion
None of these ideas about making the most of the workplace and real estate is new; they’ve been evolving for thirty years in one form or another. What is new is the willingness of many organizations to start thinking seriously about how the design and management of workspace and real estate can make a difference to their business performance, and even to their economic survival.