The widespread implementation of hybrid working has been an eye-opener for the corporate real estate sector. Meta paying £149m to walk away from a lease in Central London and HSBC looking to reduce their global office footprint by 40% highlights the scale of the challenge. It’s not only the large multinationals that are impacted, however, as organisations of all shapes and sizes are questioning whether their current estate is fit for purpose. Gone are the days of allocated desks for all and where previously an 8:10 desk-sharing ratio was a challenge to sell to employees, a new office space with a 1:10 ratio is currently being proposed by a local authority.
Where there is undeniably more space than required is in the public sector estate, with tough decisions to be made around tightened budgets. We’ve worked with a number of public sector organisations on different strategies to address their estate rationalisation, this article explores three approaches.
The first and (on paper) simplest exercise is when an organisation with a geographically dispersed estate decides that service delivery can be maintained with fewer sites. Following a consultancy exercise, one of our clients proposed relocating some services and employees across their wider estate, freeing up a large headquarters building for disposal.
Part of the estate rationalisation strategy involved taking space with another public body in a better quality (but heavily underutilised) building. It was a win-win for both, sharing maintenance and lifecycle costs. Sustainability, finances and increasing building utilisation were stronger drivers for colocation than supporting partnership working and driving synergies between similar bodies (though these have undoubtedly improved as operational remits overlap and processes have been streamlined in response to customer needs). Building work was required to satisfy confidentiality requirements while governance and information-sharing protocols were strengthened. Not all colocations require such stringent measures, however. The end result is a better utilised estate and a prime city site available for redevelopment.
A similar pre-pandemic desktop study for a local authority’s town centre campus likewise showed that the demand for space was greatly exceeded by the supply to the extent that one out of four buildings was potentially surplus to requirements. In contrast to the above scenario, there didn’t seem to be the local demand for the building or the site, making estate rationalisation more difficult in reality.
Scenario two does not involve releasing buildings but releasing space within a building, in this case a private landlord building. A post-pandemic space budget highlighted that c.30% of the initial footprint was no longer needed. The client was asked whether another public body could take over the surplus, with no changes to the layout (an optimal, sustainable solution). This was not felt to be a realistic proposition for valid operational reasons (confidentiality and organisational independence), but thankfully discussions with the landlord about separation works were positive and the floorplate will be split, with the client re-using a significant proportion of the current (and well-maintained) fit-out. This rationalisation will save the client having to relocate, places an emphasis on sustainability and is better for the landlord with the client agreeing to a new lease.
The final scenario is similar to the previous case, but the critical difference is that sharing space works (and is currently taking place, though to a much lesser extent). Previously the client was concerned with increasing headcount, proposing to shoehorn in additional desks where possible. With public sector employees not rushing back to the office in large numbers, the space budget showed that the client only needed approximately half the total footprint. Due to several factors (building ownership and condition, number of offices, geographic location and lack of alternative space) estate rationalisation here means a more efficient space plan with a greater range of work settings and inviting others to take the left-over space. The building itself lends itself to informal separation of client-owner and tenants.
Fortunately for the client, it appears that offering desk and meeting space to several other public sector bodies who are going through their own estate rationalisation has come at the right time, allowing them to take advantage of underutilised space in a good quality building, with the potential benefits of colocating in a public sector hub.
With such public sector co-working hubs and space sharing opportunities, some of the challenge is in getting the right people talking to each other, but also in potentially “encouraging” bodies to not hang on to their own poor space for concerns of losing independence in a shared setting. Opportunities for new relationships with other like-minded organisations, and saving costs while continuing to provide quality public services would seem to be more important than having your own name above the door.
Estate rationalisation and colocation in the public sector. The rationale behind it is simple. How we then fill the space, supporting new ways of working and catering to employee health and wellbeing, is a separate but related story.
If you’d like to hear more from the team on this topic, tune in to our podcast.