Planning for Offices - Space Rationalisation

Guest article from Joe Malone BSc(Hons) ICIOB 

Understanding the existing core data for the building you inhabit may well highlight that it is not fit for purpose or space inefficient; critical information if you are reviewing plans for future accommodation that may well fuel your appetite for a move

Source: http://www.sven.co.uk/

Many organisations, particularly Government organisations are currently reviewing their office space requirements with a view to rationalising and making efficiency savings but how should you approach this exercise? Many organisations see this as a simple exercise in reviewing their ways of working and you will commonly hear of organisations looking to reduce their desk to staff ratio but organisations looking to build or rent new office space have a unique opportunity to fully consider how their buildings can contribute to space efficiency and the starting point to this is first ensuring that your organisation has a robust space standard. It consistently surprises me that so few organisations have a space standard in place.

The Space Standard

Essentially the space standard will contain ideal core data drawn from best practice guidance produced by The British Council for Offices and the Office of Government and Commerce.

The National Audit Office recently published this report which again placed emphasis on government organisations to start the space rationalisation process (Link)

The simple table below shows ideal data drawn from best practice guidance and provides a template for space planning. If you were planning to inhabit existing rather than new office space then the Net Internal Area (NIA) of 10m² should be increased to 12m² and the table should review actual core data for the building you inhabit. In fact understanding the existing core data for the building you inhabit may well highlight that it is not fit for purpose or space inefficient; critical information if you are reviewing plans for future accommodation that may well fuel your appetite for a move. 

Aside from best practice guidance there are some subjective issues based on the organisations culture and aspirations for team working. Is there an aspiration to remove the perceived management hierarchy by having managers share the same open plan floor space as staff?  Undoubtedly, open plan office space is more efficient and encourages collaborative team working but are there issues of business privacy that would prohibit this working arrangement? Privacy is often the given argument for individual staff retaining their own office space but it is seldom justified when shared but limited cellular space can be booked by all staff members at suitable times. 

Office Ideal Core Data (New Space)
Headcount	190
Minimum legal requirement for office space provision per staff member	11m³
Office of Government Commerce (OGC) and British Council for Offices (BCO) standard for NIA per person (Average public sector = 24m² per person)	10m²
Business aspiration for efficiency savings	30%
Ratio of workstations to staff	7/10
Number of workstations to achieve 30% space efficiency	133
Cellular space	≤ 10%
Meeting Room provision	Typically 1.2 m² per staff member
Primary circulation space as a percentage of total NIA (Normal range for efficient buildings = 10-15%)	≤ 15%
Floor plate efficiency (NIA:GIA)	80-85%
Flexible partitioning	Yes
Local Support Space	≤5% of Total NIA
Central Support Space	25% of Total NIA
On Site Parking Space provision standard	1 space per 25m² of GEA
Required number of staff parking spaces	100 (0.8 ratio spaces/desks)
Ideal GEA Required for staff parking	1900m²
Number of single user offices	6
Number of Meeting Rooms	8

Efficiency Savings on Existing Office Space

You are of course limited on efficiency savings that can be made on existing space, your floor plate efficiency is generally fixed and you may be limited in changes that can be made to cellular and primary circulation space etc. Those who inhabit more modern buildings with flexible partitioning have a greater opportunity to make physical changes to the floor space and therefore rationalise how they use that space.

In general terms organisations will look to review their ways of working and introduce clear desk policies, increased working hours or mobile working so that they can reduce their desk to staff ratio. The average cost of a work station is circa £4500 per staff member so if you reduce the number of workstations by 30% then there are some immediate and on-going savings in not providing or supporting these work stations. If the object of this exercise is to free up space to achieve a headline figure of  say 6m² per staff member then the question I would ask is, ‘What do you now intend to do with the free space you’ve created?’ I come across this anomaly many times, organisations want to achieve this headline figure but have no real plans for the space created, moreover they have these hypothetical ideals of space per staff member in mind without understanding the wider context of additional space required for circulation and support.

If you rationalise and free up space then make sure you can generate income from that space otherwise what’s the point?

Efficiency Savings on New Office Space

I’m currently involved with the planning a new build office and if we use the ideal core data in the table we see that we have 190 staff and a guide for 10m² of NIA per staff member. This means we have to build an office with a net internal area of 1900m², or do we?

The reality is that we are still looking to reduce our desk to staff ratio by 30% and it follows that we can reduce the size of our building by 30% leaving a total requirement for only 1330m² of NIA. At our anticipated build cost of £836 per m² then this space reduction would save around £550k on the cost of development. Whilst these savings are incredibly attractive I should issue a word of caution… organisations that take full advantage of these space savings can lose business flexibility! Are you absolutely sure that there will be no future requirement for additional space? It’s a fact that many public sector organisations have a continuous downward trend in terms of the number of staff they employ but private sector businesses looking for continued growth should bear in mind future space requirements.  

By rationalising and freeing up space, organisations can create the opportunity for the co-location of services. Rochdale Metropolitan Borough Council recently took the opportunity to  relocate staff from geographically dispersed premises throughout the Rochdale area into a single Municipal Office providing a single point access service to a mixed use development containing offices, library, restaurants and cafés. They were fortunate in appointing an architectural firm who are fully conversant with BCO guidance and best practice and I’m sure that this was a critical success factor in their excellent new office design. (Link)

The concept office design I created in Sketch-up had a greatly reduced footprint and reduced development cost due to the space freed in the adjacent building and the glazed link provided to utilise that space.

Source: Joe Malone

Concept Office Design Utilising Free Space Created in Adjacent Building

For cash strapped public sector organisations looking to review their accommodation, identifying space efficiencies for shared accommodation or co-location can be the critical factor in gaining approval for new office development.

Joe Malone BSc(Hons) ICIOB 

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Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Do Consultants (Really) take the time to understand the needs of their Clients?

Guest article from Richard Davies - Project  Manager, Capital Projects, Property Services – Severn Trent Water 

When organisations are looking to rationalise, their first port of call is often an external consultant.  In my experience, where the consultant fails is not getting to grips with the culture of the organisation that has instructed them.....  This leads to wasted time and recommendations that cannot be implemented

 

Severn Trent Centre - Google Images

In these increasingly uncertain economic climates, all organisations are looking to minimise their cost base and gain maximum efficiencies.  This can lead to many actions for example reducing staff and an increased focus on outgoings.  This is as true for large organisations regardless of size.  It is a fact that one of the areas of focus, particularly for large organisations is the use and amount of operational space they hold, particularly if they have recently rationalised their staffing levels.

Until a few years ago, property was just something a company had to have in order to operate.  In most cases was treated as an unavoidable overhead, not a key part of the business, however it is increasingly becoming an important part of the cost base as companies look to minimise their overheads.   With modern technology allowing people to work from home, in most cases reduced work force sizes, and most companies adopting open plan rather than cellular office space companies are finding that they have more space than they need and a rationalisation is required.

Having more space than you need leads to not only more rent, rates etc, but the space needs to be heated, lit, secured and managed, all of which is a strain which organisations can ill afford in these austere times.  In addition, there has been an increased tendency to move to open plan and hot desks from cellular office due to the amount of space taken up by offices.  Consequently this reduction in space can lead to savings in many areas: - energy bills, FM, security etc.



Severn Trent Centre  - Under Construction

My work over the past 3 year at Severn Trent Water has been centred on these types of activity.  The business has an aging, dilapidated estate which is in need of significant investment.  The first part of this was a new Operational Centre in Coventry, which allows the workforce to work in a much more flexible way.  It promotes the open plan and hot desking philosophy with an IT solution that allows working from home and other places to be as productive as the office.  By creating this building (Severn Trent Centre) it allowed us to close 7 other buildings, all of which were old and inefficient.  An illustration of this can be seen in the carbon footprint as the new building uses far less energy than any one of the buildings closed on, which is another important aspect for Severn Trent Water.


Many organisations are going through similar processors at present and this rationalisation exercise should provide opportunities for property professionals across the spectrum, with re-design of space, fit out, review of leases, enacting of breaks in leases etc.  However this opportunity must not be squandered. When organisations are looking to rationalise their first port of call is often an external consultant.  In my experience, where the consultant fails is not getting to grips with the culture of the organisation that has instructed them.   Their advice is restricted to analysis of headcount, square meterage and cost thereof, without really understanding how the organisation works.  This leads to wasted time and recommendations that cannot be implemented. 

It is vital that any advice provided must be considered in the context of the culture and operations of the organisation and therefore consequently there is an increasing need for large organisations to have a resident property expert that understands both the property world and the nuances of the organisation.  Only then, can they help steer the consultant and apply the advice provided by external bodies to gain the most savings. It is, however true to say that professionals on the outside remain closer to the cutting edge and new thinking than those within client bodies as there is a certain level of insulation that comes with working within a client body.  There is not the daily interaction with other similar professionals which can lead to a lag in implementing new industry best practice.

As long as the economic climate remains in its current state of health, companies will increasingly review their property costs, which will in turn result in opportunities for consultants, either as the resident expert within a client body, or as a consultant providing advice.

Richard Davies  - Project Manager, Capital Projects, Property Services – Severn Trent Water 

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

 

Asset Management - Building Asset Value in Difficult Markets

Guest Article from Matt Bigam – Partner at Bidwells

Building owners should review their options in the current, challenging market. Active asset management can enhance value considerably and broaden market appeal subject to careful analysis and a full evaluation of local market circumstances. It is worth exploring different, accurately costed options.

Source: Google Images

In a flat market, characterised by limited demand, above average availability, and subdued activity in the investment sector, it can be difficult to create asset value. This can be especially challenging for older properties or buildings constructed in the last development cycle. Dated format and specifications can deter potential tenants who, in the current market, will typically have a relatively high degree of choice and strong leverage in lease negotiations. Similarly, outmoded or tired formats will deter potential investors who remain both scarce and cautious in today’s market.

When considering how to maximise asset value in a challenging economy, careful analysis of building options can improve both market prospects and investment value. Whilst detailed local market research is essential and capital expenditure needs to be very carefully considered, there will always be selected opportunities to create value via coherent asset management and enhancement initiatives.

As an example and for the purposes of analysis, let us assume a 30,000 sq ft office building which is approximately 15-20 years old. The net to gross ratio is 80/20 and the accommodation is divided over three floors, accessed via a lift and supported by basic air-conditioning. The property is assumed to have a single void floor. This property has been subject to a hypothetical asset review, placing particular emphasis on marketability and end investment value under three different scenarios.

Scenario 1 – Basic Core Refurbishment

Under this scenario, the following is assumed:

• No upgrade to building shell

• No external works

• Lift service and repair (but not replacement)

• Service and testing of existing infrastructure

• Basic refurbishment of reception areas and common parts

• No consequential requirements under Building Regulations

The cost of these works in today’s market on core only will be in the region of £10-£15 per sq ft, creating a potential improvement budget of £60,000- £90,000



Scenario 2 – Core and Basic One Floor Refurbishment

Here, the following has been assumed:

• Refurbishment as per Scenario 1

• Redecoration of one floor plate

• Service and upgrading of internal doors and review of fire  strategy

• No consequential Building Regulations adjustments

Under this scenario, refurbishment costs will equate to £15-£20 per sq ft. This produces an indicative refurbishment budget of £180,000 - £220,000, comprising approximately £60,000 for building core upgrade and £120,000 - £160,000 for the refurbished floor.

Scenario 3 – Core and BCO Cat A Floor Refurbishment

(The British Council for Offices' (BCO) mission is to research, develop and communicate best practice in all aspects of the office sector)

In this scenario, the core and one floor of the property are stripped back to shell and refitted to current BCO Cat A Standard.

Key aspects include:

• Mechanical and electrical services likely to require replacement or major upgrade

• Some consequential works arising from Building Regulations

• No external works

• Existing plant space is deemed to be adequate

In this example, refurbishment costs would rise to £40-£60 per sq ft with an approximate core upgrade cost of £60,000 and £320,000-£480,000 floor plate improvements. This produces a total potential budget of £380,000-£540,000.



In considering the above scenarios, it is of course imperative that detailed account is taken of local market conditions, particularly with regard to competing supply and the likely profile of tenant demand in the locality in question. The product clearly needs to fit the market and it is of course essential to avoid unnecessary capital commitments.

Source: Google Images

With regard to value and the attractiveness of undertaking asset improvement works, it is helpful to consider real-world situations. When this analysis is reviewed, factoring in current demand trends and net equivalent yields by building quality in the current market, in the case of a Scenario 2 refurbishment (Core and One Floor) would probably be sufficient to move the net equivalent yield on the asset inwards by around 75 basis points to approximately 7.75% based on today’s pricing with a good covenant. This produces a resultant rental uplift of circa £6-£7 per sq ft with a potential valuation uplift of approximately £700,000-£725,000. Thus, for an expenditure of £180,000- £220,000, the resultant uplift in value is considerable and clearly beneficial.

Under a Scenario 3 option (Core and BCO Cat A Floor Refurbishment), a yield of 7.00% and a rent of circa £25 per sq ft, producing an uplift of circa £5-£7 per sq ft, creating an overall potential value uplift of around £850,000-£900,000. This is also clearly beneficial, although less so in proportionate terms, than a more basic asset overhaul.  Further benefits include a more attractive reception and core areas for all tenants, which will help further rental negotiation and retention levels. Additionally a refurbished building will shorten the void period therefore speeding up time taken to recover rent, and reducing empty property rates responsibility.

In summary, building owners should review their options in the current, challenging market. Active asset management can enhance value considerably and broaden market appeal subject to careful analysis and a full evaluation of local market circumstances. It is worth exploring different, accurately costed options.

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Established over 170 years ago, today Bidwells is one of the UK's leading property consultancies and employ almost 500 people in 11 offices across England and Scotland and provide a full range of services across the Commercial, Residential and Rural sectors.

Bidwell's provide commercial and residential property owners, as well as occupiers, developers and investors with a comprehensive range of services  combining a deep understanding of the strategic objectives of our clients and the marketplace, with the resources to deliver holistic property services. Clients include developers, institutions, land owners, owner occupiers, education institutions, government bodies and private individuals.