By Shahar Alster
Chief Executive Officer & Co-Founder
Business owners have exceedingly high expectations of their employees. With after-hours emailing and working across departments with little training, today’s workforce is juggling a lot. But why do company executives demand so much from staff without requiring the real estate they occupy to be just as flexible and high performing? The reality is corporate real estate has stagnated for too long. Start-ups outgrow their office space before leases are halfway to term. Workers seem to spend more time out of office than in.
Compounding problems are changes that take effect in 2019 in how real estate must be accounted for, reshaping a business’s profit and loss statement. Here are three corporate real estate trends and changes that business owners and operators should focus on:
Flexible Space & Leases
People are working differently now. In 2016, 43% of the American workforce reported spending at least part of their work week out of the office. This means the needs from an office space are constantly in flux. A company could have 90% of staff in office on a single day and 20% the next. How can you plan for this? Workplace design is crucial. Creating a space with a variety of seating options, often called activity-based or agile workspace, accommodates staff members who prefer to spend each day at their own desk as well as those who spend a few hours each week at the office.
Though before a company designs its space, owners should consider the structure of their lease. Rather than signing 10- to 20-year leases, businesses need to consider the rapid growth so many young firms are experiencing and how that affects the need for space. Lease contracts are now being written with shorter terms and flexible renewal options, making it easier for businesses to budget and remain nimble as employee needs shift.
Space Management Software
Data and analytics reign supreme in the business world. They tell operators everything they need to know about their costs, staff, and productivity. So, space management software needed to adapt to meet these needs. No longer is it enough to simply monitor heating and cooling usage, life of appliances, light bulbs, and furniture. Now, business owners want information on how their space is being used by people. This line of software has expanded from managing utilities to including people management.
One key feature is analyzing space utilization and occupancy. Companies collect and use this data differently, but the result is the same. Some businesses add sensors to their offices, tracking how many people walk in the door on any given day, how much time they spend there, and how many desks are occupied. Others adopt hot-desking, in which employees reserve a desk or meeting room in advance, which shows how many employees are choosing to work remotely and how frequently. Are meeting rooms going unused? Are there not enough phone booths for private calls? Space management software answers these questions and more, which helps business understand how many bodies they need to accommodate and how to design offices to match their staff’s habits and needs.
Lease Accounting Standards
The Financial Accounting Standards Board introduced a new set of lease accounting standards in an effort to improve transparency among corporate real estate holdings. Previously, standards only required capital leases to be included in a business’s balance sheet. Now, a business must report assets and liabilities for leases that exceed 12 months. The new standards will also “require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases,” including qualitative and quantitative data. With companies focusing on flexible leases and workspaces and utilizing space management software to constantly collect data, the new requirements won’t be challenging to meet.
It’s clear that all the advances in corporate real estate management are data heavy, which can only help businesses. Regularly collecting data on how a space is performing and how staff utilizes it will provide greater financial control over real estate assets and more accurate budget projections. We expect to see a more robust set of data collection tools on the market for businesses to better assess their real estate and staffing needs.