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Flexible, On-Demand Offices Cut Real Estate Costs

To navigate the difficult economic environment of 2010, businesses need to rethink the way they use real estate.

Apr/May 10
There's been a lot of talk this year about hunkering down. Even with the economy starting to recover, businesses are sitting things out as they wait for the recovery to strengthen.

Having postponed major decisions last year because of the recession, they're avoiding them again this year because they're still uncertain about the outlook. Plans that might require capital outlays or some certainty about the future - including expansion, relocation, and use of space - are in a holding pattern.

But this is the wrong approach. The global economy will likely remain volatile for the next two to three years, and planning ahead will be difficult. Businesses need to be cautious in such circumstances. But caution does not mean inactivity. The companies that succeed in such a climate are the ones prepared to act.

A Fresh Real Estate Approach
In nervous economic times, companies need to be flexible, agile, and understand that the working world is changing. Use of space is a prime example.

For most organizations, property expenses are the second largest fixed cost of doing business. Yet on a given day, up to 50 percent of that space goes unused. Meeting rooms sit empty, as do desks, with staff working elsewhere, travelling, or on vacation. That space only soaks up precious capital, not just in rent, but utilities, maintenance, and cleaning costs. How can a business talk about being leaner and fitter when it carries this baggage of underused office space?

One of the recession's lessons should be that companies don't need the space of years past. Instead, they should add space when it's needed and reduce when it's not, offering the option to immediately contract or expand. Moving from traditional, fixed space to flexible, on-demand space can cut real estate costs by up to 60 percent. Using flexible space - where someone else finds, equips, maintains, and staffs the office - allows businesses to focus on their core activities.

The New World of Work
Across the globe, thousands of companies use fully-equipped, furnished business centers as their permanent space instead of leasing conventional offices. They avoid the risk of five- to 10-year leases and gain the flexibility to expand and contract when necessary. But we're seeing organizations go further.

Twice a year, Regus conducts a Business Tracker survey of international service industry professionals using our database of more than one million contacts. The survey considers global business concerns, plans, and objectives. In 2009, 59 percent of survey respondents said a substantial proportion of large companies sought to reduce their reliance on office property and switch to virtual working over the next three years; and 64 percent of respondents said smaller companies would do the same. If those respondents are right, a workplace revolution is in motion.

Technology advancements mean that millions of people no longer need to be based in a permanent office. This is where flexible or virtual working comes into play. Instead of commuting daily to an office complex, employees can work wherever and whenever. They may work at home one day, or drop into a ready-to-use office another. That space would come equipped with high-quality telecommunications systems and bandwidth, videoconferencing facilities, and meeting rooms. This office could be close to home, in another state, or on the other side of the world; it just depends where the employee is working.

Cut Costs and Help the Planet
In 2011, the worldwide mobile worker population will rise to approximately one billion people, more than 30 percent of the workforce.

But the last thing that mobile workers want to do is spend time traveling. Instead of wasting valuable time, they want to work closer to home.

In the coming years, reporting to fixed-office locations in centralized business districts will be the exception, not the norm. Instead, tomorrow's workers will take a faster commute to a mixed-use, suburban location close to home.

Besides improving work-life balance, reducing commuting distances also cuts an organization's carbon footprint. So does videoconferencing, which can reduce travel costs by up to 75 percent. It's good for the budget and the environment.

It's also beneficial for training. A senior manager or training guru can use videoconferencing to interact simultaneously with staff in different locations. Instead of making multiple trips, everyone stays close to home and achieves the same objective. It's good for the bottom-line, it's good for the carbon footprint, and it's a better use of everyone's time.

Post-Recession Decisions
The recession was grueling for employers and employees alike. But it has also made companies rethink how they work.

Forward-thinking organizations are changing the way they see the work place. They're thinking about whether they really need expensive, long-term office space. They're considering how and where employees work best. They're cutting travel. They're implementing tele-work policies. They're providing employees with the professional tools and resources they need to do their job elsewhere, from advanced technology to decentralized offices and meeting space.

They're also thinking about how mobile and flexible workers interact, collaborate with others, and generate networking's creative energy.

Timing Is Key
Although I said forward-thinking organizations are changing, businesses need to adjust now. Since the recession began, a business-as-usual strategy has been risky. To succeed today, businesses need to seize opportunities.

Timing and flexibility are the keys. Instead of hunkering down, companies need to strip excess baggage and be prepared to move. As companies navigate the choppy waters of 2010, they can limit risks, cut fixed costs, be flexible, and look for opportunities created by different stages of the economic cycle. These principles will not only guide them through this recovery, but will help them weather the next economic storm.

Guillermo Rotman is the president of the Regus Group Americas, overseeing the company's American, Canadian, and Latin American business. He previously held management positions at Blockbuster, PepsiCo/Pizza Hut, and Kraft Inc.

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