Memo bosses: There's money in space
Cutting down the workspace ratio could save millions in rent, writes Simon Johanson.
The state government could save at least $13.5 million a year if it followed the private sector's lead and introduced activity-based working in its CBD offices.
The activity-based work (ABW) model - in which employees are given a laptop and locker but not a fixed desk - reduces a company's floor space needs, an efficiency widely embraced by large corporations over the past five years.
The shift to ABW extends a 20-year trend that has seen workspace ratios, the amount of space devoted to each worker, reduce significantly.
Some sectors, such as telecommunication workers, averaged as little as eight to 10 square metres a person, Savills Australia's head of research Tony Crabb said.
By contrast, state employees typically enjoyed a workspace ratio of 25 square metres, Mr Crabb said. In federal government departments the ratio was 12 to 15 square metres.
About 7100 Victorian government workers in Melbourne's CBD occupy 180,000 square metres in city buildings, estimates suggest.
A standard A-grade building has a workspace ratio of 18 square metres a head.
"Annual rent on 180,000 square metres of space would total in the order of $54 million based on a net effective rent of about $300 a square metre," Mr Crabb said.
Moving state government employees to more efficient premises would achieve a 25 per cent saving, a reduction of $13.5 million in the government's rent.
The government's target utilisation rate was revised in 2011 to 12 square metres a person, down from 15 previously, a government spokeswoman said. The ratio was now at 15.9. "This target and activity-based working design principles are being applied to all new office design and fit out projects."
Over the past year, the government had reduced the number of properties under management by 14 and reduced the floor space under those leases by almost 17,000 square metres, resulting in savings of $13 million, she said.
ABW typically requires about seven desks for every 10 workers but the change to the workplace is as much cultural - about collaboration and flexibility - as it is physical, exponents say.
Companies such as the National Australia Bank, Telstra, the ANZ Banking Group, Suncorp and Fairfax Media, owner of The Age, have all moved to activity-based working.
Other, smaller entities, such as business software provider MYOB are now starting to follow.
Jones Lang LaSalle's Victorian manager David Bowden said the ABW trend was likely to lose impetus.
At least 40 per cent of CBD offices were occupied by companies that were too small to benefit from introducing it.
Many larger corporates that were able to introduce it had already, Mr Bowden said.
"There is a cost implication in setting it up. You need a certain scale [about 3000 square metres] to get the efficiencies," he said.
The "jury's still out" on whether ABW was producing the workplace productivity gains promised by exponents and consultants.
"Has this actually delivered what it is intended to do? It has saved costs but has it resulted in productivity gains?" he said.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free