by Roger Henderson
With the memory of the storms that raged last October, both in the City and in the southern counties, fast fading and immediate damage repaired, it is tempting to say that both events were freak occurrences, with no irreversible impact. This may be so, but the effects of the Stock Market crash at least are still being felt, and the uncertainties which followed it are still all too apparent.
In spite of a booming national economy, Citybased financial institutions continue to announce redundancies arising from “rationalisation”. Prognostications by a leading City analyst of 50,000 job losses over the next two years are not to be taken lightly, or dismissed as scaremongering. As some notable development projects are quietly shelved or slowed down there once again appears a question mark over longer term demand for offices in central London.
All this talk of slackening-off in demand for City office space is going on at a time when record-breaking levels of rent are being achieved in the West End. Which indicator should one heed? Is the City’s thirst for space soon to be quenched as the financial services business finds its equilibrium? Will this effectively seal the fate of Canary Wharf and, for that matter, King’s Cross? Or are these step-function increases in rent levels reflecting an insatiable appetite for quality business space?
The debate has a familiar ring to it, but there would seem to be some justification for the caution being shown by some developers. Not the least of the factors creating uncertainty from the tenant’s standpoint is the way that total premises costs for some businesses are approaching parity with employment costs.
It can cost more to accommodate your secretary in London than it does to pay her, a fact that cannot make a great deal of sense for those companies not tied to the capital for their operations. Certainly when creating a corporate strategy in a volatile economic environment the prospect of a long-term commitment in this context is daunting.
Property issues continue to be long term, both for the developer and for the tenant. Even with more flexible lease structures to cope with mobility, no business relishes or profits from the upheaval of unlooked-for moves.
So getting the strategy right in accommodation terms is not just being in the right building at the right price, but being reasonably well able to cater for the unforeseen as well as the foreseen. Easier said than done, perhaps, but if the provision of business premises is planned within the framework of such a strategy then the next “October storm” will not be quite so devasting.
Achieving a balance
The main aim of an accommodation strategy will be to maintain a balance between the two sides of the equation — demand versus supply.
The first steps towards this goal must be concerned with arriving at a reliable evaluation of demand, both current and projected into the future. Then the availability of accommodation supply side — has to be appraised for its ability to meet those demands. The second part of the strategy involves devising alternative means of dealing with any shortfall or surplus on the supply side in both quantity and quality.
The most obvious ingredient of demand for accommodation is the quantity of space needed to house operations, with the number of people employed being at the heart of the matter.
The temptation is to arrive at an average allocation figure per head, perhaps based on current practice, and extrapolate that for projected changes. This method, though commonly used, is fraught with disaster. It can be grossly inaccurate in projecting future demand and, when used to plan layouts in existing buildings, can result in inequitable and inefficient distribution of space.
This stems from two separate causes. One relates to the way departments vary from one another in their space needs by employing different mixes of staff. The other cause arises from demands for space for central facilities which have no direct correlation with staff numbers. These areas have tended to increase in size and importance in recent years, and should be separately assessed and accounted for.
The only reliable approach to allocating space is to build up a catalogue of demands based on individual requirements. This can be quite a daunting task, but if tackled in a logical way, with the co-operation of the user departments, it is a very worthwhile exercise. The analysis of the data can be handled on an electronic spreadsheet which, once set up, provides an extremely valuable record. It can be used for making alternative projections of the effects of future growth and provides a sound basis for planning an accommodation strategy.
Other demands
There are, of course, many aspects of demand other than just the quantity of space required. The type of space and its quality are also of great importance. Here, again, current practice and usage may not be a reliable guide to actual requirements. When considering which type of office environment is suited to a particular business the normal approach is often too heavily influenced by the building. Do we want air-conditioning? Is there good daylighting, lifts, goods entrances or whatever? More important, though, are the shapes and sizes of office floors, the size and number of private offices likely to be needed, and the special environmental demands which any equipment or facilities are likely to make.
Some of the issues are more straightforward than others, but the list will be long and the efforts taken in dealing with them should be painstaking.
Shape, size and configuration are often under-rated factors as far as impact on use is concerned. The shape and configuration of an office floor usually dictates quite rigidly how it can be used. Basically, narrow space with windows on each side is best suited for cellular division and deep space (over 50 ft wide) for open layouts. Unfortunately many office buildings offer space somewhere between the two. They are truly neither “fish nor fowl” and are a constant source of environmental problems. You either waste a lot of space in splitting them up or cause noise and distraction problems in opening them out. Complex floor plans are frequently encountered whose shape has been dictated more by the layout of the site and planning constraints than by thoughts of effective use. These can make for varied and interesting interiors, but are usually difficult to handle in practice.
Developing a strategy
At the end of this assessment you will have a well-researched and dependable bank of data on which to base an accommodation strategy. You should then, and only then, turn your attention to the stock of offices space and appraise it for its ability to meet those demands. The appraisal should follow the same thorough pattern of analysis — quantity analysed for its suitability for various uses, quality, environmental factors, your tenure of it, costs, suitability of location and so on. Again, the list is likely to be quite long and surprisingly revealing.
You will then be in a position to try to balance the equation. From a small surplus now you might be predicting a shortfall in two years’ time. Far more likely, perhaps, your analysis may underline the chronic shortage of space with which you are endeavouring to cope and strengthen your case for additional premises.
Whatever the situation, your accommodation appraisal will enable you to put together a proposal for a premises strategy to meet the demands of your business. It will be capable of being updated and modified as those demands change, without losing sight of longer-term objectives. More importantly, it will be the means of making your property assets contribute to business success.