5 Strategies for Reducing Corporate Real Estate Costs

As both employers and employees are reluctant to come back to the office, the global office vacancy rate rose to 12%, scoring a 4% rise from the pre-pandemic period. Additionally, the ongoing crises made business utility bills skyrocket. This made executives consider economizing one of their largest expenses: corporate real estate costs.

Reducing corporate real estate costs is essential for companies to ensure financial stability while maintaining efficient operations. In this article, we’ll present 5 cost-cutting strategies that can help companies effectively reduce their corporate real estate costs and improve their bottom line.

Lower costs by reducing consumption

Reducing energy consumption can help reduce corporate real estate costs in more ways than one.

You should start by evaluating your office building energy consumption and identifying opportunities to reduce it. Employing technology to optimize office operations, such as using automated systems for security, heating, cooling, and lighting, can help in reducing operating expenses.

In office buildings, HVAC systems make up 40% or more of the entire energy consumption. Automation of HVAC systems can help companies reduce their energy consumption and related costs and improve equipment performance and lifespan.

Operating costs can be reduced by installing programmable thermostats that operate by automatically adjusting the temperature based on a preset schedule. It means that the thermostat can be set to lower the temperature during non-working hours and on weekends when the office is unoccupied.

Some simpler initiatives to manage energy consumption include using renewable energy sources or natural light and ensuring that office appliances are switched off when not in use. Maximizing natural light is an overly neglected trick that can reduce the need for artificial lighting and potentially lower energy costs. Redesign your workspace by using glass partitions and skylights or removing partitions to make the most of natural light and achieve cost savings.

Increasing natural light should be combined with energy-efficient practices such as sustainable lighting. LED lighting can reduce the costs of power bills, which are a considerable expense for businesses, as they use 60% less energy to power.

Keep in mind that efficient facilities management can significantly contribute to reducing your commercial real estate operating costs. It minimizes downtime, prolongs equipment life, and reduces potential repair costs. Implementing a proactive maintenance and repair program that addresses issues before they become significant problems is a cost-effective approach that can result in a drastic drop in asset management expenditures.

Scale down your footprint

Scaling down your corporate real estate footprint can be a viable strategy for reducing property management costs. Make sure that your office space is being used efficiently by monitoring occupancy levels, analyzing utilization patterns, repurposing empty office space, or removing unused CRE. Companies can gain better insights into how their office spaces are being used by introducing apps that track space utilization in real-time to their facilities management practices. Collected data can help to identify underutilized areas that can be repurposed or downsized to reduce real estate costs.

To minimize the square footage of each employee, companies should reconsider their real estate decisions. In order to reduce overall office operating costs, companies are increasingly adopting agile working methods, which not only lower occupancy costs but also add value to their real estate portfolio.

Some of these options could help you lower your per-square-foot operating expenses:

• If your company has multiple office locations, consolidate them into a single location. This can significantly reduce the overall square footage needed and lower rent and utility costs.
• Having excess space in your office can help you offset rental costs and even create new business opportunities. Turn the extra space into a source of revenue by subletting it to another company or achieve cost savings by sharing it with a complementary business.
• Instead of assigning each and every employee a dedicated workspace, give a thought to implementing a hot-desking system. This way, employees get to share workstations on a first-come, first-served basis. Ensuring a more efficient space utilization helps companies in reducing the amount of space needed for workstations and lowers their rental costs.
• A considerable amount of space can be taken up by common areas like reception areas, conference rooms, and break rooms. Your company can achieve cost savings by creating multi-purpose rooms. Using the same space for many functions, such as meetings, training, and events reduces the amount of dedicated space required for each function.
• If your company stores physical documents on-site, give thought to storing them off-site in a secure storage facility. That’s how you can reduce the need for additional storage cabinets and free up valuable office space.
• As the pandemic-pushed trend of remote work becomes a standard labor practice, businesses start to notice how it helps save money. Employees who don't need to be in the office every day should be encouraged to embrace remote work. This can significantly reduce the number of people on the premises at any given time and lower the amount of space needed for workstations and common areas.
• Offer employees incentives to motivate them to contribute to a lower footprint. You can set specific performance parameters for the employees to follow and increase their efficiency.

The best thing about cutting commercial real estate costs is that you can invest that money in your employees and witness an increase in their morale and enthusiasm. It’s how Ben Levick, Kasa's VP, describes the support that Gable provides in talent retention.

Consider a leaseback

Leaseback can be a good option to reduce corporate real estate costs if parts of your company’s real estate portfolio do not deliver a return on investment. By selling its property to a leasing company or lender and then leasing it back for a specified period of time, the company can avoid the costs of property ownership, such as property taxes and maintenance expenses.

This strategy can potentially reduce corporate real estate costs in several ways:

• The sale of the property to a leasing company or lender can provide an immediate cash infusion for the company. That money can be used for different strategic initiatives, such as paying off debts, investing in business growth, or others.
• Selling the property can be a way to lower the tax burden by reducing the company's property taxes. As the property is no longer owned by the company, it is therefore no longer subject to property tax.
• The leasing company or lender becomes responsible for maintaining and repairing the property. This can reduce the costs associated with property maintenance and repairs for the company that sold the property.
• Leaseback arrangements typically involve long-term leases, thereby providing the company with greater flexibility to adapt to changing business needs. For instance, relocating to a different property if needed becomes much easier.
• Due to changes in market conditions, property value can depreciate after the signing of a leaseback arrangement. This can make it possible for the company to negotiate a lower rent with the leasing company or lender.

Overall, leaseback can be a viable strategy to reduce corporate real estate costs, while providing the company with greater cash flow, tax benefits, and a decrease in maintenance and repair costs.

However, it's important to carefully evaluate the terms and conditions of the leaseback agreement to ensure that it aligns with the company's long-term goals and objectives. One of the possible setbacks of a leaseback agreement is the loss of the property at the end of a contract agreement.

Redesign your workspace

Smart office renovation solutions can help with maximizing the use of available space. Making office space as flexible as possible allows you to invest money in business improvement rather than in expensive reconstructions.

To make the most of your office space while making it pleasant to work in, here are some of the strategies to give thought to:

• Removing walls and cubicles can result in more efficient use of existing space. Open floor concepts can help maximize space utilization and reduce the number of square feet needed for workstations. This office design idea can also boost collaboration and communication among employees.
• Take advantage of modular furniture, such as stackable chairs and tables, to achieve optimal use of space. Modular furniture design allows for easy reconfiguration as the needs of your team change.
• Using furniture that serves multiple purposes can also help reduce the amount of space needed for storage and common areas. If you need to provide privacy in an open space for employees to work on individual tasks, use a bookshelf that doubles as a room divider and can provide storage.
• To expand usable floor area without increasing footprint, make sure you used all of your vertical space, such as high ceilings, mezzanines, and loft areas. In reducing storage footprint and making more efficient use of existing space, efficient storage solutions such as shelving, cabinets, and filing systems should be implemented.

Use flex workspaces & centralized workspace management

Flex workspaces and centralized workspace management can potentially reduce corporate real estate costs while providing employees with greater flexibility, improving productivity, and achieving environmental sustainability.

Flex workspaces are rising in popularity as they allow for quick and easy repurposing. This reduces the need for dedicated workstations and potentially decreases the overall real estate footprint. Centralized workspace management ensures that the available workspace is being used efficiently, further reducing the need for additional space.

Flex workspaces and centralized workspace management can reduce the need for traditional office infrastructure, such as workstations, cubicles, and storage cabinets. This can potentially lower the costs related to office infrastructure.

With fewer people using the office, utility costs such as electricity and water can be reduced, saving the company money. Flex workspaces and centralized workspace management can reduce the carbon footprint of the company and help the company achieve its sustainability goals.

Bonus tip: Calculate the potential for cost reduction

The secret to figuring out the potential for corporate real estate cost reduction is to assess your current expenses, find areas for cost reduction, create a plan, and track your progress.

As 250 square foot office space could cost your company $2,500 per month on average, or up to $5,750 for a luxury office, considering flexible workspaces could be a more cost-effective solution. Keep in mind that besides the rent, additional expenses include utilities, internet, equipment, maintenance, and office supplies. Most property owners require at least one month of rent as a security deposit.

To prevent real estate costs from piling up, take a look at this workspace cost calculator and reshape the workspace as you know it to save money on office and operating expenses and invest it in what truly matters.

Save money and improve workspace efficiency with Gable

In today’s world of work, and for distributed workforces, having or renting an office space often seems redundant. It’s like having a car but never leaving a radius of a few miles! It costs money, and you never get to use it to the fullest.

So, why own a car when you can rent a bike, a boat, a scooter, a van, or a bus according to your needs? Check out how Gable can help you find an ideal workspace for your team of any size, in any location, for any purpose.