Americans between the ages of 25 and 54 spend nearly nine hours a day at work or on related activities, according to the most recent Bureau of Labor Statistics’ “American Time Use Survey.” With 260 potential work days (or 2,340 hours) in a year, that’s a lot of time spent in the office. Leisure activities, on the other hand, clock in around 912 annual hours. Even with the amount of telecommuting in the corporate world, the functionality and appeal of corporate headquarters or satellite office space in Arizona still matters.
This is where corporate real estate professionals — and CoreNet Global — come into play. Michelle Anderson, director of planning and development for Avnet Inc.’s corporate real estate, which includes about 400KSF of office space in Arizona, has tracked technology’s influence on Avnet’s offices. Like many other planners in corporate real estate, she is tasked with finding the balance between the financial pressures coming from the CFO and modern demands of a changing workforce and workplace. The types of buildings and upgrades necessary for labor- and cost-effective offices are not always the cheapest, though there is some consensus among the types of changes that yield the highest returns on investment.
“I would say the entire package of technology, furniture and finishes can be a good investment in the long run, depending on the type of efficiencies you are trying to achieve, space, environmental, or updating functionality,” says Anderson. “The focus should be to think flexible and keep in touch with what will come.”
New workspaces mean a new workplace mentality. The key is alignment, says Anderson.
“The workers’ demands and Avnet strategic goals can be at odds at times,” she says. “The most efficient way to navigate through those waters is through gaining trust and aligning with leadership directive and continually providing quality spaces that influence employees in a positive way.
“People understand the goal of cost savings with more efficient design. However, coupled with added amenities, vibrant spaces and more choices of working adds the energy and buzz required for success.”
There isn’t one formula for success.
“It depends on the company culture and what they want out of the real estate,” says John Pierson, JLL managing director for corporate office users. Pierson says, some tenants, like Aetna at Cotton Center, move into a space that isn’t known for its amenities, but for the lower cost option. Many clients he has toured are more concerned about the age of mechanical systems, maintenance costs and healthy work environments, than creating the live, work, play environment.
“The most humbling experience for me has been ‘if you build it, they may not come,’” says Anderson. “In terms of designing and developing touch down and collaboration spaces this has been a work in progress. All of the furniture case studies, human physiology studies around space design and thoughtful evaluation of workspace strategies does not always equal success. What we have learned is that understanding the organizational culture even within each location can vary significantly, creative engagement and very well thought out space organizational planning and feedback from users has led us to a much higher success rate in these important spaces.”
Avnet, Anderson says, tracks revenue generation per employee as a key metric at each site. She says this allows the company to see individual performance increase with new space delivery.
In 2003, Avnet had a 29KSF office space designed with large individual workstations, 250SF to 300SF private executive offices at the exterior windows and small conference and break areas with the ratio of occupied space around 263SF per person, according to Anderson. Nine years later, that same space has benching workstations, relocated and reduced private offices that were about 100SF smaller. Additional changes included open and closed conference areas, mobile furniture, high-end audio-visual equipment, vibrant color schemes and company-provided snacks.
“The result was a space for ‘heads down’ work that also included many spaces conducive to break out and collaborating or individual privacy zones as well as achieving our real estate goal for reducing occupancy cost by 48.4 percent,” says Anderson. “By reducing the square footage per person number from 263 to 163 eliminated the need to add space to Avnet’s portfolio.”
Productive State of Mind
Companies have differing opinions on investments’ returns.
“Investing in features that improve employee well-being is money well spent,” Anderson says. “I would also add that updated finishes will add that wow factor to even to the most skeptical worker. There is not one person who is not influenced in some small way by their surroundings. We at Avnet look at total occupancy cost to drive performance improvement and lower real estate cost.”
Springing for a LEED building has been linked to a spike in productivity and fewer sick days, Pierson says. That’s one reason, Pierson says, older building constructed in the ‘80s are having a harder time getting tenants, in addition to parking ratios and outdated mechanical systems.
“Every time Phoenix builds a new building, it leases up in a heartbeat. As long as it’s cost effective, they’ll make that run,” he says.
This has led to more retrofits, particularly in the hot East Valley submarkets. In Mesa, Centrica is getting speculatively converted to a LEED standard.
“If I was a landlord,” says Pierson, “I’d gut [an old building] and open it up and makes sure it feels open. A lot of [landlords] don’t have the vision.”
This vision is a growing asset for attracting many corporate tenants who want to retain employees and save money on training as well as development of a corporate culture. It comes down to a balance between the CFO and human resources team, says Pierson. The CFO wants to lower costs and the HR team wants an environment that retains employees.
“It’s very individual for each company,” he says. “Infusionsoft in Chandler decided to buy a two-story building, cut out an 8KSF center and put in a football field but still pay for the 8KSF they removed. It’s something an Aetna would say ‘no’ to. It’s a cultural decision.”
“A lot of the big corporate users like Aetna are very involved with the CoreNets of the world and are up to date…the reality is you’re a public company and even a GoDaddy doesn’t go in and go to the extreme of an InfusionSoft,” says Pierson. “They don’t just do things that make everyone feels part of the dot com era. People got nervous when they feel like you’re wasting money.”
The tighter the workforce gets, the more competition it will bring out of employers, says Pierson.
“You’ll either pay them more or provide an environment they’ll appreciate more,” he says, citing that Silicon Valley Bank moved into Hayden Ferry Lakeside but is paying higher wages in a class-A environment. He said companies in the market are also offering perks such as aggressive stock purchase plans, which has caused retention rates to increase. Sometimes it has nothing to do with the facilities, he says. It’s about work environment.
Corporate campus
Wells Fargo is doubling its campus footprint in Chandler and initiating Workplace 2020 for its new buildings. The program is a partnership between Corporate Properties Group and Technology Operations Group that focuses on keeping workplaces efficient and effective through “enhanced experience, innovative space and right place.”
“Ultimately, we want to deliver space and technology solutions to meet team members’ needs and enable them to be even more successful,” says Leo Bauman, Wells Fargo vice president and manager of Corporate Properties Group. “Unlike the traditional office environment, Workplace 2020 stresses the importance of flexibility and choice, allowing you to seek out the environment that fits the type of work you need to do – from collaboration and meetings to head-down work and confidential conversations.”
Technology is changing the furniture landscape, says Jennifer Callahan, sales representative at KnollStudio.
“It is critical that [corporate end users’] investment in office furniture is able to support the ever evolving and changing technology,” says Callahan. “A simple example is having USB power accessible in workstation panels and ensuring that furniture is not too dedicated and inflexible to allow for the technology changes that we may not know about today. The space needs to be able to evolve as technology morphs.”
Wells Fargo, as well as the new 2MSF State Farm campus to be located at Tempe’s Marina Heights, are among a minority of companies taking on the corporate campus model in Phoenix.
“While the Phoenix market is not made up of many headquarter locations that take space in a traditional corporate campus, we are finding end users seeking the types of amenities offered by a campus environment,” says Gensler Principal Beth Harmon-Vaughan. “The repositioning of properties such as The Circuit and 1665 W. Alameda, both in Tempe, are embracing this trend to provide creative, amenity-rich environments focused on the priorities of end users.”
This is also affected by a shift in distributed team work, adds Callahan.
“People are collaborating across geographies,” says Callahan. “We are all not in the same office. Even if we are, it doesn’t mean that we are always working in the physical office space. As employees become more mobile and teams are more distributed, it becomes important for the furniture to be flexible enough to allow distributed teams to come together.”
Office inefficiencies, such as inflexible workspaces, can cost corporate end users the most in the long run, says Callahan. This is particularly important for companies looking to reduce corporate travel costs through the use of technology.
“(GoTo meeting and Skype) are innovative ways that companies are working to drive out costs yet support their employees’ needs. It is imperative that employees have a physical space that gives them the ability to use these technologies,” says Callahan. “Collaboration fosters innovation, so having all these tools available not only reduces costs, but it can drive to innovation and breakthroughs that will be the life blood of the company,” adds Callahan.
For corporate end users looking for creative office, Harmon-Vaughan says the “most effective office environments are those which focus on the spaces with the greatest meaning to the organization’s culture and specific employee group.”
“The demands of new generations of workers are continuing to change the paradigm of planning for corporate real estate,” says Harmon-Vaughan. “The quantitative space requirements for employees, which often drive lease decisions, are only one piece of the puzzle. For a project budget to best align with a tenant’s design goals, starting with thorough programming and due diligence proves invaluable. The qualitative project drivers discovered through in-depth visioning account for implications of mobility, work/life realities and the collective amenity spaces that the changing workforce is seeking. Pressures between design goals and budgets are alleviated when stakeholders – tenants, landlords, brokers, and designers – reach an early consensus on the priorities motivating real estate decisions. We are seeing a trend of these decisions based on the design solutions which best support end users in employee attraction and retention while allowing for flexibility in their office spaces to accommodate changes in the future.”
In addition to amenities, natural light and focus/collaboration areas, Harmon-Vaughan, like Pierson, has noted emphases on health.
“Research has shown an estimated 65 percent of a company’s health related costs can be attributed to absenteeism and ‘presenteeism’ – the act of attending work while sick,” says Harmon-Vaughan. “The intersection of workplace design and well-being can reduce both.”
