Article

Compare and contrast: How benchmarking unlocks value from buildings

A growing number of companies are turning to benchmarking to get more from a building's space.

October 25, 2016
business collegues  discussing project in office

Most of us make informal comparisons every day for the people we meet and products we use to gauge their differences and establish how well they’re performing.

The same is now true with our workspaces and buildings as benchmarking – a system for comparing individual performance to a group average – makes a big impact within real estate.

So do the Germans and Swiss, for instance, know that they tend to have twice as much office space as their peers in the UK and Hong Kong? Do the Indians, Canadians and Australians know that they have the most desks per person in the world? Perhaps not. What is more widely acknowledged is that New York is the world’s most expensive city for office costs, followed – in order – by London, Hong Kong and Paris.

Until benchmarking began to take hold in the real estate sector over the last few years there was little such data available. Now, demand for this information is growing, says Victoria Mejevitch, Head of JLL’s Global Benchmarking Service.

“More organizations – especially financial services businesses, life sciences businesses and other multi-nationals – are asking to participate in benchmarking and more of them are now taking action as a result,” she explains. Benchmarking could show, for instance, that staff in a certain building have twice as much space as the industry, country or regional average. Managers of such a building would have a strong argument in such a case either to sublet some space or to move in personnel from another location.

Getting more from a building’s space

Most organizations use benchmarking to compare their efficiency to peers on ratios such as space per desk, energy consumption and emissions per employee, and cost per person. Firms in the financial services and pharmaceutical sectors are ahead of the pack when it comes to commissioning benchmarking and driving significant cost saving changes.

However, there is a rapidly growing trend for employers to focus on and invest in employee wellbeing in conjunction with costs, explains Mejevitch. Employers realize that an exclusive focus on efficiency could reduce staff morale by cutting space to claustrophobic levels.

Among London clients, for instance, the Global Benchmarking team has seen a 20 percent reduction in total space used over the last nine years. However, lower levels of space per workstation and the use of more open plan offices are often balanced by introducing more meeting rooms and quiet areas where individuals can concentrate without distractions.

Multi-national companies are also keen for their offices to have a consistent look and feel in various locations around the world. This harmonization of building presentation and conditions is a signal to clients that the same quality of service is provided globally; and it is a sign to staff that they are treated equally from Houston to Hong Kong.

The creation of similar office environments starts by benchmarking individual buildings around the world to see how they compare. Taking this information on board, the companies can then set their own “space standards” – outlining how much space should be allocated per desk, for example.

“There is more pressure on global organizations to create space standards,” says Mejevitch, “This means that the experience of being in a building will become more determined by an organization’s culture than where that building is located in the world.”

Finance directors seek building data

The growing influence of finance directors on real estate management is another driver of benchmarking. “Finance directors want the same discipline applied to real estate as to other corporate support services.  They want accountability and evidence of efficiency.  They want a set of reliable traceable KPIs for each location,” says Mejevitch.

Benchmarking provides tools for decision making.  However data has to be used with care across different regions and sectors. Mejevitch has noticed that benchmarking participants tend to move in the same direction – particularly in reducing space. But there is no single building design that will suit all users. “A successful building supports the business model, is adaptable and provides an environment where people are happy to work,” she says.

Companies are coming up with their own tailor-made ways of combining cost savings with a respect for the wishes of staff. One pharma company, for example, managed to save $3.2 million and to stay on its existing building in Shanghai for nearly three years longer than expected by going open plan and introducing smaller desks. To make these changes palatable to employees, informal meeting zones were introduced at the same time, alongside new quiet areas – as a staff survey showed a demand for breakaway spaces. Another business, a financial services firm in the city of London, cut costs by $700,000 a year when a benchmarking exercise highlighted an overly cautious risk strategy which limited all maintenance work to night-time and weekends.

While the benchmarking of buildings is relatively new, Mejevitch believes that it will be the catalyst for change and improvement for many decades to come. “For every corporate we have benchmarked, there has been a lot of room for improvement,” she says.

Indeed, the FTSE 100 traces its birth back to 1929 when a group of actuaries set up a benchmarking system that hardly anyone understood but them.  Now, however, it is the main measure that people use when deciding to buy or sell shares on the London stock exchange. Building benchmarks could very well go in the same direction.

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