Making Buildings work for Clients and Investors
The problem we are trying to solve
The property industry is predicated on delivering a built product to its customer, described by documents, specifications and legally binding contracts. In the process, its customers are compelled to employ a small army of professionals to make sense of it all. And all of this, just so that a business can refresh its workplace environment and continue to grow while maintaining control over its budgeted overheads and operational costs.
The result is the compilation of a mini-mountain of documentation to define a product building which faithfully fulfils the requests of the client’s C-suite executive team, while also performing that other necessity of legally deciding blame in the event of a contractual failure. And when the exchange of contracts is concluded, the ribbon on the shiny new demise is cut, the keys are handed over, its time for the designers and contractors to pack up, leave site, and allow the client to resume business in a refreshed property, and everyone is happy…or so that’s what we would like to think.
In peeling back the veneer, in going back to buildings that I had been a designer for, consistently and in some detail for over a decade, a rather different picture was evident for me and my research teams. I found that the definition of quality framed by us as designers is so very different to that of our end-users. Many of the buildings we completed were award winning, and judged by our industry peers as exceptional, exemplar even. However, these same buildings, evoked a very different response from surveyed end-users, who viewed them as “acceptable” rather than “exceptional”. I was finding there was clearly a gulf between what the property industry thinks, and its end-user customers think, the delivered priorities should be.
“66% of Edinburgh office workers believe that the interior layout and design of their workplace is important, but 60% think that if it were improved to match their ‘ideal’ layout and design, it would significantly increase their productivity.” What Office Workers Want – Saville BCO survey
The next question is…” does this difference in perception between providers and consumers matter“? In most fields of business, the answer would be yes.. of course it matters! But this does not seem to be the case for the construction industry who appear ambivalent to end user customers needs. What appears to matter more is contractual rigour, return on the investment capital sums that are put into property on behalf of the financial investment markets. Buildings like bonds or guilt’s are seen as a commodities to be traded and yields maximised. The constructed legal framework offers protection to all. End-user customers are but passive observers, spectators in the negotiation of contracts and heads of terms… a long way down the chain of influence.
The economics of the solution
To change the status quo, to put our customers in control, we must link desirability at user level, to the value of the building as an asset at investment level. Could we arrive at a situation where users are prepared to pay more in rent for a building, because it is a more desirable asset? Could greater desirability also improve the certainty of its yield to the investor? And if so could it be more than wishful thinking to prove a viable link? To some extent, post Lehman, this is beginning to happen with initiatives like GRESB and AODP but change is slow.
To construct a stronger economic argument requires more holistic thinking. The first thing to keep in mind is that buildings as workplaces are provided to assist businesses to do what they do on a day to day basis. If they can do that in a better more efficient way they become more desirable to the tenant. In parallel, to business, its people are far more valuable resources than its buildings. What people do and how effectively they do it is an important metric for business management to monitor. To illustrate this we have undertaken a simple calculation to compare the investment a typical UK office based professional services business (outside the London metropolitan area) will make in its people and its buildings on an annual basis pro-rata in feet-squared of occupied building area. We found staff salary and overhead costs to be twenty times that of property costs.
Staff costs swallow property costs whole.
It stands to reason therefore, that if the move to a new building could be configured to increase staff engagement by even ten percent that the saving brought about by increased staff productivity would more than offset all costs associated with the move and the additional rent that might be involved. It seems that developers and clients willing to work together to embraced this as an objective could agree higher rents and longer leases, so increasing investment yield.
Increases in staff metrics after ten percent increase in engagement from national average.
Of course, engagement, and by default productivity are difficult concepts to attribute to the building alone. There are many factors other than employee environment that govern engagement and productivity. However, what we do know is that buildings form part of corporate branding. Buildings tell staff and customers what type of organisation resides there. They position businesses in relation to their competition. So its clear that while a building is not the complete story, it can be made to command a sizable component of it, and the positive move in corporate metrics we are looking for only need to move a relatively small amount to get the return on investment required. It is now proven that the environment people work in has a profound effect on how productive they are in it. Too noisy, too hot, to much distraction, poor air quality, lack of opportunities to socialise, closeness to nature, all have proven and well documented impacts on productivity, stress, even sickness and absenteeism. Then there are the things that new research and new design around biophilia and well-being is telling us bring greater productivity to humans.
In the workplace we rely on staff to take on board new information, add new ideas to it, to create new information that is prepared for clients. The efficiency of the cerebral process is reliant on human physical and neurological health. It is in employers interests therefore, to make sure that employees are in good health, are taking adequate exercise, have access nutritious food, and are taking the time to regenerate away from the workplace. New workplaces can be designed to assist and reinforce these processes.
Design for business performance and profit
The financial incentives to pay more attention to building design, and the opportunities it offers to improve the performance of people, accentuate brand, communicate culture and improve bottom line profitability, are obvious. Its not unreasonable to suggest that a corporate business strategy to move to a new building as a means to improve the workplace environment for the better, can eat whole any costs involved and add to the bottom line of the business profit and loss account. It is within clients gift to demand more, to drive up the importance of buildings, and with it the value of the buildings designed to deliver these levels of performance. Only then will clients get the buildings they need, not the ones they get given.
At Ollio we have the skills and the expertise to help businesses, developers and architects exploit buildings for better business. We are setting out using Agile Methods to prove that buildings can improve business and vice versa.
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