CFOs are going to emerge as a significant influence in real estate discussions as we adjust to what is certain to be a recessionary environment due to the Covid-19 outbreak. Costs and efficiencies are going to be examined and companies are going to explore every available opportunity to reduce facility spend.
The way office locations were chosen when I first got into the business was based on where the CEO lived. It was all about shortening the commute for the most senior leadership. CEOs designed the space they wanted with the amenities they imagined that their employees would like with special attention paid to the senior executive wings. There were large offices, private wash rooms, executive cafeterias, and the like. Not much attention was paid to the impact of real estate on expense lines. No joke, we spent a lot of time looking for office buildings that were equidistant from the CEOs house and their country club.
That changed during the Great Recession, as CFOs exerted more control over cost cutting and got more involved. We saw an entirely new dynamic as amenities were cut, space got a lot more efficient, and the first generation of office standards was instituted. Finance chiefs wanted to be able to manage real estate costs and looked for any opportunity to create KPIs around real estate. There was a lot of number crunching as we examined cost ratios, benchmarking against industry standards, and making sure that we could demonstrate concrete savings with each transaction.
That evolved again as the labor market became hyper-competitive and recruiting and retention were paramount. Human Resources became the dominant voice in the real estate discussion as they tried to balance the needs of employees against the cost-cutting desires of finance. We became experts in labor dynamics, looking at where target employees lived, understanding what locations would attract various age cohorts. We needed to help companies understand why they were selecting a specific location and how design would help attract the right talent.
CFOs are going to want every aspect of facilities expenses examined and managed we swing back to becoming cost conscious. Every possible cost reduction strategy is going to be examined. Footprints are going to shrink as work-from-home (WFH) has proven to be a viable option and amenities are going to lose importance (who is going to want to use the office gym after all of this is over?)
Its time to dust off those excel spreadsheets and get ready to crunch numbers
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