Experts estimate hybrid working can boost company profits by 10-20%, partly through a shift from traditional city-centre office space to flexspace in the suburbs. Here’s how property owners, investors and developers can capitalise on the trend.
As companies of all sizes shift to hybrid, IWG research has found that more than half of businesses have opened offices or working spaces outside city centres. This transition, driven by employees’ desire to shorten commutes, enhance work-life balance, and cut costs, has the added benefit of stimulating local economies through increased spending by workers nearby.
This article explores the financial incentives of this shift, with a focus on how it can bolster a company’s balance sheet and improve employee health and wellbeing. Nicholas Bloom of Stanford University suggests that adopting a hybrid model can increase company profits by 10-20%. Such profitability signals a prime opportunity for property owners, investors, and developers to tap into a growing market demand.
4 financial reasons businesses are moving beyond the city
Here are the main financial considerations driving business relocations from city centres to suburbs.
1. To reduce facility spending
Let’s start with perhaps the most obvious reason to relocate: to reduce facility spending. In a survey of 500 businesses, IWG found that 73% have cut rental costs by downsizing their central headquarters and switching to working spaces outside city centres. NTT, Cisco and Deloitte are among the big names to have done so, with Cisco having saved $500m in the last five years by shifting to hybrid working. Much of its savings came in its property portfolio.
IWG CEO Mark Dixon sums up why businesses are reconsidering the need for large-scale office space. “If you ask intelligent people to commute unnecessarily for two hours a day, to come to an office to use a laptop that they could have used down the road from their home, they are going to question that.”
2. Fewer expenses
The move beyond the city means that not only are businesses taking advantage of office space in more affordable areas, but they’re also enjoying reduced costs on energy, cleaning, and office supplies through switching to hybrid. According to IWG’s research, 36% of companies say they are paying less in expenses for staff travel. Employees benefit, too; Cisco found that the average hybrid employee saves just over USD $150 a week, adding up to around USD $8,000 a year.
3. Productivity boost
When employees work closer to their homes, they’re more productive, with an IWG survey revealing that four in five workers say they’ve been more productive since switching to hybrid working. Stanford University economics expert Nicholas Bloom puts the hybrid productivity boost at 3-4%, which has a major impact on a business’s balance sheet over time.
4. Staff retention and acquisition
Attracting and recruiting the best workers is costly, but hybrid working is now seen as a major benefit that can help with it. IWG research found that 88% of employees cite hybrid working as a leading benefit they’d expect in a new role, while 95% of HR professionals agree hybrid working is an effective recruitment tool.
Having a network of workspaces in a range of geographical locations allows companies to draw from a much more widely distributed and more diverse talent pool. Research shows that the companies that have the greatest racial and ethnic diversity are “35% more likely to have financial returns above their respective national industry medians”.
With growing demand for workspaces in small towns and the suburbs, there’s a great opportunity for property investors, owners and developers to cater to this. Demand for IWG’s workspaces in these areas grew by 36% in 2022, as a result of which IWG has launched a major programme of expansion that will see 1,000 locations added to its global network over the next year – the majority in suburban and rural locations, and often in small towns.
IWG’s scale, network of market-leading brands, and diverse partnership models makes it the partner of choice for those looking to reevaluate their global real estate strategy, and safeguard their portfolios for the future.
IWG is looking for partners to open local workspaces in the heart of communities, close to employees’ homes. As an IWG partner, landlords and investors can turn empty buildings into profitable, income-generating flexible workspaces. Find out how to partner with us here.