Hey, fellow Leader 🚀,
I am Artur, and welcome to my weekly newsletter. I am focusing on topics like IT Management, Innovation, and Leadership, with an Entrepreneurial mindset. My goal is to help you navigate the IT corporate landscape. Make better decisions, create awareness, and share real-world stories.
Commercial real estate is the single largest unoptimized operational expense on in companies balance sheet.
While tech leaders fight to squeeze 5% efficiency gains out of AI strategies, executive boards are bleeding money by keeping office space to hold all the teams together at the same time.
The return-to-office (RTO) push remains strong, with many companies mandating at least three to four days on-site. While competitors are free to make inefficient choices, doubling down on remote work creates a massive competitive advantage that surprisingly few organizations are seizing.
While tech leaders allocate budget trying to optimize operational margins with AI, they are bleeding money on unnecessary office floors. Mandating 4 days on-site to justify a commercial lease isn’t a good management decision.
Why Are Companies Doubling Down on the Office?
The job market has become tougher for candidates, especially as AI is increasingly used as justification for leaner teams. Remote days are harder to negotiate, and the traditional office-centric mindset persists.
For larger organizations struggling to build a strong operational culture, the office is seen as the only way for people to collaborate and assess employee productivity.
There will always be cases where an employee will be lagging, and these cases are used as arguments while trying to assess performance in a remote context.
However, even in an office context, and underperformed employee will have the same challenges as in a remote context. This might be the strongest bias against remote working.
Commercial real estate commitments also drive these mandates. Many organizations remain locked into multi-year commercial leases. Having so much office space empty constitutes a waste of rent money without proper use. Therefore, there is a management bias to use the office space as much as possible, partly due to a sunk cost fallacy and also in maintaining a status quo mindset.
An Opportunity Lurking In
After years of working remotely and even in hybrid modes, it becomes obvious how much wasted money maintaining an office can be. It would not be far-fetched to target a 50% cost reduction on facilities expenses just by adopting a more flexible work model.
Even if a company would like to maintain an office, the amount of space required can be substantially reduced if it adopts a “hot seat” approach to hybrid work. By requesting that employees come to the office only 2 days per week, it can potentially decrease office space by around 60%. These kinds of reductions are direct cost savings. In some cases, these savings can be even greater when compared with the impacts of AI usage.
For medium-sized companies (where decision-making has fewer layers, so it can be implemented more easily), this can be a great cost-saving approach. Once the contract for the office is nearing expiration, one of the main questions should be: How much can we save if we reduce the amount of office space?
Is Not Only Rent Savings
Everyday expenditures like office supplies, cleaning services, energy consumption, and other facilities-related costs will also decrease. It is simply easier to maintain a leaner office space than a big one.
Adopting a hot-seat approach is a quick and cheap way to maintain a leaner office, with overlapping days for a team to come in.
This can also be a great competitive advantage to retain and hire new people. If the market standard is having people in the office around 3–4 days per week, a company that pushes for around 2 days (or punctual visits) will have a higher chance of recruiting the best talent, all while maintaining a leaner cost structure.
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Cheers,
Artur