The office has become the latest battleground in the fight to boost employee engagement, productivity and morale.
As return-to-office mandates gain popularity, companies are going to greater lengths to make their offices look and feel more inviting. After JPMorgan Chase informed its more than 300,000 employees that all staff would be required to return to the office five days a week, the bank spent $3bn (£2.3bn) renovating their New York headquarters. The newly refurbished premise has a 19-restaurant food court, an Irish pub, spa facilities and a signature scent.
Though this may sound excessive, it reflects the increasingly important role the office plays in supporting business strategy. This is the view held by the vast majority of finance chiefs, according to a newly published report by commercial real estate consultancy CBRE. The survey of 250 C-suite leaders from various sectors, found that 95% of CFOs view office real estate as key to achieving their organisation’s core objectives over the next three years and 79% want to have more involvement in real estate decisions. Key areas of focus for CFOs include cost management, talent attraction and space utilisation, according to the report.
Flight to quality
Paul Sherwin is the managing director of Oktra, an office design studio that has worked with brands including Deliveroo, Adidas and YouTube. He has observed a shift towards higher investment in workspace quality in the past 12 months. Businesses are investing more in in their office spaces, he says, using bright accent colours, branding, artwork and elements of biophilic design, such as plants and natural light, to encourage collaboration and productivity.
“There is a battle waging between senior management’s desire for in-person engagement and younger employees’ preference for flexibility and comfort,” Sherwin says. “Offices and people are the two biggest overheads in any business, so naturally finance chiefs have found themselves in the centre of these discussions.”
Filling up an existing office is going to cost more than the price of the additional tea and coffee
One such finance chief is Tom Moran, CFO at Komi Group, a digital media company. Moran had previous experience in property management, so led the renovation of the firm’s Manchester office, which is based in a converted mill. The space is fitted with a kitchen that is stocked with free snacks and a ‘living room’ where staff can watch Netflix. “I’ve been in these very bleak offices before where you sit like battery hens for ten hours,” he says. “I wanted the office to feel like the comfort of the home.”
However, it did take Moran time to get his head around the idea that people actually want to work from a sofa. “That still boggles me,” he admits. “But I had to think about what the younger staff want and what would encourage them to collaborate.”
UK office take-up, which refers to the amount of office space that has been leased or sold to occupiers, reached a post-pandemic high in the final quarter of 2024, according to analysis by real estate data platform CoStar. The research also reveals a flight to quality, with prime locations and modern buildings being the preference as firms seek suitable spaces to attract staff and welcome clients.
Meanwhile, executives are proving they are willing to pay sky-high rents to secure top spots. Prime rent spaces are above £40 per square foot in the UK’s major cities – Manchester, Birmingham, Leeds, Bristol, Edinburgh and Glasgow – CoStar data shows. Meanwhile, in some parts of London, rents reached as much as £122 per square foot.
These numbers highlight the importance of timing, Sherwin notes. For centrally located spaces, firms need to be ready to act quickly because demand is very high. “The earlier you think about these things, the better,” he adds.
Breaking down the cost of RTO mandates
“At a time when cost control is critical, the return of large numbers of employees to the office will increase employers’ costs and heap further pressure on already tight margins and cashflows,” says Alistair Roman, the former group finance director at the Post Office and founder of the Cost Optimisation Consultancy, a business advisory firm.
Those that don’t account for the increase in staff numbers may encounter problems. When Amazon’s corporate employees were called back to offices recently, it was reported that some struggled to find car parking spaces. Likewise, JP Morgan has been criticised for failing to provide adequate desk space for all employees to attend full-time.
Finance chiefs need to understand the impact of an RTO mandate across the company’s entire cost base. “Filling up an existing office for the first time in years is going to cost more than just the additional tea and coffee required,” Roman says. Office designs and layouts have evolved considerably following the pandemic and some investment may be required to bring them up to date.
The additional spend will likely fall into two categories: facilities and fit-out. Fit-out costs, which include furniture, flooring, lighting, breakout spaces and decoration, are typically going to be a firm’s largest expenditures, Sherwin says, and the cost can vary significantly based on the size of the space and location.
Some of the latest office design trends driving costs are hybrid workspaces, technology integration, eco-friendly building materials and multi-functional spaces like cafes, massage rooms and libraries.
It is worth noting that firms can claim tax relief in the case of some refurbishments. “Depending on the tenancy of the office, whether the building is leased or owner-managed, they can be included as part of the fit-out allowance to smooth the heavy upfront costs,” Roman notes. Increased energy-saving allowance also enables businesses to reduce their corporation tax liability.
There are additional expenses to consider beyond real estate and refurbishments. CFOs must also factor in employee turnover costs if staff who are unwilling to return to the office leave. Some firms may want to consider the cost of childcare, commute compensation and lost productivity due to the time staff spend traveling to work.
There’s also the potential cost of any legal challenges, such as discrimination claims arising from a mandatory return-to-office policy. Nationwide was ordered to pay more than £350,000 in compensation to a former employee, who was also a carer to her elderly mother, after she was made redundant following her refusal to return to the office.
CFOs must consider if it is all worth the cost. For Komi’s Moran, seeing the increased engagement, collaboration and social interaction among staff “makes it a worthwhile investment”.
Doing more with less
There are ways CFOs can minimise expenses. Many companies are choosing to reduce their office spaces to save on rent and service charges. “By reducing even a few 1000 square feet, you’re saving millions of pounds across the length of the lease,” Sherwin says. Firms are then reinvesting those savings into improving the quality of the space or providing additional perks, such as snacks and gym classes.
Timothy Hatton is a senior designer at the architecture firm HOK. “It’s not about how much you spend, it’s about using the space you have more intelligently,” he says. “To guarantee a strong return on investment, executives should consider what employees need to be happy and productive then prioritise investment in those areas.”
Hatton and his team designed Arup’s new headquarters in Birmingham. It was built specifically to meet the firm’s sustainability commitments and support neurodiverse staff, Hatton says. The fit-out includes dedicated mindfulness zones and customisable lighting, which studies show can reduce stress and anxiety.
It also targeted a 96% waste diversion from landfill, prioritising re-use of various items such as furniture and carpet tiles. This was achieved through the procurement of natural and recycled materials for interior components, which was cheaper than purchasing new furniture.
The new office has transformed Arup’s workplace culture and employee engagement, with a 10% increase in office attendance and a noticeable rise in social activities.
Remodelling does not have to be expensive, just effective, Hatton stresses. It could be as simple as taking away a few desks and replacing them with a common seating area. “Before splashing out on the latest office fads, stop and think about what your workforce needs and what you can do with your existing space,” he says.
As more CEOs demand employees return to the office, finance chiefs must calculate whether or not the firm is prepared to host their entire workforce and how much it might cost. Failing to provide adequate desks or parking spaces have seen some RTO plans backfire. Done well, however, the right office space has the power to counter negative workplace culture and boost productivity.
The office has become the latest battleground in the fight to boost employee engagement, productivity and morale.
As return-to-office mandates gain popularity, companies are going to greater lengths to make their offices look and feel more inviting. After JPMorgan Chase informed its more than 300,000 employees that all staff would be required to return to the office five days a week, the bank spent $3bn (£2.3bn) renovating their New York headquarters. The newly refurbished premise has a 19-restaurant food court, an Irish pub, spa facilities and a signature scent.
Though this may sound excessive, it reflects the increasingly important role the office plays in supporting business strategy. This is the view held by the vast majority of finance chiefs, according to a newly published report by commercial real estate consultancy CBRE. The survey of 250 C-suite leaders from various sectors, found that 95% of CFOs view office real estate as key to achieving their organisation’s core objectives over the next three years and 79% want to have more involvement in real estate decisions. Key areas of focus for CFOs include cost management, talent attraction and space utilisation, according to the report.
