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Moving with the Times

15 February 2007

There are a number of options open to companies when looking to expand, relocate or merge offices, or to reduce costs of occupation. Tim Worboys, discusses the benefits of managed space accommodation compared to more traditional options.

Davidson House, Reading, home to MetLife Insurance

THE NEED FOR BUSINESS AGILITY IN THE FACE of a rapidly changing commercial landscape is driving many companies to review their cost base. Pressures on margins are forcing organisations to re-examine their traditional approaches to property which typically, is 20 per cent of total business costs - second only to salaries.

Property is often thought of as a 'sunk cost' - a consequence of running the business. The rent, the rates, and the less visible costs of cleaning, security, maintenance and so on, tend to be wrapped together as property costs and accepted as fixed.

One of the key drivers for reviewing property costs is when companies are faced with the possibility of relocation or unforeseen changes in circumstances. Property moves can be triggered by a number of different factors, such as expanding or ontracting workforces, consolidation of several buildings into one, landlord dissatisfaction, the need to move to a new emerging market or as a result of mergers and acquisitions. Occasionally temporary solutions are required whilst a new head office is purpose built or an existing office is refurbished.

Relocations can also be triggered by the need to reduce the total cost of operation, to reduce the liabilities of the business which can be a combination of both property and staff overhead costs. For example as a result of Government commissioning The Lyons Review, an independent study into the scope for relocating a substantial number of public sector activities from London to other parts of the country, the Healthcare Commission piloted a move to Peter House, Stonemarti's premises in Manchester. Since moving into the building the Healthcare Commission has up-scaled its requirements from 25 to 220 workstations.

When considering a property move there are typically three main options open to organisations - buying, leasing/renting or taking up serviced or managed space accommodation. Relocation can often present the business with more headaches and spiralling costs such as long-term lease commitments, facilities management issues, as well as how to deal with its redundant legacy estate. This is why in recent years more organisations are looking to the serviced and managed office space market to provide the choice and freedom they are looking for.

There are a number of subtle differences between traditional serviced offices and the new wave of managed space accommodation. While on the surface both options provide a similar product, managed space premises are bringing a new way of thinking about the office and how it is offered. Most managed space operators deliver consultative-led solutions, packaging into the offering FM and non-core operational services whilst delivering bespoke fit-out options. Fundamentally this approach provides end users with choice over the use of their own furniture, IT, reception and/or meeting rooms or to outsource part or all of these facilities back to the operator, substantially reducing their total space requirement.

Prime locations
Having a central location can help organisations to keep their finger on the pulse of the city. Networking is also extremely important for up and coming businesses and being in an inspirational and contemporary environment, where one can easily mix with other professionals, is especially important. Other factors to consider are flexibility with the ability to expand or contract at short notice to accommodate the needs of the business, and transparant pricing - not paying for space and services they do not use or getting locked into long-term lease commitments which can bedifficult to break. Managed space providers are again different - generally costs are built into one fixed rate, per person per workspace, with a negotiated monthly charge, effectively only paying for the room they use, not warehouse space for future growth.

Most organisations want to promote their own brand. In most serviced offices companies find themselves flying under someone else's flag. Companies should seek out managed space which is unbranded, this effectively means that the building is no different to a conventional offer. Companies are constantly looking for ways to slim down their operations and reduce staff overheads such as administration/IT staff or front of house reception and meeting stewards.A managed solution can take away some of the operational headaches of running an office through the provision of a comprehensive FMservice.

MetLife Insurance
In June 2005 MetLife Insurance moved into Davidson House, one of Stonemartin' s newest building's based in the heart of Reading' s thriving business community. In 2005, CitiGroup decided to sell off its international insurance subsidiaries which led to discussions with MetLife Insurance, a global organisation that in the UK offers creditor, personal accident and critical illness insurance through major banking partners. MetLife was growing rapidly and looking to expand its portfolio. MetLife brokered a deal with CitiGroup to acquire all of its international insurance subsidiaries, including CitiInsurance and Travellers Life & Annuity. CitiGroup's UK insurance company, CitiInsurance, had a large employee base in the Thames Valley area. As CitiInsurance was based in CitiGroup's offices in Reading, following the acquisition, the team needed to find alternative accommodation.

After looking long and hard around the Reading area for flexible, but cost-effective work space, which would allow the company to grow, MetLife selected Davidson House and subsequently moved into its new premises in June 2005. Davidson House provided the perfect solution to MetLife's relocation requirements. Importantly, Stonemartin was able to provide the flexibility to allow for MetLife's ambitious growth plans and since moving into the building MetLife has dramatically upscaled its requirements, increasing from 45 to 97 workstations in less than two years. A single monthly charge means that MetLife does not have to pay for space it is not using, which reduces wastage. In addition, the transparent pricing system gives the company more flexibility as the month-by-month charge means it can negotiate its agreement in accordance with the needs of the business.

Colin Moody, Managing Director at MetLife explains: "At every stage of our growth, Davidson House has worked with us to ensure that we scale up in a very cost effective way with the minimum of disruption to our daily business. Davidson House also worked with us to ensure efficiency of use, whereby space taken was synchronised with the actual business needs, minimising any waste."

Acquisitions by their very nature naturally cause branding problems, more often than not the newly acquired business needs to re-brand. It was vital, therefore, that MetLife was able to move into an unbranded building so that it could bring its own personality into the workplace.

Traditionally serviced or managed office space has been viewed as a stop-gap while companies look for a more permanent base. Stonemartin seeks to create a consultative-led solution for its clients thereby guaranteeing long term repeatled business. Examples of this are companies such as Blue Arrow, Kleinwort Benson, BCL Legal and Martin Ward Anderson, who now operate across a number of Stonemartin's buildings. And this is the case with MetLife. At first Davidson House represented a practical solution for the company's imminent business needs, however, since being in the building the organisation has come to appreciate all the other services and facilities on offer. For this reason alone MetLife has chosen to relocate internally at Davidson House, continuing to grow and expand within the building rather than look elsewhere for new accommodation.

Following the acquisition, MetLife wanted to be careful it did not 'double up' on business services such as IT equipment, infrastructure and support, reception services, cleaning, security and maintenance. Stonemartin supplies these essentials as standard. As a result Davidson House has enabled MetLife to outsource its non-core business services allowing staff more time to devote to core business activities.

As a large organisation, MetLife often hosts a number of external meetings, staff briefings and presentations. Davidson House provides the company with all it could need on-site with its fully-equipped meeting and conferencing room facilities, which means the business doesn't have to worry about whether it has adequate meeting rooms when important guests arrive.

Property is a major expense and commitment for any company, so it is vital that any relocation meets the needs of the business. As times are changing, so is office accommodation, and managed space is seen as the obvious 'new frontier'. The superior buildings and first-class standards of service are all designed to lighten the load of the modern day working pressures businesses are under in order to remain competitive. Change is also a constant for most companies and the flexibility and choice that managed space offers accommodates for those unpredictable times. And finally, urban working is the future, as demand for environmentally friendly working practices increases so businesses are moving away from out-of-town office parks and drifting back towards the city centres.

Tim Worboys is Sales and Marketing Director of Stonemartin plc www.stonemartin.co.uk.


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