Most recessions move in waves. One sector wanes, then another, then another, and by the time the dominoes stop falling, the first ones to fall already are back on their feet.
This one was different, says #b#Mark Gorman#/b#, executive managing director of Newmark Knight Frank’s Dallas office. This time it was less like someone tipping over dominoes in a neat line and more like some kid kicking them all down in a tantrum. Consequently, Gorman says, there is no clear point at which to start over.
The upside, he says, is that this unprecedented, all-at-once cave-in of the world’s economies has sparked unprecedented optimism. We are staring at the unknown, but we’re also staring at a blank page. Anyone can craft anything here, and businesses are looking to restructure themselves based on this optimism.
Gorman will present “Thriving in a Storm: Managing Corporate Real Estate in an Economic Downturn,” at CoreNet New Jersey’s monthly meeting on Tuesday, April 6, at 8:30 a.m. at Tower Center II in East Brunswick. Cost: $50. For more information, visit www.-corenetnj.org.
If companies are not engaging in true optimism, they at least are paying attention to what they need and how they operate. The opportunities they see, Gorman says, are not just how to get back on top, but how to operate more efficiently. And now that staff sizes have been pared to a minimum, companies are turning their attention to their real estate holdings.
#b#How much is your space worth#/b#? Office space is expensive. Behind employee expenses, the spaces in which those employees work make up the largest part of most companies’ budgets.
Over the past 18 months numerous companies have trimmed — and in some cases gutted — their ranks in order to find the proper balance of work load and productivity. One they found it, Gorman says, managers took a long look at where the survivors needed to go. Some companies found that they were just as, or even more, efficient with their employees working out of the office. Others found that they suddenly had all this extra space they didn’t need, so they got rid of it, through lease expirations or, less frequently, outright sales.
Smart managers, Gorman says, are now analyzing the value of the spaces they have. Space value is not merely what you pay in rent, it is what that space costs you to operate in the course of a day or week. Say, for example, you pay $10 every month for every square foot you rent. Each office is 100 square feet, meaning each office costs you $1,000 a month in rent.
Now consider what it costs to pay each employee each day he works in that 100-square-foot office. Then calculate what it costs to heat it. To have it cleaned. How much electricity it takes to run the machines. Each square foot, then, could cost, say, $16 a month. Is there a way to make your space more efficient? If you can trim even pennies off each square foot, Gorman says, you can save a lot of money for a company that has a lot of real estate holdings.
#b#The new everything#/b#. “Flat is the new up,” Gorman says. Where companies used to look for profits, most have learned to be happy with finding that they haven’t actually lost money.
Gorman sees successful companies operating with this new perspective. While the dust is still settling, motivated companies are taking risks and redefining their workspaces.
The evolution of the modern office is entering its third epoch, Gorman says. In the 1950s, America was a post-industrial society that built is workspaces to act like factories, with clear lines of delineation and authority. By the mid-1970s, though, that started to change. Companies set out to design offices that were larger and more active, encouraging more open spaces and interaction.
Unfortunately, Gorman says, all that open space eventually became “boxed off into gray cubes.” Tele-working was intended to be the antidote, and it has worked for some companies, but Gorman says that office managers now are shooting for something that combines the home-worker and the office-bound.
“We’re now seeing office solutions that are more experiential,” Gorman says. Companies are going virtual and using programs such as SecondLife to interact from afar. And they are finding more often that mobility and fluidity are the keys to happier workers and more efficient use of space.
A native Texan, Gorman earned his bachelor’s in business administration from the University of Austin in the early 1980s and went to work for Nortel Networks, where he oversaw global real estate operations for the communications giant. He helped develop a portfolio strategy that eliminated more than 26 million square feet of underutilized space and saved $800 million in annual operating costs.
He also co-wrote “New Wave Officing,” a guide to creating alternative work environments and enabling global tele-work. With Nortel he spent a significant portion of his time overseas and was responsible for 7 million square feet in 32 countries throughout Europe, the Middle East, and Africa.
He was also privy to the tech collapse of 2000 that began with the telecom industry in Texas and eventually staggered the entire high-tech sector. Nortel was swept up by the first wave of that collapse, and many of Gorman’s accomplishments came after the company was faced with an immediate need to restructure itself.
Gorman joined Newmark Knight Frank in the Dallas office in 2009, where he works with international clients to develop portfolio and workplace strategies aimed at boosting their key business objectives. He has been involved with CoreNet for several years, and serves on its board of directors. His talks on reconfiguring companies have become his signature since last year, he says, when a talk at one CoreNet meeting generated a flurry of requests to have him visit individual chapters.
What he has found in his travels around the country, he says, is that companies willing to embrace their “block and tackle” basics are the ones creating the trends and taking the risks. Some will work and some will not, he admits, but the opportunities the future presents are astounding.
The reality, of course, is that it will take work and time. “If you listen to economists, the recession is over because we’ve had growth for two straight quarters,” Gorman says. “Technically it is over, but for the average American it’s not at all.”