Manulife Financial Corp.’s 90-year-old global headquarters in midtown Toronto, fronted by limestone columns and a manicured lawn, have had a makeover.
Inside the regal building of Canada’s largest insurer, employees can sit at any desk, get their phones fixed at the in-house technology hub, check out the herb garden in the new cafeteria, and charge their electric cars in the parking lot. That’s if they even come into the office to work.
The insurer, which employs about 29,000 people around the world, aims to knock about 25 percent off its property bill with renovations and new offices in cities including Toronto, Montreal, and Hong Kong. By 2017, Manulife’s major offices will have unassigned desks, tighter layouts, and flexible schedules that will allow a third of Canadian employees to work remotely.
Real estate is an easy target for cost cutting especially with office prices surging, said Ross Moore, head of Canadian research for CBRE Group Inc., one of the country’s largest office brokerages. “The employee’s saying, ‘Yeah, I don’t want a cubicle’ and the employer is saying, ‘Yeah, I’ll get rid of 30 percent of my real estate because it’s a significant cost.’”
Insurers, banks, law firms, and auditors are borrowing from technology companies by killing the stuffy cubicle, adding modern touches such as walls employees can write on while generating ideas, and giving staff schedule options.
At Manulife’s Toronto office, small white desks and open spaces have replaced green fabric cubicles. Executives at the company who once coveted a wood-paneled corner office will work in 300-square-foot (28-square-meter) glass boxes, with the exception of four people including Chief Executive Officer Donald Guloien.
“Every time someone got promoted, I would see a construction bill -- it just drove me nuts,” said Kevin Adolphe, head of the insurer’s real estate team and Manulife Asset Management’s private markets unit, said from Toronto. “I would go, ‘Why are we rebuilding things all the time?’ Or someone got promoted and they’d say ‘Well, I really want a new office and Johnny’s got the office.’”
Manulife will also add rental income from leasing the extra space once taken up by empty desks and filing cabinets. About a third of Manulife’s three main Toronto buildings, comprising 1 million square feet, will be leased to firms such as luxury watch maker Breitling SA, Adolphe said.
Adolphe declined to say how much the program will cost and what it’s charging tenants. Half the savings will pay for the renovations and additions and the rest will be profit, he said.
Leasing space in its Toronto property alone could give Manulife about C$11.3 million a year ($9.1 million), assuming it leases its target 300,000 square feet, according to data from Cushman & Wakefield. The average office rent in midtown Toronto is C$37.67 per square foot, the brokerage said in its fourth quarter 2014 report.
Manulife is also consolidating staff, moving most employees from six floors in a tower owned by Brookfield Office Properties Inc. on Queen St. East in Toronto to its revamped midtown offices. U.S. insurer MetLife Inc. announced a similar plan in March, saying it will move people from across the city to its namesake building in Manhattan.
Other Canadian financial firms shrinking the amount of personal space for employees include Deloitte LLP, which will nix assigned desks and have lockers for staff at its new location in a downtown tower set for completion next year. The auditor and financial-services firm will place about 3,500 employees in 419,000 square feet, or 120 square feet per person.
On average, companies are now seeking 30 percent less space when moving to a new office, CBRE’s Moore said, taking cues from tech companies Sony Corp. last year rented 71,500 square feet in a downtown Vancouver low-rise office to fit as many as 700 people, or 102 square feet per employee. That’s less than half of what a North American worker got five years ago, a 2012 study by real estate consultant CoreNet Global Inc. showed.
“Although we started down the path of, this is all about savings, what we realized very quickly is we’re going to see substantial benefits that we can’t really measure perfectly,” including productivity, staff engagement, and less employee turnover, Manulife’s Adolphe said. “We’re seeing that today.”