Canada Stockwatch – Insurer Manulife Financial Corp. (TSE:MFC, Mkt cap 43.52B, P/E 12.31, Div/yield 0.16/2.81, EPS 1.79, Shares 1.97B) revealed recently that it will reduce its property bill by up to 25 percent with renovations and new offices in cities that include Montreal, Toronto and Hong Kong.
With office prices surging and advances in technology allowing staff freedom from traditional cubicles, many companies are reducing the significant costs associated with real estate. By 2017, Manulife’s major offices will have unassigned desks and modern layouts, and offer flexible schedules that will allow a third of its Canadian employees the opportunity to work remotely.
In the past, staff promotions often led to the construction of new offices – and the bills associated with it. Now, Manulife plans to generate rental income in its buildings by leasing out the space that was previously taken up by unused desks and office furniture. For example, about a third of the company’s buildings in Toronto (comprising 1 million square feet) will now be leased to other firms, such as luxury watch maker Breitling.
If Manulife achieves its target of 300,000 square feet, the company could receive around C$11.3 million per year in rental fees from in its Toronto property alone. According to commercial real estate brokers Cushman & Wakefield, the average office rent in midtown Toronto is C$37.67 per square foot.
With approximately 29,000 employees around the world, Manulife also hopes to make cost savings by consolidating staff. The most significant move will be that of the employees based over six floors in a tower on Queen St. East to its recently revamped midtown offices.
Kevin Adolphe, head of real estate and Manulife Asset Management’s private markets unit, admits that the motivation for the changes was originally about savings but said the company quickly realized that it would also see “substantial benefits that we can’t really measure perfectly.” This includes productivity, staff engagement, and less employee turnover.
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