Nedbank slashes half its office space

Due to the group’s space reductions across its offices and – importantly – branches, it incurred the same total cost of occupancy in the first six months of this year as it did in the same period five years ago. This is despite rental and administrative price increases as well as depreciation.

In the first half, its so-called ‘accommodation’ expenses totalled R1.095 billion. In the first half of 2019, this was R1.091 billion. There was a 3% decrease from 2023. (Included in this figure are load-shedding-related expenses, which improved over the past year. Last year, this was R62 million. This year, it decreased to R27 million.)

It has reduced 52% of its office space, or 201 000m², in the last seven-and-a-half years.

Most corporate staff use ‘hot desks’ in open plan areas, and its shift to a hybrid work-from-home model in 2020 and 2021 helped drive the reduction.

It also has remote working arrangements in place for certain staff across the bank. Only 60% of its staff will be on campus on any given day. This means it has a desk ‘utilisation’ rate of well over 100%.

For comparison, its Sandton head office campus (135 Rivonia Road) has around 42 000m² of commercial office space. This means it has removed total space equal to nearly five of its head office buildings since 2016.

Ironically, Nedbank doesn’t fully utilise its head office space, with a number of commercial listings available for pockets of space – some as large as 2 000m² – across various floors in the building. (Gross rentals are set at between R200 and R220 per square metre).

In the first six months of this year, it cut 23 000m² of space.

A chunk of space – nearly 50 000m² – was cut in 2020 as an immediate response to the Covid-19 pandemic, but its plan to reduce its office space had been in place for some time under its Target Operating Model 1.0 and Target Operating Model 2.0 initiatives. Under the latter, it has realised cumulative benefits of R2.6 billion versus the R2.5 billion expected.

Not just office space …

Nedbank isn’t only reducing office space. It has cut 60 000m² (approximately one third) of branch floor space since 2020. It says it optimises “the shape of our infrastructure largely through Project Imagine (our digitally focused outlets)”.

Currently, four of every five branches are digitally and sales-focused.

This will be rolled out to all branches in the next two years. Nedbank says that “by the end of 2025, 57% of branches will be smaller than 200 m², which is a significant shift from our current branch mix”. It currently has 549 retail outlets.

Its strategy is to shift deposits to cash-accepting ATMs, of which it now has 1 338.

It is trimming the number of ‘normal’ ATMs as it increases the number of intelligent devices. It says that in the past year, the amount of cash dispensed through its ATMs decreased by 1%.

The decrease in floor space overall needs to be seen in the context of an ‘only’ 9% reduction in the number of employees across the group since 2020 (it now has just under 26 000, which includes nearly 300 ‘new’ staff as part of the acquisition of Eqstra). This means it is using its space far more efficiently than ever.

Nedbank sees additional floor space cuts (“benefits”) alongside other paybacks from data analytics, payment modernisation, and hyper-automation going forward and will update the market on this with its full-year results at the start of 2025.  – moneyweb.co.za