A large-scale global study completed in August and September has attempted to shed more light on the predicted effects of Covid-19 on working habits.
Some 555 respondents took part in the 'Future of Work' study by not-for-profit education and research body, the Urban Land Institute (ULI), and advisory firm Ernst & Young as it looked into trends for the next three-to-five years.
Key findings include that 53% expect a decrease in demand for office space in the next three-to-five-year period as a result of new work patterns. Interestingly, over one-third (37%) said they expected no change and 10% said they would increase office space.
The authors’ commentary on the findings present a mixed picture: ‘There is quite some difference of opinion on floorspace demand; short term we would project a decrease, but long term is less certain. We are also seeing new builds and deals happening showing a market appetite. Location is a factor.’
The report continues: ‘Ultimately, short-term cost management will have the biggest impact. Big occupiers will be looking to reduce occupancy costs; this is a long-term trend which will continue.
‘As tenants require less space, we will be seeing obsolete spaces and buildings. What does this mean for our real estate players when we have all that space and no demand for it? Owners and developers will be forced to adapt and repurpose the obsolete office buildings which could be turned into mixed uses, co-living and residential.’
Safety tech
Perhaps predictably, the top way in which global real estate users say workspace will change is linked to safety. Some 95% predict the proliferarion of new tech to make buildings 'pandemic safe', followed by healthy building amenities, healthy-certified offices, and more space for collaboration and meetings.
‘Smarter and healthier buildings are seen as “winners” with a focus on well-being as a key selling point to occupiers. Technology will assist us to be back in the office and will be an activator towards health and well-being,’ the report states.
‘Real estate companies will no longer be looking to provide desks to maximize occupancy but rather focus on providing amenities in offices spaces. This could range from providing easy access to food and drink, tech-abled break-out areas, up to concierge service.’
A significant proportion (61%) felt that office space was important in attracting and retaining employees.
‘The younger generation will be the most office-located to escape subpar homework environments and socialize in city centres afterwards,’ ULI and Erst & Young predict.
The authors say flexible and tailor-made lease contracts are expected to become the 'new normal'. However, this presents a challenge to investors.
States the report: ’It is no longer just about selling “offices” but “workspaces” for real estate players.’ Developers and owners will need to offer flexible scalable solutions to attract tenants. It is proposed that data tracking of how spaces are used will be vital for organizations in understanding what mix of long-term office space and flexible spaces they will need.
‘There is the current challenge that investors demand predictable long-term secure returns, but occupiers want to have flexibility without long commitments.
‘Companies will sign market standard leases for a certain amount of space that they are sure they need for their core operations, and then they will add a layer of flex space.’
WFH
A huge majority (83%) expect remote time to be offered to employees over the next three-to-five years.
Post-Covid-19, employees may be working remotely between 1 and 3 days per week, say 75%.
Joining the responses together from office use predictions to working from home, the study also has implications for coworking space.
A CEO of a listed office REIT, said, ‘The customer base is there for shared workspace. I think coworking is here to stay. I think the question is, who is going to be around to service that demand after the Covid-19 period is over? And I do think there will be a lot of consolidation. But I think it will emerge, it will be a real business, and there will be players who will thrive after the crisis is over.’
A spokesman for the two bodies said real estate professionals overwhelmingly expected increased remote working, including more home working (96%), more remote working away from the home (72%) and more use of satellite offices at the edge of cities (67%).
‘The resulting ecosystem of workplaces will accelerate a blending of uses between residential, hospitality and office spaces, and a shift in language from “office” to “workspace”.
‘The majority of real estate professionals expect that more than 60% of employees may be spending more than 40% of their time working remotely, in comparison to 20% of staff working 20% of their time remotely pre-covid-19. Nonetheless respondents continue to see a key role for physical office space in creating a corporate culture (96%) and recruiting and retaining employees (93%).’
Expected impacts on the real estate industry include increased demand for flexible office footprints (96%), flexible lease contracts (66%) and more widespread use of coworking facilities by large corporate occupiers (60%).
CEO of ULI Europe Lisette van Doorn, said: ‘Flexibility is the consistent demand we are hearing. Employees expect it from their employers and corporates from their landlords. Especially over the shorter term this focus is accompanied by a drive by corporates to save costs, as many try to cope with the negative economic impacts deriving from the pandemic.'
‘At the same time, there is a strong focus on the quality and location of the physical space as a key element to attract and retain talent and expression of a corporate’s culture. This is also closely connected to an increasing focus on Environmental, Social and Governance both by citizens and corporates. This provides opportunities for real estate players who have embedded these elements in their corporate strategies and buildings, for their branding and to build stronger, longer-lasting relationships with tenants and users.’
According to EY Consulting associate partner, Vincent Raufast, remote work makes real estate more critical. 'While the total office space is likely to decrease, the quality of real estate will be even more critical. The physical office space will play a key role in preventing a loss of corporate culture, less effective talent management, a higher staff turnover and a loss of creativity.
He added: 'It will need to meet new demands including healthy building amenities and more space designed for collaborative work, as well as formal and informal meetings with colleagues.’
The report notes that the impact of the future of work will reach beyond buildings and work activity to communities and cities more broadly. Key changes expected relate to easier access to online public services (93%), the need to develop more efficient local supply chains (92%), less need to commute (91%) and an increasing pressure to focus on social impact, inclusiveness and health for businesses and people (91%).
