Last March, office workers around the globe quickly packed up their desks and re-opened the next morning as a remote workforce. Adrenaline was high and the expected timeline was short, but denial soon turned into acceptance as risk management teams began strategizing on the future of office space and what tenants would require this year and beyond.
The kick-off session of NAIOP’s Officecast virtual series took on the topic of tenant demand, led by Kate North, Vice President Workplace Advisory for Colliers and Global Chair, Workplace Evolutionaries, International Facilities Management Association, and featured panelists Julie Seitz, Managing Director | Corporate Real Estate, Delta Air Lines, and David Barban, Director, Real Estate Finance & Workplace Solutions, Wolters Kluwer.
North began by walking through a March 2020 survey by Colliers on what many have called “the largest work from home experiment ever.” Colliers’ Global Workplace Survey queried 5,000 office space users, and the company recently re-surveyed the group to see how input changed between March and September.
Results show that the coronavirus pandemic has increased workers’ demand for flexibility: eight out 10 respondents say they’d like to continue working from home at least one day a week even after restrictions are lifted. Productivity has been minimally impacted or has improved, say respondents, with the elimination of commutes. Technology has helped maintain feelings of connectivity, and 90% say they are being virtually managed effectively. The work-life balance is in harmony, although many miss the separation between their work and home lives.
Colliers created four “2025 Future Scenarios for Corporate Real Estate” based on key drivers that will shape office, including economic, social technology, political, work environment and location trends.
Scenario 1: Back to 2019. This scenario has a low adoption of WFH and workforces continue to be managed in global and regional centers. Use of technology for artificial intelligence and automation continue at a steady pace, and the portfolio strategy remains status quo.
Scenario 2: The Office is Digital. In this plan, the office is defined by a digital experience with varied space types supporting work, and remote work becomes a competitive advantage for hiring. Real estate strategies are driven by employee choice, and the majority of the portfolio moves to variable, home or flexible workspace options. Technology is integrated with real estate and there are major adoptions of new platforms with accelerating globalization and greater offshore expansion.
Scenario 3: Disruption is the New Normal. Location is irrelevant here, and physical and digital lives are blended. Employees choose when, where and how they work, with companies attracting talent globally and people moving from company to company frequently. Virtual reality replaces most physical interactions.
Scenario 4: Adapting to Change. WFH is here to stay, and segmentation by function, living situation and demographics inform policies. Technology continues to advance in order to facilitate workflow and communications, and company portfolio strategies adapt for alternative occupancies.
Officecast participants were polled on which scenario they felt was most realistic, with Scenario 4, “Adapting to Change,” taking the overwhelming majority of votes. Scenario 3 was in second and Scenario 1 in third, with no votes for Scenario 2.
Seitz and Barban agreed with the informal poll results, with Barban noting that his company had already started to embrace a more remote workforce before COVID, and he expects a post-COVID acceleration in workforce mobility. Seitz concurred, but noted that it’s critical for building owners to think about who tenants are and where they might be on that spectrum. Legacy businesses, like airlines, could be slower to adapt and new, more nimble companies like startups would likely lead the pack in change innovation.
Barban said that about 25% of Wolters Kluwer’s U.S. workforce was already mobile – without a dedicated office space – before COVID. The pandemic has been a “force proof of concept” for many managers to see that a mobile workforce can work, he said, and the challenge now is to figure out what it looks like going forward and how to balance a larger shift to a mobile workforce with those who want to fully return to the physical office.
Seitz noted that Delta Air Lines is seeing a return to dedicated space, particularly in call centers that had largely been shared desk environments. Now, with health and sanitary concerns, shared workspaces are out and dedicated spaces are in. To accommodate the demand for social distancing, Seitz said Delta moved quickly to reposition former collaborative areas into individual workspaces. It’s not forever, she said, noting that employees will expect such amenities to return post-pandemic.
Building design and uses may continue to shift, particularly in buildings with a mix of public-facing and tenant uses. Air filtration is very important – people want to know how air is being treated and expect transparency on indoor air quality, said North.
The office will return to high density spaces, said Barban, but we’ll look at it differently. Instead of how many people fit into the building, we’ll look at how many people have a dedicated space there. Tenants are still going to demand amenities like large meeting spaces and gyms, and Seitz noted that health clinics and conveniences like pharmacies will be in-demand. Seitz predicts that intense densification, like bench seating, will not be welcome by many and could take up to a decade to return.
Expectations for office will continue to change as a COVID-19 vaccine becomes widely available and workforces settle into what emerges as their new normal, and all of that will impact for demand for space. Barban says it will be harder to convert older spaces into desirable space with capacity for automation and health/safety amenities. Seitz says older product may be in better locations, so owners should be prepared to invest in them.
This post is brought to you by Marcus & Millichap, sponsor of NAIOP’s Officecast 2020. Learn more about Marcus & Millichap at www.marcusmillichap.com.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.