The future of office real estate
When the Covid-19 pandemic is over, offices will still be used—but differently. Companies and their employees will have more options, and thus diversity of locations and uses will dominate the business world.
We have learned about possibilities that we didn’t imagine in 2019, the good old days. Remote work has proved to be far more viable than we realized, even in the eyes of last year’s greatest skeptics of “work from home.”
But many business leaders also lament the loss of face-to-face meetings. Remote communications works best with occasional real live conversations. That’s true both for one-on-one relations as well as small group meetings. The creativity that can come from an in-person meeting was lost. Alex Conant and Terry Sullivan of Firehouse Strategies wrote in the Wall Street Journal, “Online video conferences are no substitute for the creativity that happens when a group of smart people get together in person. Trust between colleagues can easily break down outside the office.”
From a management perspective, the old way of working may seem best. But the picture is different from an employee retention and recruiting viewpoint. Some people liked working from home. Some people had mixed feelings: they didn’t much care for working from home but were happy to skip the commute.
The preferences of these employees are important. Before the pandemic, the United States (and many other countries) faced an extremely tight labor market. The demographics for employers were ugly. The scariest chart for business in the coming decade showed virtually no growth in the working age population between 2020 and 2030. But since those last Census Bureau projections, foreign immigration into the United States has plummeted, so businesses will once again face a labor shortage.
The tight labor market means that every company work requirement has a cost in employee retention and recruitment. Only work requirements that add value to the business are worth the cost. If the company gets as much done with an employee working from home four out of five days, and the employee is happier, that’s what the successful business will allow.
We’ll have some people working from home most days, while others will want to return to the office for social connections. And now consider those with mixed feelings. Plenty of people don’t want to work from home. They have other people and animals in the house, or they don’t want an obligation to keep the background of video calls tidy. Yet commuting is a drag, whether by car or train or bus. The ideal for these folks might be a desk in a local co-working space five minutes from home, plus one day a week at the central office.
The cost of downtown real estate is high enough that renting a suburban co-working space for a worker is a good deal. At least, it’s a good deal if the company does not also reserve space for that employee downtown. With many folks spending a few days a week working remotely, office space can be downsized. The company will need to juggle different needs from different groups, such as the marketing team working together in the office on Mondays, finance on Tuesdays, and so forth.
Adam Segal concurs with this vision of diversity of work locations, and argues that businesses will have to be more intentional about how and why employees interact with one another. Segal is the founder and CEO of Cove, a technology firm helping companies and property managers organize and operate office space. He says that the casual hallway conversation that results in a great new idea doesn’t really happen much. Team leaders will have to be more intentional about bringing employees together for creative collaboration. That may sometimes involve quick emails or text messages, or short meetings on office days, and sometimes lengthier meetings.
We who are veterans of corporate staff meetings know that they sometimes constitute a series of one-on-one discussions with the boss, totally irrelevant to the rest of the team. Good managers must understand when group discussions will be valuable and who should attend those discussions, without wasting other employees’ time.
What will it take to get from where we are to that future office model? Segal begins with companies understanding what their space needs really are as we come out of the pandemic. He expects many companies to wait until lease renewals to re-think their needs, though I recommend that executives start the process much earlier.
Technology will be needed in many directions. Some companies need to work on their current tech support for remote work. Plenty of employees who want to work from home—which will save the company money—need better internet connections and hardware. Many businesses will have to add technology to coordinate use of the reduced space, including scheduling of different spaces. Some companies may have sufficiently flexible space that on the days when their own employees are not using it, other companies’ employees will be able to. Scheduling software will be vital.
The nuts and bolts of managing office space in the new environment may not be a core corporate function. In fact, it may make sense to outsource operations to a company specializing in such work, a niche that Segal’s company is moving into.
The office of the future will be based on some core concepts. People vary in their preferences. The labor market will be tight, so managers must not demand things of employees that don’t add value to the company. And, in Segal’s words, “Real estate is value-less unless people use it.”