While some companies have committed to remote work for the long haul, many others are in a place to rethink office space planning and their commercial real estate needs. Here's what you should be looking at now.
This article was originally featured on Forbes.com as part of the Forbes Real Estate Council.
Companies are now well into their fourth quarter of remote work, and one analysis of 10 major cities shows that just 25% of workers are back in office buildings. Gone are the days when company culture resides in the conference room, meeting room or common area. Today, office space can be anywhere — the bedroom, home office, flex space or coworking spot.
While some companies like Twitter and Square have committed to remote work for the long haul, many others are in a place to rethink office space planning and their commercial real estate needs. What is the office layout of the future? When corporations are space planning their next two, five or 10 years, what square footage will they need? How will companies strategize utilization for commercial space?
At Instant, long before the Covid-19 pandemic, we advised businesses on effective corporate office space strategies, helping them to secure space at speed and delivering and managing turnkey, custom workspaces. With the pandemic came a fundamental change in how and where we work, and it is expected that the changes will be for the long term. For the next one to two years at a minimum, property strategies will need to be altered to ensure that as leases end or are broken, the use of flex space is reviewed alongside traditional solutions to retain maximum agility allow commercial office space to remain an enabler for corporate strategy.
What does agility mean when it comes to commercial lease decisions?
In our conversations with companies ranging from small businesses to Fortune 500 enterprises, we've learned that some businesses are expecting to downsize their portfolios by up to 40% within five years. With space planning, increased portfolio agility strikes a new balance, introducing shorter-term leases and flexible contracts into the mix with the longer-term core office leases. This reduces portfolio costs and encourages an intelligent use of capex while banking on term-appropriate, consistently improved workspaces designed to evolve over time.
When it comes to approaching agility, companies would be smart to start with determining priorities and understanding the roles within an individual workforce. Once the geographic footprint of a company's workforce is reviewed and how it may change in the future is understood, the company is then equipped to map out functions and locations for space planning. This includes core offices, flex space, coworking space and virtual office space, to name a few.
What can companies do now to evaluate their office space needs for 2021 and beyond?
Before the pandemic, work from home was just a small portion of a corporation's space planning. The majority of work was carried out in the core office — headquarters and core leased offices that held primary business functions were the main space requirements.
Now, real estate is being looked at with fresh eyes. Central business districts (CBDs) were hit the hardest from a demand perspective through Covid-19. They are also typically the largest offices by square footage and come with the most expensive and inflexible contracts. As a result, we are seeing portfolio planning become the new normal for companies. Human resources, real estate and IT teams need to answer key questions:
• What is the purpose of this office?
• Who needs to attend and when?
• With what frequency and for what function?
• What scale is needed?
• What are the primary location considerations?
• How do we fund, operate and control it?
• How do we make it more agile?
In asking these questions as the tenant, many companies are evolving from a core office model where most of their square footage is in the main office location to a dispersed office portfolio, which more evenly distributes office space planning to three categories of space: homeworking, spokes (work near home, work near clients, offices on short- or medium-term leases, flexible leases) and hubs, which are the main headquarters and core leased offices. These core offices, while still an important piece of the puzzle, no longer have a monopoly on company real estate space.
For the employee, this evolution means that work becomes an activity, not a location. They can choose where to work based on their activity, in a geographically convenient location and in an office space designed for the activity being undertaken, maximizing productivity and contributing to a happier, more dynamic company culture.
When companies consider space planning and each office layout for the future, they think about what purpose each space will serve. Offices will be activity-oriented. Key considerations include employee collaboration, where employees will focus on client engagement and where individual work will happen. Most anticipate a stark increase in individual work happening in a virtual office, often at home. Office design in collaborative and client-engagement hubs will likely have more real estate dedicated to meeting rooms and fewer individual workstations.
How does technology impact office-design decisions?
On the tech side, there is a convergence of two important office space dynamics: companies "rightsizing" their portfolios and the fundamental shift in employee power.
Rightsizing is an adjustment to an organization's space and square footage needs. Gone are the days when companies needed one desk per person. Now, with employees seizing control of where and when they work, a company's footprint will drastically shift. Organizations have begun using technology to track their staff's space usage. By analyzing occupancy habits, the company — or tenant — will be able to identify relevant new office space needs accordingly. Companies are also zip-code mapping their employees' home locations to best determine where their spokes — work-near-home locations — should exist so they can better support their employees and create cluster offices that meet the needs of employees near where they are based.
This marks a tremendous shift in real estate, which is now viewed as a service to employees rather than a hub for the employer or client and will drive office space planning well into this next decade.
