Editor’s Note: We are delighted to welcome our friend David Bergeron to discuss the Future of the Office with us. David is an Executive Vice President at Savills where he works with leading technology and life sciences companies to harness and quantify the power of real estate to positively impact company culture, collaboration, productivity and talent retention.
[MV] You obviously keep a close watch on the pulse of the commercial real estate market. Is this the end of the office? What are you seeing from your clients right now?
[DB] After 9/11 many thought that was the end of the office, but workers returned to the office and the result of the Black Swan event was permanent changes to security measures and operations. COVID-19 will not be the end of the office either, but it will result in significant changes to how we work. While remote work policies have gained momentum, most companies see the benefit of time in the office together to encourage collaboration, culture and innovation. Tenants are rethinking how they use their office space and they are putting employees first with a focus on wellness, and they are looking to be located in key talent markets.
[MV] Do you expect to see office occupancies revert to how they were pre-pandemic or will there be a new normal?
[DB] Office occupancy is rebounding but still under 50% nationally. Working from home can save employees anywhere from $6,000 to $12,000 a year, largely in commute-related costs, by one estimate. In this high inflation environment, what would inspire someone to forgo such savings and come into the office? Ideally, a “commute-worthy” workplace. A recent Leesman paper on RTO advises employers that “in an age of experience, you must magnetize, not mandate.” In other words, the in-office experience is the draw, and to build that experience, you must develop a better understanding of what your employees need to be productive in a workspace. Many employees simply do not have the infrastructure they require at home, such as printing equipment, a large enough monitor, reliable internet, and more. Choice of space is most likely limited. And as we have established, social connections can suffer working from home. A recent study found a link between working from home and higher rates of depression, anxiety, sleeping difficulties, and feelings of loneliness. The benefits of working from home are many, but the side effects may be something employees have not consciously come to grips with yet. Communicating the wellness benefits of social interaction at the office is a healthy nudge. It shows employees empathy and demonstrates how an office presence is in their best interests – no mandate necessary.
[MV] You work with a lot of tech clients who may have more flexibility to operate remotely given how they operate, but not every company has that ability. What differences are you seeing from companies in different industries and different geographies?
[DB] Some companies rely more heavily on mentorship, such as the legal industry, and working fully remote for more junior associates would be challenging. Law firms on average across major markets are back to the office 62% of the time from the pre-pandemic baseline, well above the national average (47%) for all industries. The Sunbelt saw the quickest return to the office after the pandemic, and those office markets have not been affected as severely. South Florida has seen the smallest change in space availability from pre-pandemic to Q3 2022 (100 basis points), and San Francisco has seen the highest change (1,940 basis points). Most heavily overturning market dynamics in San Francisco since 2020 has been the technology industry which has changed drastically due to the increased adoption of remote work early in the pandemic, then in 2022 economic volatility, high interest rates and earnings pressures have resulted in drastic cost-cutting measures for many. These quickly changing dynamics are forcing many tech companies to return space to the market in the form of subleases, further adding to the oversupply of office space.
[MV] Because of cloud computing, software-as-a-service applications are now available on demand to employees no matter their physical location. There is no need to be tethered to a single desk to get work done. How does that change how companies think about the function of their space?
[DB] The office is not necessary for heads down work to be completed. However, coming into the office helps employees not to feel like a contract worker, but part of an organization that cares about them and is worth caring about in turn. Collaboration and small talk that cannot happen between Zoom meetings, does happen in an office. There is an energy achieved when there are people working in the office together that cannot be replicated at home. Whichever return to office approach is used, it’s important to let company culture guide workplace strategy versus adopting a cookie cutter approach.
[MV] If companies have some number of remote employees or have more of a hybrid approach, what have you seen companies do to effectively engage their employees and maintain productivity? Is it about tools and systems, culture, processes, all of the above?
[DB] Being strategic about physical office features, including investments in the right technology and infrastructure, and incorporating a range of choice in flexible and functional spaces, offers employees an experience they will be hard-pressed to replicate at home. Comfortable and ergonomic furniture is something else that is commonly absent in the home office and a corporate office can more easily provide. Beyond space enhancements, employers can take steps to enrich the community aspect of the office, from curating professional development opportunities to social events or volunteer work for local charities. The workplace connects people well beyond everyday work tasks, and this is an undeniable differentiator from the home office. Employee experience matters. When the workplace is optimized for use and provides the social connections people need, the commute, even if only a day or two per week, will prove worthwhile.
[MV] Most companies don't have the budget to repurpose their entire office space or jump into a new lease. Are there more tactical things companies can do to get the most out of their existing space?
[DB] When it comes to workplace benefits and amenities, think practically. Anything that will give people time back in their week, or money back in their weekly budget, is a convenience that mimics the advantages of working from home and may help to earn the commute to the office. Meanwhile, employers reinforce a positive working culture, potentially increase retention, and drive extra incentive to come to the office. Subsidies for public transportation are not just budget-friendly for employees but also beneficial for the environment. Where public transportation is not an option, parking subsidies for drivers or extension of remote policies again create time and money savings for employees. While gourmet food may be an unnecessary luxury, occasional free food never goes unappreciated. Laundry and dry cleaning onsite can provide employees with another time-saving amenity. Pick-up areas for grocery and package delivery are also practical time savers. All would make worthwhile investments in the repurposing of unused space.
[MV] Thanks David!