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Not a pandemic, but demographics will decide the future and value of the office

Jan Verhaegh • 06/10/2020
The global pandemic has massively accelerated our understanding of the opportunities for remote working. Those who only need a computer and telephone for their work have been putting home working to the test en masse since mid-March and, thanks to technology, have confirmed that this throws up few obstacles.

From meetings, introductions and job applications to taking a training course online. What does this say about the future of the office? Will fewer of us be going to the office at the same time? Will workspaces become larger? Or will the office become a kind of clubhouse? The real estate advisers at Cushman & Wakefield expect that the future, and with it the value of the office, rests in the hands of those who work there, now and above all in the future. The gamechanger on the office market is that it is no longer the employer but the future workforce that will determine the organization’s need for office space.

The value of working from the office 

Some office users quickly decided – perhaps too quickly – to overturn the office strategy entirely and ditch the office. Others calculated that we would work for half the time at the office, and the other half at home, or a mix of office and home working during a working day. And there are others who swear by a ‘smart building’, where you can work touchless in a green office environment with good food and drink on offer and a healthy climate, all at a 1.5-metre distance from each other. This in combination with regional hubs besides the main office, which will probably be smaller. All potential scenarios, but at the same time developments which are difficult to predict in the current crisis. It is therefore unwise to take far-reaching decisions on office space during a period of crisis. 
What we can say at this stage, though, is that because of Covid-19 mandatory homeworking has led us to reassess the way we need to think about the value of offices and how we need to recalibrate existing workplace strategies. But the value of the office, and with it the recovery of the office market, is driven much more by demographic trends than by the pandemic. The future workforce and its generational makeup will determine the need for office space and what that office environment must or must not facilitate. The imminent demographic upheavals, in combination with the ongoing shortages in the labour market, will determine the need for office space, office workplaces and the function of the office itself. This will certainly not by definition result in less office space, but will lead to different office use and different workplace strategies. 

Demographics and the war for talent

In the current decade around 700 million Baby Boomers will retire and we will see the first fifty-year-olds of generation X, while the total worldwide population will be dominated by 2 billion people in generation Z. A fifty-year-old Millennial may seem a long way off, but this will be reality at the end of this decade. The impending demographic changes are complete upheavals and will have a huge effect on the entire real estate market, and that certainly includes the office market. Employers, always in search of top talent, will have to stand out from their rivals within highly diverse generations, each with their own requirements and expectations as regards where, when and how they will work. For employers, this means that they will be able to make their mark in this war for talent by facilitating freedom and flexibility in the choice of workplace. 

Where at present the Millennial is still the most strongly represented generation on the workfloor, digital native generation Z, who assume that everything they touch is seamlessly connected with each other, will soon become the largest cohort of employees in the organizations’ total workforce. Attracting, stimulating, motivating and retaining talented employees in all these generations demands answers to a wide range of needs and preferences within these diverse generations. Because, as research shows, it is perfectly possible for all generations to work from home, but that is not what all of them want. During the coming five years, office users will have to search for a sustainable and technical symbiosis between an optimal office environment and an optimal homeworking environment.  

Economic outlook in the Netherlands 

Worldwide research by Cushman & Wakefield indicates that the global office market will show the first signs of recovery from the crisis in 2022. Full recovery is expected in 2025. These recovery times can be compared to those of the financial crisis and recession in the years from 2008 to 2012. 

In the Netherlands, the recovery will be swifter due to its strong economic foundations and the shortages in the office market at good locations in towns and cities. Since the Covid-19 outbreak, national vacancy figures in the Netherlands have been at their lowest ever and the economic forecasts for our country are significantly better than those for other European countries, and certainly compared to those in America and Asia. The IMF is assuming that the economic recession caused by the pandemic will gradually normalize in the final quarter of this year. The support measures will do much to prevent bankruptcies and rounds of redundancies, as a result of which a recovery will be visible as early as 2021 and the Dutch economy is likely to pick up by 3 percent.

Data extrapolation

Cushman & Wakefield has carried out one of the largest studies in the world into office use since the Covid-19 outbreak. More than 56,000 respondents, of which 11,000 within the organization itself, were questioned about their current and future wishes concerning office use. The preferences of diverse generations were studied with regard to their workplace, their wishes concerning office use and homeworking, and the work-life balance. 

This study was carried out at the start of the pandemic and repeated as worldwide lockdowns began to relax. The two main outcomes of this study are:

  1. employees can be productive anywhere, not only at the office;
  2. 73% of the respondents name facilitating flexibility and the freedom to decide when and where they work as a condition for good employment practice.

This means that the function of the office will change permanently. More than a workplace, it will above all become the place where people connect with the organization they work for, the place where they become inspired, learn, collaborate and socialize. 

A new standard for the future

More than the question whether people will return to the office, businesses must above all answer the question ‘when and for what reason does my future workforce want to come to the office’. Covid-19 will undoubtedly make homeworking a more permanent feature in the long term too. But being able to work from home en masse does not mean that employees want to do so en masse. As the worldwide study by Cushman & Wakefield shows, what applies for one generation is not automatically the standard or starting point for another generation. 

International real estate adviser Cushman & Wakefield therefore argues that the profile of the future population of employees in an organization will become the determining factor for the function of and the need for the use of the office. As a result, office use is transforming rapidly from a property issue, usually on the basis of fixed, pre-Covid-19 workplace standards imposed by the employer, to an organizational issue in which the workforce itself will determine the need for office space and the way in which it will be used. This forces the employer to put good employment practices at its heart when deciding on its future accommodation strategy. 

 

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