As we continue to debate with all our occupier clients across the world on ‘how much space do/will we need’, we repeatedly reference the long term trend of urbanisation.
But can we be sure urbanisation is set to continue? Will the office have a future? Or has COVID-19 created a fault line in history and we should not rely on the past to predict the future?
Executive teams rely on data to inform decision making and find conceptual presentations without evidence difficult to grasp. The currently available data does not create a set of probable outcomes and the future is far from tangible.
We are therefore seeing varying degrees of risk appetite in an inherently uncertain world. There are those companies that are moving to a fully flexible workforce and are on a radical re-work of portfolios, and those who are nibbling at the edges more out of cost pressures than forward thinking.
We of course, don’t know who will be right, however history also tells us that there will be many case studies at the end of this episode in history, where both the risk takers and the more cautious will be proven right due to their own circumstance!
When I consider the last few horrible months, I reflect on what will change forever versus which changes will be short term, in the way we live, work and play.
I look at the German approach to the pandemic and my German colleagues and friends (who understand different cultures), tell me of a more measured, humble and less aggressive and divisive press which has helped steer a clearer and seemingly more successful path.
I look at the lack of people travelling back into offices in major UK cities and ask whether this is due to public transport, money, lack of clarity over the rules or genuine fear!
Finally, I look at the debate about the future of the office, retail and hospitality and the discussion that rages about COVID’s implications for all three sectors.
In attempting to answer these questions with a real estate hat on, I can only look at history and human behaviour for clues.
We know that, as a species, we have developed the following habits (some are thousands of years in the making and some are short term technologically enabled phenomena):
- We are social animals and therefore when this painful tiny moment in historical time finishes, we will want to reconnect and collaborate with each other;
- We will still want services as quickly and cheaply as possible which also reflect quality;
- Our best work platform is a combination of different settings for different requirements and
- People will still want to live in cities just as they have been for over 100 years, because they provide a vibrant 24-hour living environment, especially for the young.
So, what’s the future looking like for the CRE industry, and will anything change?
My conclusion is that the fundamentals of where and why people work, live and play will not change, the smart money will be on how people do it.
Those that seek to answer the how will be those that will see the greatest success as we hopefully move towards a new normal.
The discussion on the future of the office as a place to work continues unabated. The question on many minds is how to make the most informed decision possible. I have looked at two reference points over the past week that I believe will assist in making an intelligent decision about the way the future will unfold.
The first, is that while many cities have opened up across Europe, the mass use of public transport has a material impact on people’s decision as to how they travel into city centre offices. The biggest cities, with the heaviest reliance on public transport have seen a very low take up of people making the choice to stop working from home and move back to a corporate office working environment.
As an example of the rationale of a remote working first approach; last week I was on a Teams call with two colleagues who were both in our London office, but sitting at their respective socially distanced desks! Was that commute worth it? The, rightly lauded, benefits of being in an office environment with colleagues to brainstorm, socialise, develop strategy and innovate has been so that the pros and cons still seem to sway towards the cautious and home worker.
The second data point is the hassle factor and ensuing cost of flying to and from countries in the future. The smart travel/hop on hop off way of life even with flying, it seems has receded in many minds. The proven efficacy of virtual meetings increased global connectivity and the simple time factor of getting to a city, perhaps for a single meeting, will surely reduce the number of short-term requirements for day trip meetings.
Perhaps a more weekly and organised stay versus drop in and drop out will result. This surely has benefits in engaging with teams across the world more deeply. The question as with all our theories is how much of the potential change will be long term and become a habit/norm compared to the human habit of going back to the old way because ‘that’s what we used to do!’
Such an unprecedented global social experiment in my view has and will change things forever. We need to ask ourselves and indeed challenge our business, our colleagues and our respective corporate leadership as to how far we want to change. Is this a chance to make some of the fundamental changes we knew were coming but we’ve been avoiding addressing? How far are we willing to go, will be take the chance to make major changes to our culture, environment and location? I for one am determined that the answer will be an unequivocal, yes.
There seems to be a consensus when we look forward, that in one of the chapters of future thinking around major trends, the shift of global economic power from West to East is a happening phenomenon.
If we take this further and debate whether it will be a shift of global economic power from country to country, or indeed whether the increase in economic power that the global tech giants have established through COVID-19, will mean that they, as opposed to countries, will drive the new global economic agenda.
If this assertion is true, then similar to a town, village or community that are all owned by the same landlord, there will be a sense of consistency and direction that is often lost when ownership is disseminated, like in a country.
Looking to the future, perhaps the inspirational agenda that the tech giants are building around wellbeing, progressive thinking, the future of where we work and indeed how location plays a role, may mean that their size and collectiveness could help form a better shift of power than if it is simply a continent to continent axis change and all the challenges that such a shift would, and indeed is already, producing.
As the supply of everything from groceries to smart phone returns to ‘normal’, manufacturing and distribution companies are beginning to rethink how to get goods to market. Gartner reports that global smart phone sales are down 20% in Q1. Apple has fared better than most, in part to its global online stores and Chinese manufacturing coming back into the picture.
As offices think about what's next in terms of their footprint and the use of the office, so too manufacturing companies are thinking about how they can ensure the right amounts of goods are available to sell, in the right place, at the right price. Gearing up for the Thanksgiving to Christmas season is crucial for many to salvage something for the 2020 financial year.
Most manufacturers are looking to improve (de-risk) their supply chain by adding key partners and not being predominantly reliant on one country or company. A rethink of logistics and distribution channels is also important (the balance between in store and online) with new issues that effectively means a re-think for the post pandemic world.
Manufacturing and distribution do not WFH via technology! It works from and to every corner of the globe using vulnerable supply chains and businesses, and so arguably has the toughest challenge dealing with COVID-19 as its spreads and, for now at least, eludes human ingenuity at eradicating it (New Zealand aside).
There is no escaping the plethora of CEO announcements on the ‘office worker’ dilemma. Our industry is in a unique position to help make working lives more profound than the drudgery of the commute, work, commute, axis so many people had to endure. Equally ubiquitous are the surveys telling us what workers want. A heady mix of fact and opinion, driving decision making.
Mark Zuckerberg’s thoughtful reflections on what might happen and the changes to business life is well worth a listen. Some permanent home working and within 5 years he predicts 50% will work ‘remotely’. The big question is - remote from what and how to tackle all the challenges that working away from colleagues and a central office brings? Downloads of Calm, a meditation app, has doubled to 200,000 a day - with corporate users being the biggest user group.
Technology solutions will accelerate. AGI (Artificial General Intelligence) is focused on technology that can match the human mind and is coming. Some AI development is proving of immediate use. Microsoft has acquired a UK RPA company (Softomotive) which looks at ‘mundane tasks that are boring, repetitive, and prone to human error’ such as invoicing and financial reporting.
Business needs to retool, and office designers need to understand how we want to work in this brave new world. We can’t just bolt on old ways of doing things and hope for the best. Those that do probably won’t survive.
Life on Mars is a TV show that takes a police detective back from 2006 to 1973 and things were not quite the same. We are doing this in reverse. As Apple reopens another 25 stores across America (that’s 100 globally out of 510) they will look the same, but everyone wears a mask, your temperature is checked at the door, its limited access and cleaners are front and centre. This is the new gold standard for all businesses.
Two key components will drive our ability to leave lockdown. Data and technology. Global law practice Eversheds Sutherland has said it plans on spending more money on technology and less on office space in the future. Our industry needs to vastly improve its collection and use of data sets with a focus on understanding what makes employees productive - not just now (in the middle of a crisis) but also in the future.
Building choice will now have smart systems at the top of the check list. Thermal scanners and thermometer ‘guns’ will check your temperature in the building lobby. Your smart phone will book a desk for you, then plan your commute. It will allow you through security and into the lift, guide you to your desk, whilst making you a coffee.
This is ‘no touch business’.
Predicting the future is never a good thing but planning for a better one is in our grasp. We need a new vocabulary and to think differently about how we work. Remote working for example. Remote from what? Every survey says most office workers are as productive or more productive working from home. Technology helps but it is not the only important factor - it doesn’t ‘do’ emotional intelligence - yet.
Industry has a similar set of challenges - as always it will be those businesses that make improvements to drive better productivity, that will perform in the next few years. Those that want to return to how things were will be the losers in this new economic cycle. Just in case manufacturing will drive some different decisions.
We need to focus on how we redefine work processes and interactions to ensure a distributed workforce. Working from distributed workplaces can gel teams, enhance trust, build teamwork and improve productivity. This is in our gift as an industry to lead.
My biggest hope is that this new era of employee focused work settings will also drive greater focus on ESG and that the ‘Greta Moment’ is not confined to history, as companies focus on survival. Governments have a massive part to play in all of this.
As the term gap year takes on a new meaning for all, we can see an easing of restrictions approaching. Pret, for example, is open in London across a few key sites next to hospitals. Government guidance on businesses re-opening is the employer is responsible for taking all necessary precautions and this can vary between type of job setting, and it has identified seven. The Health & Safety Executive will be on hand to enforce the new rules.
Office workers should expect to be at home for longer, assuming they even want to try and get on public transport followed by a lift at work, whilst wearing a mask! All the data suggests the majority are more efficient working from home provided they have good technology. CEOs have latched on to this and a few have been public, sounding the death knell of the office as we knew it. Cushman & Wakefield’s nuanced view is businesses will want a range of locations (for office workers) from home working through local, regional and city locations, dependent on work type.
Businesses are starting to reflect on their old business model - optimising for efficiency - but at what cost? Expect changes once lockdown ends and we have dealt with the immediate crisis.
The ‘R word’, ‘Build Back Better’, ‘social distancing’ are just some of the terms that have filtered into our vocabulary as we face the biggest challenge of our lifetimes. What should business look like in a few weeks as lockdown comes to an end?
Employees need to trust that their employer has a plan, that they execute and that delivers a safe work environment, as well as a better business. The Government needs to deliver safe transport. It also needs to make the collective ‘we’ as important as the ‘I’, meaning opinions about data privacy need to loosen enough for society to rebuild itself.
An unintended consequence should mean the best businesses deliver more home working and re-examine how and where work happens. Balancing working from home and face to face creativity will reduce the amount of office space occupied. Industrial supply chains will alter, distribution direct to the consumer will increase and receive more focus from businesses.
The exhausted road warrior of the 1980s has become the Zoom fatigued employee of the 2020s…burn out will still happen unless we adjust how we work and expect our colleagues to interact. We need to look to technology to improve the process of work and help redefine what’s important. Challenging times.
We are facing a structural break in the economy and this means businesses will innovate/pivot – choose your expression – and this will bring changes to the property portfolio that corporates really need - amount, cost, location, tenure, safety - the property industry’s own structural break. An FT leader recently took Mark Twain’s oft used quote about his death in a leader article that concluded “today’s enforced homeworking experiment looks set to prove the enduring appeal of a good office”. The point is that change is required to achieve this.
The smart corporate is now planning for that ‘good’ office or industrial facility – the pandemic curve is flattening across the world at varying rates and the move to the new property normal needs to be planned now. Cushman & Wakefield is launching this week its Recovery Readiness: A How-to Guide for Reopening Your Workplace based on our experience in Asia and a global team of thought leaders.
Every corporate is re-assessing its property needs, the lay out of space and new working protocols. Property cost could easily increase with additional costs of cleaning and security required. Staff wellness has never been so important, nor has the need to involve them in decision making. Their safety is paramount.
It seems increasingly likely that over the next 2 months business will be allowed to open again, in some limited way, dependent upon country legislation and any re-occurrence of the novel coronavirus. Every business is weighing up its need to get back to work against the wellbeing of the employees.
Governments need to determine how we can use public transport safely. Landlords need to ensure their buildings are as safe as possible (from the car park to the tenant space) and are operated in a way that the tenants agree to.
Industrial and office occupiers face a similar challenge: rearranging how and when employees can work to maximise their health, as well as their safety. Workers won’t enter a building unless they feel safe; the ‘6 feet office’ is here to stay.
As a property industry, we need to look at the business response to the pandemic (competitors cooperating and teams working across industry). The real estate industry needs both the landlords and occupiers (as well as the banks) to work together to determine the best possible outcome for everyone. Both parties have a cost to absorb and need to do this in a collaborative and fair way.
Many employees are still at their place of work - so the rest of us can be at home. Key priorities for corporates right now are dealing with whatever recession we go into - V, U, or worst case, L.
Across EMEA every office and industrial project is under review. Difficult discussions with landlords (and their banks) about rent reductions/holidays/part payments will happen as we approach the June quarter date. Legal terms and conditions will also be reviewed.
With 5G upon us and the use of tech tools having grown in acceptance overnight, business leaders are now thinking about the physical and virtual office differently, to the advantage of both the employees and the bottom line. Employees will want something different when they return.
A heightened focus on the employee inevitably leads to thinking about future changes that are now inevitable.
The early days of lockdown have seen the Facilities Management teams across EMEA do an incredible job of deep cleaning business premises; helping those staff who are needed on site and ensuring essential building infrastructure is maintained.
Industries all have their own challenges:
- Financial institutions initially split teams into 2 or 3 groups to have some in the office, others in back-up space, and some at home. Most are now at home.
- Manufacturing/packaging companies servicing the food and pharma markets are flat out trying to increase output. Additional warehouse space is often needed as they ramp up.
- Tech companies in the communication space are increasing capacity to manage the surge in usage.
Now we see current building projects being paused across the region. Construction crews are standing down and space fit outs cannot be completed. This means businesses will not want to close deals and use rent free periods without the ability to fit out the space and without knowing when their workforce can return to the workplace. Preserving capital is paramount to all businesses right now, and cost savings are being made wherever possible.