By Simon Todd- Group Head of Real Estate
The pandemic has forced us to rethink the way we live, transforming industries and how we do business. The agenda of 2022 MIPIM illustrated this shift, with the focus on how the real estate industry transforms the spaces in which we live and work into a more sustainable and prosperous future for all. This directly impacts how the office is designed.
The Great Resignation Year
2021 has been described as the Great Resignation Year. A PWC survey found, for instance, that 65% of workers looking for a job in August 2021 cited more workplace flexibility as the top reason. This reflects conversations taking place across the real estate sector in which talent retention is viewed as a key focus, and increasing concern, for most businesses. The physical nature of the office will of course have a role to play in this changing urban landscape.
Findings like these must therefore be factored into whether an office building will continue to be a viable investment or end up obsolete due in part to the increasing adoption of the hybrid working model. The reality is of course that it is not an either-or, the office as an asset class will surely continue – but it will need to evolve
Office Social Life in the 18th Century
Humans are fundamentally social animals and innovation, brainstorming new ideas, research, and development are best played as a team game. The British Library, next to Kings Cross train station has in recent times evolved into something of a modern office, with free wi-fi, coffee, and comfy chairs. Inside hangs a portrait of Charles Lamb, who wrote one of the best accounts of life as an office clerk at the end of the 18th Century. According to a fascinating BBC report, it was to East India House that 17-year-old Charles Lamb went to work in 1792. Lamb wrote: “On Friday I was at the office from 10 in the morning (two hours dinner except) to 11 at night – last night till 9.” Lamb and his colleagues were made to sign in and out, and every quarter of an hour had to ensure they were in the office. Despite the daily grind of bureaucracy and paperwork, however, Lamb reportedly talked fondly of his colleagues and practical jokes took place, in a very rich and atmospheric social life in the office.
In some sense, history and tradition are on the side of the office, even the tech companies of today, whom we might expect would be looking to unshackle their workforces from the office, continue to value the collaboration and growth of ideas that can only be created when people occupy the same space. The future, however, is certainly not set in stone (or bricks and mortar) and the office will need to prove its worth because even those same tech firms, along with many others, are struggling to entice people back to a physical workspace.
It is still not 100% clear what the post-pandemic office looks like and where should it be located. Pre-pandemic it was the older Gen Z and younger Millennials that were most vocal about the need for a flexible and hybrid office working environment, with Gen X and Boomers tending to advocate the fixed office environment for everyone but the more senior people. In the return to work, however, it has been the older Gen Z and the younger millennial that have been the faster adopters of the truly hybrid model.
Whatever the preference, there is a general recognition that a collaborative and innovative office nurtures the aspects of learning and development which happen by osmosis. A lot of that knowledge and experience sits with our experience and older colleagues and so the physical office environment needs to make itself attractive at all levels to ensure we gain a diverse and correct balance of experience in the office.
You Must Buy The Commute
An interesting phrase that is now being used is – “You must buy the commute”, meaning that if you are going to entice an office worker that has been sitting at home for the last two years back, you need to provide them with something more attractive than they have at home. The level of the commercial vibrancy of the location within which an office sits and the ancillary facilities supporting an office can now easily be considered as important as the quality of the physical office space itself.
Data on occupier demand is already providing some evidence that secondary offices offering little or no additional value for their workforce compared with the home environment no longer provide a viable option. A landlord client and owner of a significant mixed-use London estate recently commented that they are developing office facilities and activities that will make the employees of tenants feel they are missing out if they don’t come in. Another interesting trend in new prime office development is the pressure from potential new tenants for the developer to include a percentage of co-working space within a scheme, to help support the tenants with a post-pandemic hybrid working model without the tenant having to carry the full fixed cost of this additional flex space or risk colocation of staff.
The New BYOD (Bring Your Own Dog?)
The well-being of employees has been at the top of the agenda for most employers during the pandemic with many companies now re-examining how they define well-being mentally, physically, and financially. How can the physical office environment practically support the well-being requirements of the workforce? This might combine support for people to walk, cycle, and run into the office with indoor nature areas and even bring your own dog (BYOD) to work facilities!
The segregation of work and home life is also important, so if the physical office environment can also support this while facilitating the management and supervision of a healthy work regime then so much the better. The office is not dead, but it does need to evolve to survive, and we need to cater to the needs of modern tech-savvy workers. To achieve that aim though developers must be proactive rather than reactive when designing better office environments. A faster horse isn’t going to survive the test of time.
Crestbridge ($130bn) is an international fund administrator with expertise across PE, VC, Debt, and Real Estate.