CORONAVIRUS COVID-19 PANDEMICPROPERTY REVIEWER

A flexible footprint and the future of the office

Lachlan Buchanan, Head of Real Estate, Pacific, WeWork
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OPINION: IT’S no secret COVID-19 has forced a significant shift in the way organisations operate, forcing us to adapt and rethink how we work. With real estate being one of the largest fixed costs, businesses are now focused on rationalising their footprint as they rethink their space needs, and tackle the challenge of providing workspace that is safe and inspiring for their people to return whilst also driving down costs.

With this in mind, it is fair to say that occupiers will be more willing, or forced, to be somewhat experimental when it comes to engaging the commercial real estate market to satisfy their future space needs. Old assumptions and rules of thumb on how organisations expect their people to occupy office space are being reassessed. What will the new normal look like, and is it a radical change?

Right now, most of the conversations around the place of the office in a post-COVID-19 world are based on theory and hypothesis. However as lease expiries and capital expenditure decisions loom, these projections will need to be turned into real decisions relating to investment and lease liability.

Striving to strike a balance between current space needs and future requirements to accommodate an agile workforce has long been a discussion point for corporate real estate decision makers. More than ever, companies need to balance when, where and how their people will interact with their workspace. Even before the pandemic, there was a shift towards more flexible working with employees seeking a working environment that inspired productivity and collaboration – the pandemic has accelerated that trend, and companies are recognising the need to re-evaluate their office needs entirely. At the forefront of this is flexibility – in space, place and time.

The pandemic has forced a fresh take on how we consume commercial real estate. Viewing our office footprint as fluid and flexible will go a long way to alleviate the pain in this decision. Uncertainty and volatility calls for the ability to be even more nimble than ever before. At WeWork, we envisage a world where office space, like other supply items businesses need, is more on demand rather than static: it flexes with the changing requirements of the business. Our members, large and small, partner with us as a service provider to access COVID-safe office space with flexible lease terms and facilities management because it’s something a business can effectively outsource, while being part of a vibrant global community.

The unpredictable events of 2020 have reminded us that the fundamentals of the office market are cyclical: effective rents and vacancies go up and down. Whilst it may take some years before equilibrium is once again found, what is likely to change is how we interact with space. From the cellular, hierarchical layouts of the 70s and 80s, to the workstation farms of the 90s and the activity based working design of recent decades, the way we work is set to evolve again. In fact, we are seeing our members around the world demand even more space for collaboration, social proximity and learning, all within the same footprint.

As we start to emerge from the pandemic, we recognise that while remote working has become part of our ‘new normal’, the value of the office has never been more apparent. People are tired of working from home, or “living at work” as it feels like most days. Recent Atlassian research, conducted by consultancy Paper Giant, surveyed 5000 full-time workers globally including 1010 in Australia, finding 77 per cent of the Australians agreed they “missed the energy of their workplace”, compared to 49 per cent of the global sample. Similarly, look at how social capital is built and fostered. In a deep-dive study on collaboration we conducted with bright spot strategy, we found that the ability to have unplanned interactions has dropped by 25 per cent on average since working from home. For employees who collaborate in close-knit team environments, the decline is as high as 40 per cent. The sense of community and the ability to share knowledge and ideas are key attractions of co-working.

For many, meaningful business is done outside of Zoom calls. If your work days are jammed with calls, you might feel busy, but that’s not to say you’re being productive. Highly structured days spent Zoom to Zoom or even meeting to meeting eliminates the time where accidental face-to-face conversations occur. It’s in these interactions where our thoughts and ideas are allowed to wander which in turn provokes more consequential discussions about how to navigate a pathway forward or problem solve a challenge. While a home environment may sometimes be more conducive to solo or individual work, the office provides a place for creative, innovative, unstructured and human interactions with our colleagues.

It’s for this reason, we’re quickly seeing organisations rethink the very idea of an office – from a place where work tasks are performed, into a space to exchange ideas, brainstorm, and create. Working remotely, it becomes more difficult for those who are used to interacting with co-workers to make decisions, find non-standard solutions and come up with new ideas, learn by themselves and teach new employees. For the younger and more junior members of the workforce, this is even more pronounced: for learning, mentoring, socialising and growing.

Beyond the short-term requirements of creating safe spaces for employees to return to, the mid- to long-term focuses needed to support productivity and a robust culture will centre around choice, trust, well-being, and health. A key finding of a 2018 study conducted by Slack commissioned to uncover some important truths about employee engagement and productivity, found that people crave transparency. They want to know what’s going on across their organisations. It also showed that connection is critical for a positive environment. It’s easy to think “connection” is a soft metric, but experts say it can be one of the most critical markers of employee engagement. Strong connections at work improve individual happiness, but also effectiveness on the job.

Whatever form the ‘new normal’ takes, it is a chance to really reimagine what value we can derive from our workspace and really use it as a tangible tool to drive sustainable business outcomes. Today companies are redefining their office needs and rightly questioning the concept of space as a fixed commodity. They’re looking for flexibility: the ability to quickly reduce or increase the number of seats or re-equip offices to create a distributed network across geographies. Tomorrow’s workspaces will be purpose-built for connection and team-building, and we will all increasingly become more deliberate in our intention to “go to work” for learning, collaboration and social interaction.

By Lachlan Buchanan, Head of Real Estate, Pacific, WeWork.

With over 18 years’ experience in the commercial real estate and flexible workspace sector, Lachlan has transacted in over 50 markets across developed, emerging and frontier markets in Australia, New Zealand, Asia, India, Middle East and Europe. At WeWork, Lachlan manages the acquisition and leasing of space across the Pacific region. He is passionate about workplace trends and the changing dynamics that flexible space is bringing to commercial real estate.

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