The Human Condition(s)

Take two freeze-frames of the Pittsburgh office market - one from 2010 and another from 2020. The most noticeable difference is the significant vibrancy around Greater Downtown today. We have been reporting on this realty for the past several years, but even as exciting as the current economy has been, the absorption of office space has been stagnant and has even experienced a negative net result in 2017 (first time in the decade). What is happening? How can the city feel so vibrant, yet market dynamics seem to lag in absorption and vacancy? The answer is the work environment is changing dramatically.

JLL’s Chief Research Officer, Ben Breslau, states “Major corporations have long targeted talent-rich innovation hubs, but the war for talent and margin pressures are further pushing companies to rethink their global location strategies with a focus on talent hotspots.” In Pittsburgh, this has become our reality. In the past 36 months, we’ve witnessed as the world’s top companies plant flags near our universities. However, if you look closer, you will notice the leasing is predominantly taking place in new construction or repositioned buildings. Mr. Breslau goes on to say, “Buildings themselves are quickly becoming smart and connected. Real estate assets are now more like computers with a roof.” There has never been so much emphasis on efficiency and technology in Pittsburgh from office users. The newer buildings provide efficiencies that older buildings simply cannot without a major overhaul, but there is another aspect not to be overlooked when searching for a new office – the employee experience.

JLL’s Chief Human Resources Officer, Mary Bilbrey states, “recruiting, retaining, engaging and developing talent has never been more important or competitive.” She continues, “If you aren’t creating positive experiences for your people, then you’re going to lose them.” In a competitive labor market, a company’s work environment is crucial to productivity and sustainability. In Pittsburgh, the newer, more efficient and strategically located office properties are capturing the leasing demand. The older buildings in Pittsburgh are finding it difficult to check all of the boxes companies feel are necessary to achieve their hiring and retention goals, while utilizing their office space in the most efficient and productive way.

At the end of 2019, FNB announced plans to anchor the flagship tower at the former Civic Arena site. This exemplifies the modern-day occupancy strategy - by leasing new construction, centralizing their location and taking advantage of new amenities, FNB will realize the return on investing in the largest placemaking development within Pittsburgh’s downtown. As important as the location, amenities and efficiency of the building may be for attracting talent, the next step is the build-out of the premises to retain talent and bolster productivity.

What can a company like FNB do to ensure that while employees are at their desks, they are within the most comfortable and productive setting? There are different variables to consider when asking this question about your own work environment. How mobile do you want your employees to be? Gone are the days when tall cubes filled the inside of a room and executives monopolized the views in offices along the perimeter. Now, bench seating and interior room offices allow natural light to pour in and breath life into the office. How collaborative do you want your employees to be? The total square footage per employee has dramatically decreased; however, decreasing desk size and digitizing storage enables offices to add larger cafeterias, employee lounges and recreational zones that allow employees to unintentionally run into each other and share ideas. How do can your employees enjoy coming to work? By being aware of what makes a healthy work environment, enabling the entry of natural light, limiting noise pollution, providing green elements and properly regulating temperatures, employees will enjoy coming to the office and ultimately give them the means to be more productive.

The way we think about real estate has changed dramatically. Although cost savings and efficiency will always be important when planning an office relocation, employee experience is arguably more important. Without happy employees, a business cannot thrive in the war for talent. Therefore, I will continue to educate, advise and advocate that placing the employee’s well-being at the forefront of the real estate decision-making process will ultimately result in better company culture and greater productivity. And as the management guru Peter Drucker famously stated, “culture eats strategy for breakfast”.

For more about JLL and Pittsburgh trends, please visit jll.com/pittsburgh