Real Estate's Four Great Challenges - Part 2

This is part 2 in a series of 5 posts looking at the four great challenges facing the real estate industry on the road to 2030.

Part 1 is here

Part 3 is here

I am available to present the entire series in person: So far I'll be doing so in London, Copenhagen, New York, Washington DC, Miami and Vienna. Contact me if you'd like to book an event.

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Challenge No 2 is:

The rise of hybrid, remote and distributed working.

In order to understand where we are today we need to remind ourselves of the actualité of where we were pre pandemic.

In 2019 it was easy to say what an office was, and what it was for.

The general consensus about 'the office' was that it was a physical space where employees would go to work during set hours.?

It was seen as the primary location for work and the place where employees would interact and collaborate with colleagues.?

The office was a critical component of the corporate culture.

From the perspective of investors and landlords the office was a valuable asset that could generate stable rental income and potentially appreciate in value over time.?

And for most corporate occupiers the office was the central hub of their business operations.?

In short ‘Work’ revolved around the office.

And for many people the office had real benefits:

Such as:

1. Face-to-face interactions with colleagues and the ability to collaborate in person.
2. Opportunities for networking and building relationships with colleagues.
3. Access to office resources and amenities, such as equipment and specialised spaces.
4. A sense of structure and routine in their workday, and the ability to separate work and home life.
5. And opportunities for socialising and team-building with colleagues.

Though the downsides were pretty much as you would expect.

1. Commuting to and from the office, which could be time-consuming and stressful. And expensive.
2. Distractions and interruptions from colleagues or noise in open-plan office environments.
3. Lack of privacy and personal space in open-plan office environments.
4. Feeling constrained or limited in their work environment, particularly in smaller offices.
5. And the difficulty balancing work and personal life, and feeling like work was taking over their personal time.

Nevertheless, despite the downsides, going to the office was seen as the default or standard mode of work, and many companies had policies in place that required employees to be physically present in the office during set hours.

Co-working and other flexible office options were available in 2019, but they were not yet as widespread or popular as they are today.?

Co-working spaces, in particular, were still a relatively new concept, and were primarily used by freelancers, entrepreneurs, and startups.

These options began to gain popularity amongst larger companies and corporate occupiers, but across major cities we were only ever looking at low single digits percentages of workspace being ‘flex’.

And then, in early 2020 Covid struck, which forced office based companies to move to remote work in a matter of weeks.

This raised many concerns at the time. Employers were worried about:

1. Decreased productivity and effectiveness in a remote work environment, due to distractions and interruptions, difficulty maintaining focus, and other factors.
2. Challenges with managing and monitoring employee performance and engagement, due to the lack of face-to-face interactions and the potential for decreased communication and collaboration.
3. The potential for decreased collaboration and communication between team members, which could impact the quality of work and the ability to achieve goals.
4. Technical issues related to remote access to company resources, such as limited or unreliable access to high-speed internet and VPNs, and a shortage of necessary hardware and software.
5. The impact of remote work on employee well-being, particularly as many employees were suddenly facing new challenges related to work-life balance, isolation, and mental health.

All these concerns were what put a break on working away from the office pre pandemic as well. Simply put it all looked a bit too difficult. A day at home here and there was fine but essentially most companies were very much designed around the office.

And to a large extent employees tended to be concerned about the same things.

So, after we all had no choice but to relocate to our homes and away from our offices - how did this all pan out??

Were these early fears validated??

How did companies deal with those five key areas of concern?

Well, as it turned out, at least for the better managed companies, there were and are ways to redesign how we work:

1. To counter the potential for decreased productivity and effectiveness, employers utilised new tools and technologies for communication and collaboration, such as video conferencing software and project management tools. You no doubt remember the mass rapid adoption of Zoom. They also established clear expectations and goals for employees, and provided additional support and resources to help employees adapt to the new work environment.
2. Challenges with managing and monitoring employee performance and engagement were dealt with by adopting new performance management strategies and tools to help managers monitor employee performance and engagement in a remote or hybrid work environment. They also provided additional training and resources to help managers effectively manage remote teams.
3. To keep teams working well together good employers encouraged ongoing communication and collaboration, gave people the tools necessary and developed new processes and workflows. They also offered more flexibility in terms of work schedules and locations, allowing employees to work from home or other remote locations as needed.
4. Technical issues related to remote access to company resources were solved by investing in new IT infrastructure and security protocols, and providing additional support and resources to help employees access company resources from home.
5. Good employers prioritised employee well-being, mental health, and work-life balance through empathetic management. They worked hard at understanding who might be affected in what ways and then offered the support and resources necessary to deal with situations as they arose.

In a nutshell companies that were successful in making remote work effective invested in new tools and technologies, established clear communication and collaboration processes, and provided additional training and resources to help employees and managers adapt to the new work environment.

Some companies of course did not fare so well. And this was primarily because they did not do what well managed companies did.?

Inadequate management practices and lack of proper support and resources are at the root of almost all failures to make working away from the office work.

But the overall reality is that the fears employers, and to an extent employees had about not working together in an office largely turned out to be imaginary. For most people, and for most tasks, remote working….. worked.

The cold turkey necessity brought on by Covid taught the world that companies did not NEED an office to get work done.

Those things most of us disliked about being in an office: commuting, distractions and interruptions, the lack of privacy and personal space, the constraints of a work environment and the difficulty juggling work and personal life did not HAVE to be endured. Work could get done, without these downsides.

The two things employees learnt, and cannot unlearn, is that commuting does not need to be a daily fixture throughout their entire working life, and that choice and flexibility is life altering.

Commuting, flexibility and choice: Less of the former and more of the latter. Please.

This is Challenge Number 2 because this is what everyone wants.

And they know it is possible and they are not going to give it up.

Now of course just working from home is, for the large majority of people, not enough. There are things people enjoyed about offices and there are things they want to do in them.

Most of us like face to face time with our colleagues, we want to build networks and relationships, we want to learn, we want to feel connected to others, and we want to socialise with them.?

What we’ve really done is found out what we would like to do where. What tasks we can best do here, and what tasks we can best do there.

Now we are in the post Covid era and not restricted to only working from home, just about everyone is moving to a hybrid way of working. With X days in the office, and Y days ‘somewhere else’.

This is clearly harder to manage than either when we were all in the office, or all at home, but like adapting to working from home, all the issues are ‘known knowns’ and educated, well resourced and trained managers should have no trouble dealing with them.

In 2019 everyone new what the office was for. In 2023 that purpose is very different. We’ve learnt a lot. We can take all the upsides from pre covid, and manage away all the downsides. That’ll leave us with a very different marketplace, and a very different way of working.

The challenge is in managing it all. Optimising our companies, enabling our employees to be happy, healthy and productive, and restructuring our real estate to act as a catalyst for great work. Not just as somewhere to go.

The essential point is that you cannot successfully run a hybrid company if your operating model is based on being office centric.

The post Covid world necessitates not just re-imagined offices but re-imagined companies. The good and best companies know this and are reaping the benefits. The badly managed companies are mostly reaching for office mandates based on zero interaction with employee needs.

There is only one place this will lead to. We are going to see the split between well and badly managed companies getting wider and wider.

This is data from research by ‘The Future Forum’, which is well respected, organised by Slack, and in this case draws from a survey of 10,243 workers across the U.S., Australia, France, Germany, Japan, and the U.K., conducted from November 16 to December 22, 2022.

Using the UK as an example you can see that we are very much in a hybrid world, and the desire for location and schedule flexibility is very high.

What is also worryingly high though is the percentage of people likely or very likely to be looking for a new job. 27%. Against a global average of 24%. That’s a lot of churn.

Which may partly be a function of burnout.

Which appears to be on the rise. Across the world, burnout is increasing - 42% of the workforce is reporting burnout.

So something is clearly amiss. Not all of which of course will be workplace related but the important statistic to end with is this one:

’53% of those who are dissatisfied with their level of flexibility say they are burnt out compared to 37% of employees who are satisfied with their level of flexibility.’

That is enough of a gap to just reiterate the point that choice and flexibility, along with the desire for less commuting, really is at the heart of how we should be thinking about workplaces.

And why challenge number 2 is not going away anytime soon.

I’d like to leave you with this chart from Gallup looking at engagement at work within the US. Only some 32% of people are fully engaged at work, whilst 18% are actively disengaged.

The role of real estate in engagement is a developing area I think. As we move to being a service rather than a product industry we will inevitably see ‘operators’ adding layers of additional services that aren’t specifically real estate related but that enhance the experience of specific real estate.

We shape our buildings, and then they shape us.

As someone once wisely said:)