Back in March, most of us were thrown into our work-from-home routine without much notice or preparation, or even prior experience for some. COVID swept through countries across the globe, and Work-From-Office (WFO) became Work-From-Home (WFH) with the blink of an eye. After several months of adjusting, folks have found ways to be productive while staying safe and balancing the new lifestyles and habits, all while working from home. Our incredible ability to innovate and adapt has led to one huge question for the corporate real estate industry: How will COVID affect workplace real estate in the upcoming years and in the long run?

Normalization of Remote Work

In some ways, COVID has made remote work possible for organizations who thought otherwise. Those who traditionally operated almost entirely on the WFO basis involuntarily switched to remote work as much as they could with upgraded technology to facilitate and simplify remote work.

Despite offices slowly reopening with limited capacity, remote work is generally viable for most teams. As a result, organizations will likely choose to continue this momentum and look to implementing a hybrid work model. Some organizations, especially those in the tech world, did such a fantastic job with remote work that they are looking to WFH as a permanent option for their employees. Employees would only come to the office on some days of the week for meetings, in-person collaborations, or just simply the enjoyment of physically being in the office. The choice to come to the office would be a personal one. This would mean less time spent commuting on public transportation, less exposure to potential germs and viruses, and ultimately fewer people traveling to and from work on weekdays.

Normalization of remote work is an overall positive movement for the wellbeing of the workforce, but not so much for the downtown corporate real estate market.

Occupancy and Space Utilization

Occupancy and utilization were the first metrics to be impacted by the pandemic. Right out from the gate, workplaces experienced significant dips in occupancy when COVID-led restrictions and advisories were put into effect. Downtowns and business districts practically became ghost towns overnight. When the situation improved and restrictions were lifted, occupancy levels began to recover as organizations finalized and executed their return-to-work plans.

Although occupancy will regain some lost ground when organizations fully reopen their workplaces, it's hard to say that we will return to the normal, pre-COVID occupancy levels due to the viability of remote work. In addition, the decline in occupancy levels will be much more noticeable if the organization has developed robust flexible or hybrid work policies during the last few months.

So, how can organizations tackle this challenge of lower occupancy and utilization?

Real Estate Strategies

For decades, organizations have been aiming to lease the most convenient, efficient spaces in central business districts. These spaces allow organizations to better attract talent as access to various transportation methods opens up the talent pool. Additionally, organizations have also been enhancing the spaces internally to better cater to their people and their needs, as well as improving metrics around square footage per person and financials such as ROI per square foot.

That was the market norm before COVID. After the pandemic, however, things could potentially change. The workforce now has different and new demands and expectations from their workplaces. And yes, there will still be workplaces, as explained in a previous blog post. This calls for new strategies that must aim to increase the level of support for new work dynamics and to provide an exceptional workplace experience.

Choices and Flexibility

The physical space now needs to better draw the team together for and strengthen work, social interactions, and innovations that cannot be done well remotely. In order to do so, there must be choices, choices, and choices for the team. With COVID shedding new light on the possibility and effectiveness of WFO, WFH, WFA (Work-From-Anywhere), workplaces need to offer more options for their teams. These include different setups and configurations of primary workspaces such as workstations and auxiliary workspaces such as huddle corners, break and conference rooms, and frankly, the extra seats in the kitchen.

Having options is great, but that is not enough in the new era of work. Flexibility, which has long been a well-discussed concept in the workplace industry, is also a necessity moving forward. Flexibility of when to work, where to work, and how to work will be crucial for your team to accommodate any unforeseeable events in their lives. The equipment and furniture in the workplace should have the ability to be easily moved and rearranged based on the team's needs at any given moment. This would provide a big boost in efforts to foster an environment for effective, collaborative work sessions that are key.

Decentralization: Hub-and-Spoke

Changes to real estate are imminent. Depending on the organization's business, financials, operations, impacts from COVID, as well as lease agreements, every workplace will certainly experience some sort of modifications. Some workplaces will change slightly, in which the space itself remains the same with only minor adjustments like putting up signage, rolling out off-limit restrictions, and displacing furniture to reduce capacity. On the other end of the spectrum, some workplaces will go through extreme changes that could lead to the decentralization of workplace real estate. For example, a massive downtown headquarters could be broken up into smaller satellite offices spread across the city and suburbs, using the hub-and-spoke model.

There are both advantages and disadvantages to this strategy. Let's discuss the advantages first. One, further reducing the density of each office location could help lower the risks of viral spread. Two, employees who love and crave in-person social interactions could still do so in a lower-risk, safer environment, and possibly with coworkers in different departments whom they do not normally connect with. Three, in the event that an employee contracts the virus, it could potentially be slightly easier to manage the aftermath, such as contact tracing and arranging testing for the team. And not to mention, it is less of a financial burden to arrange complete cleaning and disinfecting of the space. Four, offices in the suburbs would likely provide more parking spaces for the tenants within the commercial complex. This is a major plus for those who have long commutes to work. Now they have the option to drive to work, in their own personal space of their vehicles.

While all of the above sound very attractive, there are disadvantages to the hub-and-spoke model. One, decentralization will take time and resources. As always, hunting for and building out or furnishing a new space is no easy feat. Two, maintaining the same organizational culture in the satellite offices will require detailed planning and execution. Change management will be more crucial to facilitate this change. Three, overhead expenses may increase while operational efficiency may decrease as internal services and vendor services will be distributed into multiple locations.

Key Takeaway

All in all, there is no single approach to overcoming the post-COVID real estate challenges. Organizations need to look within to find the answers for themselves. Also, there is never a right strategy forever. What works now may not work for the next quarter. Keeping flexibility and an open mind and being ready to iterate over and over again is absolutely vital.