Reading the papers and listening to certain commentators you could be forgiven for thinking that the end was nigh for the office, but as with a lot of things it is difficult to generalise.
Demand for office space is linked to the economy; in a downturn, office demand reduces as employment levels fall and corporates move into cash preservation mode. Coronavirus has undoubtedly pushed us into a recession and in the short term this will affect demand. However, in light of the success of wholescale working from home, the question is now being asked – over the longer term, will this be the catalyst for the end of the office?
As ever the devil is in the detail; increased working from home does not directly mean less demand for office space. There are myriad factors which need to be considered, including density, financial returns, productivity and technology. Before examining these, it is worth taking a step back to look at the function and purpose of the office.
For the occupier, offices provide a physical space to bring people together to co-ordinate activity, output and performance and to boost creativity. Along with this, they showcase a company’s brand and culture and play a key feature in attracting and retaining the best talent. The function of the office will continue to evolve, accelerating trends which emphasise the importance of collaboration and innovation to employee productivity.
For employees the office provides a place for face-to-face interactions that technology struggles to replicate, such as social interaction, mentoring and managing. Even after the recent success of working from home, employees still state they would like to be in the office for the majority of the week.
As one of my colleagues puts it, it’s the “three Cs” – colleagues, culture and collaboration – that are still highly valued. You would be mistaken for thinking that Dublin city centre is about to suffer some apocalyptic breakdown, forgetting the importance of the office to a city’s ecosystem. People want cafes and restaurants, shops and places to live in the city, but without offices, which are the factories of the 21st century, you remove the engine that powers this growth.
The future of the office
There are clear benefits for employees in working from home, not least among them being the removal of the requirement to commute and the availability of more flexible hours. However, for many people their home living arrangements make working from home a suboptimal choice, owing to limited space, a lack of privacy and/or more distractions. Additionally, employees miss the social interaction that office life brings.
The maintenance of productivity away from the office over the longer term is also yet to be verified, and is likely to be boosted by regular office interaction. Flexibility will be key to employee satisfaction and the balance of office and remote working anywhere will be based around the individual.
So what changes should we expect to see to the office and our engagement with it?
There is little doubt that Covid-19 is going to accelerate changes in office design. The most evident change will be in occupational density. The upward trend has gone sharply into reverse as social distancing is adhered to. However, once a vaccine or effective treatment is available, there is likely to be a movement back toward the densities recorded pre-Covid-19, but not all the way, as health and wellbeing will remain top-of-mind for occupiers. A greater focus on spaces which emphasise face-to-face interaction is likely as office space is redesigned or repurposed away from individual full-day occupancy desks.
Technology on its own is unlikely to have a significant impact on overall leasing demand. Over the short term, the adoption of new technologies will facilitate remote working and ensure workers’ wellbeing and efficiency on their return to office buildings. Over the longer term, occupier demand is expected to gravitate towards technology – heavy smart office buildings, reflecting their ability to support companies’ environmental, sustainability, health and wellness initiatives.
The lack of commuting is the most quoted benefit of working from home and it is one of the areas that is causing the most concern for re-entry to the office – particularly in those cities which are highly dependent on public transport. A slower re-entry is likely in many of these locations. Some cities are pushing the benefits of cycling or walking. Over the longer term, face-to-face interaction (internal and external) is still expected to gravitate towards centrally-located and highly-amenitised urban centres such as Dublin.
The rise of the hyperconnected city region will gradually shift the spatial pattern of office demand, pushing it toward a diverse office market ecosystem comprising three major elements:
- Rising demand in liveable, well connected suburbs and small cities;
- A reimagined and increasingly multiuse urban core;
- New clusters of innovation-based activities.
The Covid-19 pandemic has been another unforeseen extreme shock to our world with far-reaching consequences over the short and long term. There will be an inevitable correction in the short term as the economic impact of the pandemic flows through to corporate activity. However, over the longer term the office will remain a fundamental part of our corporate culture and will play an essential role in our work and productivity.
If you don’t believe me consider these facts. In August Facebook leased 730,000sq ft and Amazon paid $1.4 billion for two new buildings in New York. While Google pulled out of one deal in the South Docks, they are still proceeding with two more representing 360,000sq ft or 3,600 new jobs. These are hardly the acts from the world’s most successful companies saying that they have no faith in the future of offices.
- John Moran is chief executive of JLL Ireland