This article is sponsored by Colliers.
New return-to-office (RTO) policies are shaking up office portfolios, especially in select industries that are embracing hybrid, remote and distributed workplaces. To better understand how office design and leasing activity are impacted by these changes, Colliers surveyed leading companies in the US and internationally. Here, the firm’s Workplace Advisory Vice President Michelle Cleverdon discusses the newly released report.
Your survey shows that a majority of people will be required to spend three or four days in the office. What material changes to workplace design does this trend inspire?
While our survey indicates that many occupiers have established an expected number of days in the office (almost 70%), a third have not created a requirement yet. This indicates that there is still some uncertainty in how the office will be utilized in the months and years ahead.
The workplace and design of physical office space is critical for individual organizations. They need to determine the “purpose of place” and how face-to-face interaction or presence in the office can enhance the activities and tasks of their employees. Trends we are already seeing include further emphasis on behavior-based or activity-based approaches to design. This includes providing the right balance of personal and community settings, as well as a balance of multi-purpose spaces that can accommodate heads-down solo work, collaboration, social interaction and knowledge transfer, both formal and informal. As such, occupiers are finding ways to integrate more conferencing space, phone booths, focus rooms and open collaborative settings geared for share-outs – even if full-on renovation is not possible.
Another design trend we are seeing is the need for adaptable or configurable space. Intentional large-scale gatherings have been identified as a key reason to go to the office by many organizations. As such, we are seeing a shift toward “onsite is the new offsite.” This means that groups of different sizes are gathering for longer periods of time on an intermittent basis to solve specific problems, share-out or engage in curated interactions. This has identified a need for gathering space that can be broken into different sizes and configured in different ways, all with an eye toward hospitality, amenities and an integration of technology to enhance the experience.
Technology is also a key design trend and will continue to need to be fully integrated into office environments. High-performing audio and visual connection among off-site and onsite workers is increasingly important to promote “presence equity”. This includes technologically enabled ways to bridge the hybrid or distributed divide in an attempt to keep the “digital playing field” as leveled as possible, regardless of work location.
Almost 40% of respondents reportedly are undecided if they will invest in new amenities for office workers. Does this explain the continuing popularity of shorter lease terms?
Not entirely. Ambiguity is causing varied approaches to securing office space, both in shorter term leases and flex or serviced office offerings. There is instability coming from a variety of socioeconomic trends, the changing preferences of employees – especially employees with different skill sets or functional areas, headcount fluctuations and uncertainty about physical presence in offices. Due to the variety of pressures, many companies are taking a “wait and see” approach which includes short-term lease terms.
Why did 60% of those surveyed not seek shorter lease terms?
There is a percentage of companies that are not committing to leases at all right now, so they are not seeking shorter or longer lease terms. These companies are still analyzing the rollout of their RTO strategy and assessing the degree of impact that will be required to support their occupancy strategy. Of those remaining companies, we believe that due to the opportunity or need to reinvest in the workplace design and employee experience as a result of hybrid, in many cases traditional length lease terms are still the appropriate structure from a corporate finance perspective. Their reinvestment could include a total rethink of their workplace including downsizing and consolidation into new space which will require capital expenditure to be accounted for and paid back through more traditional lease terms.
There were no notable differences in the responses of American firms versus international ones, but there was when it came to size. Firms with more than 150 office properties responded differently than firms with smaller portfolios. Why is that, and could you elaborate further on the differences?
We agree that there was not much difference in US responses versus international. Beyond some specific cultural differences in different parts of the world, the pandemic impacted how work gets done in a profound and immediate way everywhere. There has been a global impact, response and information sharing on RTO policies like never seen before.
When it comes to differences in the size of portfolios, this could be attributed to scale and impact of an organization. The larger the organization, typically the more established and refined its operational approach and infrastructure enabling employees. However, this can also cause organizations to be slower to transform. Larger organizations typically exhibit more stringent policy creation to support a company with more employees and mature business models. Equity in solutions and depth of programs can be advantageous, but can also cause strain, as there are many constituents, stakeholders and diverse functional types to accommodate.
From the data, we can see that the larger organizations are less likely to have established an RTO date (only about half). Over the course of the pandemic, we have seen many headlines around large companies with huge recruiting efforts that have announced their RTO approaches, but have had to walk this back or adjust due to changing restrictions caused by the pandemic or even backlash from their employee base. The change and ambiguity in messaging can create angst amongst their existing workers and potentially impact retention. In addition, this instability may negatively influence the ability to attract new talent if the RTO plans or hybrid approach does not align with that of potential candidates who are already in high demand.
Overwhelmingly, larger size portfolios had an in-office expectation pre-pandemic, but now have established a hybrid RTO policy going forward. They have also been less likely to establish a number of days, which could be attributed to complexity and scale of the organizations and a hesitancy to create a one size fits all approach, but also hesitancy to negatively impact recruiting efforts. If a number of days have been established, larger portfolio respondents are more likely to take a “middle of the road” approach by establishing three days a week in the office (almost 50% of respondents), as compared to their smaller counterparts.
The sectors most embracing hybrid office setups were technology, media and telecom, consumer products and heavy manufacturing. What does this mean for those portfolios, and do you foresee these sectors remaining hybrid longer term?
Historically, some of the industries highlighted have pushed the envelope on digital transformation, distributed organizational structures and sophisticated workplace strategies. It may come as no surprise that these same industries have leaned in to revalidate their approaches, amenities, design standards and enablement programs. However, the pandemic has caused some more traditional industries to accelerate their own optimization plans and entirely rethink how they provision and use workspaces. You can expect more change and clarity on long-term impacts in the coming years.
For the industries highlighted as most embracing of hybrid work models, they may also be placing a keener eye on where their talent is located and opening recruiting to markets previously untapped. Distributed and potentially completely remote teams will require support to be the most successful in working within this paradigm. As such, we may see shorter term and flex office solutions become the norm to provide employees with suitable in-office solutions while still maintaining a certain level of agility to keep up with the pace of the business.
As far as the potential for hybrid work to be a longer-term trend, from all the data that has been collected, the cat is very much out of the bag. The last 28 months have demonstrated that work is very much about what you do, and not necessarily about where you are. The office and real-life interactions are still needed to enable companies to not only survive but, more importantly, thrive. People are best enabled when they are provided agency and choice to access the people and places that will enhance their tasks at hand. This is the future of work.
How might company portfolios continue to shift, seeing that only 20% identified as having hybrid operating structures before the pandemic, compared to 77% now?
More dynamic and proactive portfolio decisions may become more prominent. This can be achieved through consistent workplace strategy and workforce evaluation with real-time data and analytics, as well as a mix of portfolio solutions in varying locations based on need and site purpose. More traditional solutions for portfolios are still relevant, but other levers like flex, co-working, serviced office and short-term leases are effective levers to achieve support of vigorous business requirements. We must acknowledge that new metrics are likely and more robust data points, regularly gathered, will be critical. And most important of all, how this data is visualized and shared will enable business leaders to make well-informed, more strategic decisions.
Michelle Cleverdon is a Vice President in Colliers’ Workplace Advisory Americas practice with a decade of experience in design and consulting. Based in the San Francisco Bay Area, Cleverdon leads the team’s western region.
With a passion for creating meaningful and valuable connections between people, technology and the work environment, Cleverdon helps create workplaces that help people and businesses thrive. She focuses on developing transformational spaces that boost employee engagement activity and meet client objectives.