How Work From Home Has Changed The Future Of Commercial Real Estate
Sanjay Rishi, America’s CEO, Corporate Solutions, at JLL, told Karen Webster in an interview that in the United States, the commercial real estate market may be poised to embrace a range of hybrid models as we emerge from the lingering and long shadow of the pandemic.
Those models will evolve in a fluid manner over the next few years, based on various combinations of work from home/dedicated office space footprints, shaped in part by a considerable amount of digitization.
The changes are coming from the top down, said Rishi.
“The C-suite executives — the CEOs and CFOs — are closer to the whole real estate space than they’ve ever been,” he said.
Even as digital efforts remain top of mind for these executives as they try to keep top lines intact and grapple with the challenges of managing distributed workforces, they are also focusing on corporate culture.
And as a result, conventional wisdom may be stood on its proverbial ear.
The simplistic, initial reaction of most observers, explained Rishi, is that the shift to a virtual, work-from-home model will be the norm, cutting across industry verticals.
Dig a little deeper, though, maintained Rishi, and nuances and precedent tell a different tale. Culture and collaboration are not so easily replicated across computer screens. In addition, JLL’s own research has found that a majority of 3,000 surveyed workers — 58 percent — miss the office.
Much depends, of course, on the timeframes tied to developing vaccines in the fight against COVID-19 — and allaying workers’ fears over taking mass transit or crowding into elevators or cubicles.
Catastrophes, including pandemics, cast a shadow, indeed — but the length of that shadow can vary.
“But we’re such a resilient society,” added Rishi. “Human beings as whole are so resilient.”
Case in point: After the terror attacks of 9/11, said Rishi, no one really wanted to work in high-rise buildings, and no one wanted to work on the 90th floor. Major urban centers shuddered with a lack of demand for commercial office space.
Fast forward a year, said Rishi, and people returned to pre-9/11 mindsets, crowded skyscrapers again, and real estate transaction valuations returned to where they had been earlier, and climbed even higher.
In short, we (eventually) went right back to the ways we worked and lived before the attacks.
The battle between resilience and change may be a bit different this time around, with so much tied to public health concerns. Indeed, PYMNTS’ own data show that roughly 35 percent of consumers said a vaccine is an important factor making them feel comfortable enough to return to work (in person).
But there will be a re-entry into office life, Rishi said, when we move past the economic headwinds that are, in some cases, pushing tenants to seek temporary rent relief.
Although, as Rishi told Webster: “We’re still in a wait and watch mode,” within JLL’s own client base. There are a range of strategies at work.
Some firms want to cut costs and are paring down office space. Other firms are committing to at least keeping current operations in place, spending the capital necessary on maintenance.
And still other companies, are spending money to actually redo their offices, said Rishi, because the offices themselves need to be looked at in a different light — and firms can hold on to their physical footprints but find new ways to use existing space.
The stage is set for such large-scale revamps, as Rishi noted that a number of JLL clients still have 70 percent to 80 percent occupancy rates, which are remarkably high considering that we are in the midst of the pandemic.
In broad terms, the very definition of the office is being re-shaped. That includes re-examination of conference rooms, of how much space may be needed in the era of social distancing.
“The shift to digital compliments this,” he said.
A redesign of existing space can conceivably offer digital access to healthcare data or offer touchless conference room reservations.
Re-entry into the physical world, toward a hybrid model, will be a step-by-step process, and at least some of the heavy lifting — in terms of workplace safety, with a nod toward sanitizing regimes, and making sure air and water quality are addressed — are largely behind us.
As companies re-examine their workspaces, they are taking into account the needs of working parents (and childcare needs, especially in urban areas) and whether staggered workplace teams, alternating days, are effective, and where co-working spaces have a place. In other cases, establishing satellite offices may gain traction.
“It’s very possible that companies will start having teams come in on certain days and not other days,” said Rishi. “It’s a matter of finding the right balance between human interaction, eyeball to eyeball, reading your body language.”
There’s a virtual spectrum of hybrid workplace models that intertwine in-person and distance collaborations.
As he recounted to Webster, in the words of one JLL client: “I can operate my business, virtually, on a Sunday. But I cannot grow my business in a virtual world alone.”
The Value Of Collaboration
Collaboration, in all of its forms, is critical to any company’s success.
As Rishi said, “unless you have a sense of belonging that comes from working groups and an ecosystem of people, you become portable.” Portability, he said, frays the bonds between workers and employers, and it saddles companies with high, sometimes untenable, retention costs.
The near-term roadmap, he said, will show a lot more certainty a year from now as we will likely have “at least some level of mitigation for the coronavirus, with all its strains.”
Looking even further down the road, he told Webster, “we will operate in a much more digitized environment. Offices will not go away. And five years from now, will resilience win over the demand for these hybrid workspaces? It’s a question we will have to wait to see how it is answered.”
