Adapt or Die: Five Predictions for the Workplace of the Future

As a commercial real estate veteran, I can assure you that my industry has rarely if ever driven front-page news.

How quickly things change. In a matter of months, Covid-19 has caused an historic, radical transformation in how we think about the time-honored act of going to work. The CDC recently issued restrictive occupancy guidelines; companies like Twitter and Shopify have suggested their employees may work remotely forever; NYC is re-opening, yet only 10-15% of office workers have actually returned.

Is the office as we knew it gone forever? Or have recent events simply accelerated inevitable and much-needed change? Staying ahead of the curve has long been an obsession for those of us in the business of building, owning, and managing real estate. Now, my colleagues and I spend every waking moment trying to resolve these questions.

Let’s begin with the good news: reports of “the death of the office” are premature. Long before the pandemic, flexible work arrangements, reversal in office densification, and improving employee health and wellness were well under way-;Covid-19 just got us there faster.

There is much to do as we rethink the modern office. Here are five predictions on what we believe workplaces must look like going forward:

1: The More Things Change, The More They Stay the Same

Post-pandemic, there will be roughly the same demand for office space. In architectural firm Gensler’s U.S. Work From Home (WFH) Survey, a poll of 2,300 workers across 10 industries, only 12% said they did not want to return to an office. Zoom CEO Eric Yuan says “technology-wise we are not ready to work from home,” and that it may be “15 to 20 years” for product and infrastructure to fully support WFH. Organizations may survive remotely for now, but in-person interaction is critical for professional development, culture and upskilling. While remote work will increase meaningfully, its impact will likely be offset entirely by job growth and reversal of densification (which saw US-based companies cram 13% more employees into the same amount of space).

2: Talent Talks

Going forward, employees will exercise an even greater influence over corporate real estate decisions. Office space selection was historically a top-down decision made by C-Suites. The war for talent changed that, as companies leased record space in Central Business Districts and invested in amenities to attract Millennials. Office selections will be increasingly geared towards what employees want: flexibility, reduced commutes, health & wellness, and other amenities. The pandemic will only accelerate this trend, as employees demand more from the office to improve on WFH.

3: Shout It from the Rooftops

Companies will physically decentralize. Some have referred to this as a “hub-and-spoke” model, but the reality is more complex. Cities will not be replaced, but suburban and localized markets are likely to gain ground as the pandemic, higher cost of living, social unrest and strained municipal finances conspire to extend urban recoveries. The “City that Never Sleeps” may soon work that way, as officials consider a 24/7 workday with 20% of the workforce working at a time. Ultimately, megacities like NYC will function like a series of small, independent communities instead of a monolith-opolis. Similarly, more corporations will provide multiple locations to reach employees’ residential communities. This will spur additional growth in pioneering areas like the Far West Side and the Outer Boroughs. At 25 Kent, our development in Williamsburg, we received two RFPs over Memorial Day, one because the CEO concluded a 30-minute drive from his home to Brooklyn was preferable to a two-train commute to Midtown South.

4: Be Young at Heart

Aged commercial buildings will get crushed in favor of new construction. In law firm Morrison & Foerster’s poll of which sector was most likely to fare worst, Class B/C Office received more than double the responses as Class A Office. Lease signoffs now frequently include  a “Covid-checklist,” a clear shift. Newly developed buildings are at a distinct advantage. They likely contain modern infrastructure; generally have higher operating budgets, which can absorb enhanced cleaning costs; and professional owners can quickly make necessary investments. New construction has other advantages like occupancy efficiencies, which social distancing has made more valuable than ever. Buildings serviced by only one elevator might still be code compliant, but overnight became inadequate to keep employees safe. This inevitable acceleration of functional obsolescence will buoy the Class A market, as an ever-smaller percentage of supply competes for tenant demand.

5: Show Don’t Tell

Office buildings are long into a paradigm shift, from computational processing facilities to inspirational places that foster creativity and innovation. In our 21^st Century service economy, creativity is the new productivity; innovations are still brainstormed on whiteboards, meaningful connections are made in hallways, and deadlocked negotiations are solved via side-room deals. Traditional, physical aspects of workspace cannot be given up by most workers in most office-based businesses. Mental health has already been dubiously anointed “our next pandemic” and Covid-19’s impact on it has been well documented. Well-designed offices can help to counteract those effects: natural light and physical movement are healthy and inspirational. Being together facilitates being a part of something bigger, provides structure and balance in individuals’ lives, and reduces isolation. In the same way that brands maintain a well-funded online presence, they communicate their values in physical form through their office space.

Conclusion

Necessity, it is said, is the mother of invention. The only hope for the real-estate industry and corporate America to put Covid-19 behind us is to move past the current, paralyzing uncertainty and invest in innovation. One lesson that we have made little progress in learning is that arbitrary segmentation of society by economic industry or geographic region is a temporary measure and will not deliver a full recovery. The workplace of the future can’t come soon enough, and we think this roadmap shows the way. As goes the office, so goes the economy.