Demand for urban offices to be driven by flexibility and health amenities
The future of work in our cities is set to trigger a major shift in office real estate with a focus on quality rather than quantity, says a new report from EY and the Urban Land Institute
Demand for city-based offices over the next few years will likely be influenced by a strong focus on flexibility, not only relating to work activity but also space and location. New demands, including healthy building amenities, will also be at the forefront of higher expectations.
These are among key findings of a global report from EY and the Urban Land Institute (ULI), which looks at the impact of the future of work on real estate and cities over the next three to five years. The desire for increased flexibility, the report says, is likely to lead to a flight to quality over quantity of office space, and a move towards flexible and tailor-made leasing models.
‘The desire for increased flexibility will lead to tailormade leasing models…’
To inform the report, Future of Work 2020: a global real estate player’s point of view, the researchers surveyed 555 real estate professionals worldwide. The broad range of respondents included investors, developers, architects, planners and other service providers. The research focused on a time horizon beyond the immediate short-term impact of the Covid-19 pandemic.
Remote work on the rise
Real estate professionals overwhelmingly expect increased remote working, including more home working (96 per cent), more remote working away from the home (72 per cent), and more use of satellite offices at the edge of cities (67 per cent). The resulting ecosystem of workplaces will accelerate a blending of uses between residential, hospitality and office spaces, and a shift in language from ‘office’ to ‘workspace’.
The majority of real estate professionals anticipate more than three-fifths of employees may be spending more than 40 per cent of their time working remotely, in comparison to a fifth of staff working 20 per cent of their time remotely prior to the pandemic. Nonetheless, respondents continue to see a key role for physical office space in creating a corporate culture (96 per cent) and recruiting and retaining employees (93 per cent).
Expected impacts on the real estate industry include increased demand for flexible office footprints (96 per cent), flexible lease contracts (66 per cent) and more widespread use of co-working facilities by large corporate occupiers (60 per cent).
Just over half (53 per cent) of respondents anticipate a decrease in the office space needed by their organisation, and only 37 per cent envisage no change, while increasing the demands for healthy building amenities (94 per cent) and more space designed for collaborative work (81 per cent). This all may lead to a much faster obsolescence of buildings and future significant repurposing of offices.
According to Vincent Raufast, EY Consulting’s associate partner, remote work actually makes real estate more critical and potentially attractive, especially if office space can meet rising expectations in terms of health-inducing amenities.
‘While the total office space is likely to decrease, the quality of real estate will be even more critical,’ argued Raufast. ‘Physical office space will play a key role in preventing a loss of corporate culture, less effective talent management, a higher staff turnover, and a loss of creativity. It will need to meet new demands including healthy building amenities and more space designed for collaborative work, as well as formal and informal meetings with colleagues.’
Shift in work trends
Commenting on the shift in working patterns, Lisette van Doorn, chief executive of ULI Europe, said: ‘Flexibility is the consistent demand we’re hearing. Employees expect it from their employers and corporates from their landlords. Especially over the shorter term, this focus is accompanied with a drive by corporates to save costs, as many try to cope with the negative economic impacts deriving from the pandemic.’
ULI Europe’s van Doorn continued: “At the same time, there is a strong focus on the quality and location of the physical space as a key element to attract and retain talent, and as an expression of a corporate’s culture. This is also closely connected to an increasing focus on environmental, social and governance both by citizens and corporates. This provides opportunities for real estate players, who have embedded these elements in their corporate strategies and buildings, to build stronger, longer-lasting relationships with tenants and users.’
The report notes that the impact of the future of work will reach beyond buildings and work activity to communities and cities more broadly. Expected changes relate to easier access to online public services (93 per cent), the need to develop more efficient local supply chains (92 per cent), less need to commute (91 per cent), and an increasing pressure to focus on social impact, inclusiveness and health for businesses and people (91 per cent).