A recent article in The New York Times investigates the shifts in commercial real estate and hypothesizes about the future of work. While it is obvious that COVID-19 significantly impacted the way employers use and think about physical office space, the data shows that trends away from large, big-city headquarters and towards virtual work and locations in multiple smaller cities had been growing for years prior to the pandemic.
Some of these changes can be attributed to the rising cost of living and ultra-competitive housing markets in large metropolitan areas. People are now able to earn high salaries in smaller cities where the cost of living is much lower. In 2018, even while the US economy was growing, fewer people were moving to big cities like New York, Los Angeles, and San Francisco; a similar trend was seen in London and Paris. Employers are also able to expand their talent pool by creating virtual and remote work opportunities or by establishing different hubs across multiple locations as opposed to one large headquarters. In the 2010s, tech giants like Apple and Google started splitting their headquarters into various hubs across the country and globe. Just a couple years ago, the financial software company, Stripe, opened a “remote hub” in addition to its four global locations.
Additionally, more companies have become aware that traditional work offices may not be the most supportive option when it comes to the productivity and wellness of their employees. The Times notes that almost 40% of employees report that their workplace fails to enable them to work productively, according to research by Leesman, a firm that measures employee experience. COVID-19 has amplified employers’ focus on productivity as pandemic-related closures and policies forced rapid changes to employees’ schedules, personal responsibilities, and work environments.
Of course, it’s too early to say just how the pandemic will create additional long-term impacts on commercial office space. Certainly, it has expedited many companies’ transitions over to remote and hybrid work options. While market data shows that many companies are continuing to renew leases, many are renewing existing contracts for a shorter period of time—possibly to wait and see how the market will change.
The Times suggests that, most likely, a diminished demand (even moderate) for physical office space will break up dense, centralized business districts. New employment areas may rise up where none were previously, while some commercial spaces may switch to residential or retail use. Some large companies are even experimenting with satellite offices, just outside of their larger city headquarters. There is a growing interest in not only working where one lives but living closer to work; people are not as interested in long commutes to busy urban centers. Mixed-used buildings, with both residential and commercial space, are becoming more popular.
Prepare For Changing Work Environments To Reshape Employee Needs
As cities and business districts change, employers will want to take note of how this could affect their talent retention and recruitment. With more companies embracing remote work and satellite office spaces, more employees may be inspired to relocate to a place that better suits their financial goals, family needs, and personal interests. Employers that aren’t ready for these changes could lose valuable workers or see a decrease in qualified job candidates.
Any change in physical work environments also complicates how employer compensation and benefits might work. Some employers, for example, may choose to pay employees based on where they live, and not on where the business is located, in order to adjust for the cost of living. Wellness needs might also change; certain benefits will not be utilized or relevant for workers off-site or in separate locations. These employees may expect comparable options to be offered, such as switching to virtual fitness classes and wellness challenges instead of offering on-site recreational facilities or food services.
Having a scattered workforce also raises challenges when it comes to keeping workers engaged as well as creating camaraderie. Employers need to approach how they can bring employees together—whether that is through more virtual gatherings and communication, scheduled get-togethers in person for team-building activities, or by requiring some work to be done at a central headquarters on certain days or times of the year. By making a plan now for these new work and office space trends, employers will be well-prepared when it comes to maintaining productivity levels, retaining talent, and meeting employee needs.