A “dispersed operational workforce” with a net reduction in the demand for office space for a company based on endless growth.
By Wolf Richter for WOLF STREET.
The office sector of commercial real estate has a special moment: How on earth are all these offices occupied – that is, rented – when neither the companies nor the employees want to occupy them as they used to?
So here are two surveys, one from tech companies and their intentions for their offices; and the other office workers who work at home now and what they think of going back to the office. To top off the picture, let’s start with a third survey conducted by Fannie Mae of mortgage lenders.
Fannie: Mortgage lenders have found that working remotely increases productivity.
Corporate cost-reducers are ubiquitous: 62% of mortgage lenders (banks and non-banks) said moving to a remote workforce improved productivity and 51% reduced operating costs.
The downside is that 52% of mortgage lenders reported that employee collaboration within and between business functions has decreased, according to the survey. But that’s not high on the priority list. Productivity is at the top of the priority list.
Of these lenders, 79% preferred a hybrid model, where 21% to 80% of employees worked remotely. The most important factors in deciding on their workplace strategy were, in this order:
- Corporate culture
- Talent retention
- Customer experience.
And which employees would most likely have to work in the office again? According to the mortgage lenders, these are the two most commonly mentioned:
- Management; “The personal presence of executives facilitates communication, collaboration and decision-making.”
- Customer-oriented staff; “Many consumers prefer face-to-face interactions, and lenders have stated that this is the key to success.”
A Chicago mortgage lender who works in Alabama? Or overseas? Yup. Investing in remote work tech capabilities, IT security and IT infrastructure has enabled mortgage lenders to:
- Recruit talent without geographical restrictions.
- Retain talent as many lenders expect employee demands for permanent remote work to increase.
“The trend of a distributed operational workforce,” Fannie sees in all of this:
“A workplace model could emerge among mortgage lenders that includes leadership roles and consumer-facing staff in central offices, while more operational roles in geographically diverse locations work remotely.
“With a hybrid work model, companies expect improved flexibility and benefit from increased productivity, an expanded talent pool and potentially reduced operating costs.”
Tech companies: 95% expect to work remotely for at least a few days a week.
Real estate services company Savills published a survey of technology companies, 90% of which are based in the United States. Almost a third employs over 1,000 people and a quarter employs between 251 and 1,000 people.
Only 9% said they will never return to the office. That’s the good. The rest will have some sort of office needs. In the next 12 to 18 months you will need:
- Less office space: 47%
- The same office space: 40%
- More office space: 13%.
This means a significant net reduction in the demand for office space in a business model (commercial property) that is based on endless growth and new construction and is going to be a tough nut to crack.
Working from anywhere, even far away, is becoming a common option:
- 26% of companies allow all employees to move out of the office permanently.
- 54% allow employees to move on a case-by-case basis.
- 17% no, everyone has to live where they can commute to the office.
Hire software engineers in India instead of Oakland? You bet: 72% of companies said yes they are “open to recruiting talent from new regions as some roles may be removed”.
And 95% said that “flexible work” – a mixture of remote work and office work – is “normalized” in their organization.
How many days per week do you imagine the average employee would work in the office in a typical week? 76% of companies said the average employee will spend 2-3 days a week in the office
- 1 day a week in the office: 9% of companies
- 2 days a week in the office: 18% of companies
- 3 days: 58%
- 4 days: 11%
- 5 days: 4%
And office design will move away from desk farms, where everyone is married to a dedicated desk, and move towards the “hotel desk model” where employees book a desk for specific time slots and “collaboration spaces”.
Most employees who work from home want to keep going.
A survey of California residents conducted by the University of Southern California found that 38% of workers with broadband access have worked full-time at home and 17% part-time at home, for a total of 55%, either full-time or part-time.
However, work-from-home favors high-income individuals, which every study and common sense on the subject confirms: Only 32% of the lowest-income group reported working from home full- or part-time, compared with 60% who did earn between $ 60,000 and $ 100,000 and 73% earn over $ 100,000.
So these are the people who are already working remotely. And what do you want in the future?
82% would like to work at home at least part of the time. Only 18% do not want to work remotely at all:
- 31% would like to work remotely 5 days a week
- 22% would like to work remotely 3-4 days a week
- 29% would like to work remotely 1-2 days a week.
- 18% do not want to work remotely at all.
It is clear that under the package, companies need to offer flexibility to hire and retain good employees.
In view of these tendencies, the offices are mostly still empty. Empty offices have historically been piling up in the market. And not just temporarily: in Houston, San Francisco, Los Angeles, Manhattan, Chicago and Washington DC, the burglary of offices is particularly ugly.
Regarding the return of employees to the office: In the 10 largest subways, office use at the beginning of March 2020 is still only 26% of the old normal level in the country, according to data from Kastle Systems, whose electronic access systems are installed in thousands of office buildings:
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