DHC Real Estate Services

WILL WE GO BACK TO THE OFFICE? 

24.11.20 09:27 AM By Jon

MORE IMPORTANTLY, SHOULD WE?

Recently, my wife and I were catching up with another couple about life over Zoom. The topic shifted to the quarantine and the struggle of balancing working from home while parenting young kids, a struggle my wife and I are all too familiar with. They are both investment bankers and had starkly different views about working from home. The husband, who works for a smaller team, was relatively comfortable working remotely. However, his wife, who works at a large institutional shop, spoke about the challenges the younger team members are having. She said they are struggling and stressed because they do not have the mentorship, supervision, and support of one another in the same way they would in the office. 


As Americans, we are united in a desire to return to a more normal life. In less than a year, the COVID-19 pandemic has made us long for the things we took for granted. We want our kids to go back to school or attend a music concert or a nice restaurant and eat inside without fear. However, the idea of returning to the office is a far more divisive issue. Given the apparent effectiveness of vaccines, we will likely be able to return to some sense of normalcy at some point in 2021.

But will we? Should we? And what will that look like? 

For the most part - working from home has been a success - but why?

Gone are the days when you left your work at the office and had to find a conference room to hold team meetings. We have ably transitioned to videoconferencing through platforms like Zoom, Microsoft Teams, and Google Hangouts. Over the past ten years, the migration to cloud-based technologies allowed employees to access their files from home and seamlessly conduct their business from any connected device. 


However, one of the biggest surprises was the rapid and nearly seamless transition many businesses made to go fully remote. While the hospitality, restaurant, and travel industries continue to face significant challenges, many companies are thriving with team members working full-time from their living rooms, kitchen tables, and bedrooms worldwide. Productivity remains high, and some forms of collaboration increased. But why? 


First, the technologies are working. We have replaced many of the things we do in a physical space by using technologies to emulate that experience. It is also safe to assume that these tools will continue to adapt and evolve. However, I also believe that companies are underweighting the impact of relationships that existing teams built before the transition to a remote working environment.  In my view, the trust, culture, and relationships built upon 40 hour weeks of working near one another created the foundation necessary for existing teams to pivot to a distributed model. 


Another reason for the increased productivity is a pragmatic one, fear.  In an economy severely weakened by the fallout from Covid-19, employees are working harder, on more extended hours, to keep their job and demonstrate value. 

But what is the impact?

Some of the downsides of remote work

Health & Wellness

Cushman & Wakefield recently conducted an in-depth survey about the current massive work-from-home experiment, featuring more than 40,000 respondents from 30 companies across 20 different industries. The study revealed that productivity and team collaboration went up, but human connection and socialization took a hit, which in the long run can negatively impact a company's culture. Isolation and loneliness have always been a significant challenge for many employees. It is more significant now, having to separate from colleagues and loved ones and friends. This sense of isolation takes a toll on many people's mental health, ultimately hurting their work performance.


Even before Covid, there was a general awareness of the harmful impact loneliness has on productivity, retention, and overall culture. In January 2020, Cigna released a study that suggests 62% of US workers may be lonely, and those lonely workers are less engaged, less productive, and report lower retention rates. Lonely workers are also twice as likely as non-lonely workers to call out sick and five times more likely to miss work due to stress. The additional days missed could cost employers more than $4,200 per year. At a national level, the annual cost of worker loneliness may be more than $400 billion. COVID-19 exacerbated this trend.


Aside from the fact that lockdowns impact mental health, the shutdowns also restricted people's access to health and wellness services. Many gyms remain closed or severely restricted. People stocked up on unhealthy snacks to cope. For some, employees lost access to the healthy amenities that many companies provide within their office space, such as gyms, yoga classes, meditation rooms, and healthy food options. 

Ad hoc learning

Another drawback of working exclusively from home is the impact on informal learning, which is the knowledge employees gain through working day-to-day in a physical office space. For new team members, learning by observing their colleagues and leaders is critical to their career growth. 


A survey of young professionals by CEMS, an alliance of business schools and corporate partners, found that 72% felt not being able to network with colleagues physically would damage their long-term careers. 68% of those surveyed said the lack of face-to-face training would significantly impact their career progression.


There is an intrinsic value in overhearing senior leaders discuss business or chatting with colleagues about their job and career. I know many people who have advanced their careers by walking into an executive's office and asking insightful questions. Unfortunately, this type of on-the-job knowledge sharing is hard to replicate remotely, which is better suited for discrete and topical conversations about a specific project than the software texture of office noise. 

Integrating new team members

The other day, I talked with a growing company business leader who shared that new hires, particularly young people, feel lost. He described the new team members as "mercenaries" lacking a sense of loyalty or connection to the company. Those new team members have been unable to build authentic intraoffice relationships the way older established team members had. Anyone who met their significant other online knows that relationships are different when people finally have an opportunity to meet. 


Similarly, hiring new employees in a work-from-home model is challenging. Sure, you can interview, hire, and even provide training programs online. But it's not the same as being walked around the office during interviews or on your first day and getting the opportunity to shake hands with new teammates. It's much harder to establish the type of camaraderie that leads to real human connections through a screen. 


Although younger employees can quickly adapt to working from home, it may seem counterintuitive that younger employees are the most vocal about getting back to the office. I know a business leader who shared that his younger employees in Hong Kong pushed hard to get back to the office, which now has nearly 60% occupancy. While the virus is less rampant in Hong Kong than in the United States, I anticipate experiencing the same types of pressures here. Young employees in major US cities will force their employers to reopen their offices sooner than later. 


It makes sense.  Older, established workers are more comfortable and have existing intraoffice relationships.  For them, it is not nearly as inconvenient to work remotely. In fact, for many babyboomers, remote work means not having to deal with a commute. I would argue that even for established professionals, the long-term impacts may be equally problematic and lead to cultural erosion.  However, for the younger contingent of workers, the office is critical.  An office is more than a workplace; it is a place for social interactions, a driver of culture that promotes interaction with colleagues, occasional laughs, mentorship, learning, and teamwork. 

What is the Role of the Workplace?

For decades now, business leaders know that the office has not been about just a physical space to sit and work. It is an enabler of business operations. It has a role in shaping or reinforcing culture, encouraging education, sparking creativity, and promoting collaboration. Ultimately an office is part of people strategy; it is about talent, recruiting, retention, culture, creativity, and productivity. 


And while we have new ways of working and added amenities to our workplaces, none of this is new. Humans are social beings, and we have congregated in physical spaces to do commerce for thousands of years. People crave closeness - a seek a sense of connection - and an environment where we can feed off each other's energy, receive instant feedback, and feel like we are at our home away from home.                                                                 


Environmental psychology is increasingly part of the conversation around the design of an effective workplace. The goals are to create that sense of belonging and enhance productivity. A visually vibrant workspace encourages innovation, while an open-floor layout promotes collaboration and communication. Private, quiet areas with little to no background noise help people focus and concentrate. Think about the times in your life where simply changing the environment impacted your mood, creativity, energy, and happiness. Getting the best out of people is more than changing a screen background. 


Even in this climate, many large companies and landlords understand these ideas. Google and Facebook continued growing, signing major leases in New York City post-pandemic.  Many major institutional owners are also increasing investment in the office sector. 

My View

Right now, companies are rightfully evaluating their workplace strategy. I believe we will see many companies shed space in the short term.  Candidly we already see it. However, I do predict we will see a widespread return to the workplace.  The return to work will take time, and the office will look a little different than it used to. Companies will invest in space for the same reasons they did before the pandemic; talent, culture, connectivity, learning, and wellbeing. For now, getting rid of real estate is an immediate cost saver. While it is much harder to quantify culture and a sense of belonging, my view is that it is far more valuable than the cost of real estate. 

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