Corporate Real Estate and the COVID-19 mind trap | Real Estate | Deloitte Netherlands

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Corporate Real Estate and the COVID-19 mind trap

The combination of expertise in corporate real estate, human capital, IT, sustainability and mobility, makes it possible to map the impact of COVID-19 and the future trends on the office portfolio in customized scenarios. By performing this scenario planning, a more deliberate decision will be made on how to be ready for a post-COVID world, avoiding the mind trap of acting too impulsively.

COVID-19 is showing us that it is possible for businesses to operate without using their offices at all. Working from home has become the new reality for many of us, so organizations are re evaluating the quantitative and qualitative demand for office space. A debate is unfolding in the corporate real estate world about which lessons to learn from this unique situation, with a largely homebound workforce. Fueled by the idea that working from home does not necessarily affect business performance and because various employee groups have reported positive experiences, corporate real estate managers may feel a rising pressure from their boards to reduce office square meters as a cost-saving measure. Quickly acting on this new situation may seem a logical step but organizations may fall into the mind trap of reacting too impulsively. As many of us know, working styles do not change overnight.

To move forward in a world that starts to recover from the crisis, corporate real estate managers have to consider which COVID-induced changes are likely to stay in the post-COVID world and which will disappear. However, at this stage we can only speculate on whether people will continue to work from home collectively. Neither are we sure about which activities will bring people back to the office. If we are to get a sense of the future corporate real estate requirements, it is crucial to have scenario planning that distinguishes between the various outcomes of the current situation.

Is COVID-19 changing the way we work?

The situation around COVID has fundamentally changed common perspectives on working from home, the implicit expectations between employers and employees – known as the social contract – and the interplay between workplace, human capital and technology. Physical well-being has never been more at the forefront of employees’ and organizations’ minds than during COVID-19, since everyone has been forced to work from home without the necessary training or change programs accompanying this sudden shift. Quite abruptly, managers were forced to be considerate about a drop in productivity brought about by stress and other mental health challenges that working from home provoked among employee groups. Social isolation, economic uncertainty, personal losses and the blurring line between working and leisure time has made organizations more empathetic. As a response, instead of checking their physical presence, management facilitated employees to choose on how, how much, when and in what way to work. With the current ongoing situation and boosted by the pre-pandemic trend of managing on output rather than on presence, i.e. a more transformational management style instead of a transactional one, working from home has really been given a chance to prove itself.

This collective acceptance for ‘distributed working’ has provided the right momentum to resolve the teething problems inherently connected to change. Suddenly, out of necessity, people had the time to get acquainted with the new technologies needed to completely adopt the home as a working location. As a result, working remotely and collaborating digitally became embedded in the collective workstyle.

Data from a Dutch survey shows that for about 50% of employees the new working from home imperative has implanted the wish to continue to (partially) work from home, even after the crisis . The biggest drivers are the absence of commuting time and being able to spend more time with friends and family. And an American survey shows that due to enhanced focus and efficient breaks employees working remotely in the crisis period have increased their average working days by 1.4 days per month. Also, organizations faced with new sustainability ambitions see a chance to reduce their impact on the climate. As it seems the demand for office space can be limited and overseas travel may be replaced by videocalls, their carbon outlet can be reduced.

Will people go back to the office?

However, while we agree that working post-COVID will likely be different, many people will just as likely find their way to the office again. Not everyone appreciates the blurred line between home and the office. Other important drivers for this expected flock to the office share the need for personal proximity and relate to collaboration, serendipity and our social nature. Homes or online locations are far from ideal for much of the work activities, such as brainstorming, meeting and presenting. This hampers productivity. Also, a day at the office bustles with social interactions. When working from home, people will easily start to miss the informalities between employees at the office. These informal exchanges normally bring energy, a collaborative spirit and serendipity. Also, our social nature means we would simply miss our colleagues too much if we have do not have a place to physically meet. As a Dutch survey noted, 43% of the people indicated that working from home has meant a lack of personal proximity, so the feeling of belonging to the team has become a key challenge. This lack of human interaction may reduce team productivity and undermine employee satisfaction in the long run. Something to be avoided in the post-COVID world. So offices will probably still be important in a post-COVID world, although the perks of proximity, stimulating interaction, collaboration and innovation will change their main function.

Scenarios for the future demand of office space

The working routines people relied on before the pandemic have been disrupted and a new way of working has proven to be an option, amplifying the call for a constructive discussion on how and where we wish to work in a post-COVID world. As we have outlined, COVID-19 has dramatically changed the way we work, and we tend to like some aspects of it. We should, however, learn from previous trends in workplace innovation and realize these have only changed some aspects of working. As we are learning to thrive in a post-COVID world, we should therefore distinguish between changes that belong to crisis management and the changes that are likely to linger after we have recovered from the current situation. Organizations now need to rethink where and when people would like to work when their offices will fully open up again. Corporate real estate managers should seize the opportunity to leverage the full potential of distributed working, without losing the benefits of having a central place for employees to interact and connect.

To do so, a vision that considers the potential preferred working styles of employees and the quantitative and qualitative demand for office space is critical. This vision must be holistic in nature, understanding the interplay of HR, IT, mobility and sustainability and the potential impact COVID-19 may have on these different domains.

To navigate the future, four different scenarios should be analyzed, based on variables that connect to HR, IT, mobility and sustainability.
As this article shows, the unfolding of workplace trends will make some of the current jobs redundant in the future. For the remaining jobs the way we work will change. This requires a work environment that facilitates new work activities. Moreover, the demand for office space decreases if a lower headcount becomes effective. This represents the first axis of the grid, see the figure below. The second axis distinguishes between a quick return to the office due to the easing of restrictions and a return that is still far away. If working from home continues to be the imperative for a longer period, more people may get accustomed to this, decreasing the presence rate of employees, lowering the demand for office space in the post-COVID world. This creates four possible scenarios:

  • In scenario 1, old habits, the office opens up shortly, making lasting effects of working from home less probable. This may bring us back to our old habits and working styles, resulting in only little changes in the function of the office and the demand for office space.
  • In scenario 2, the collaboration office, while the office opens up quickly, trends in the way we work rapidly changes our jobs. This requires a stronger focus on the collaboration between humans and the interaction between humans and technology. This asks for a fresh office concept to facilitate these interactions and support a company culture reflecting the social enterprise.
  • Scenario 3, the home as a place for focus. Working from home continues to be the imperative for a longer period, giving employees more time to get accustomed to distributed working. When a return to the office is possible again, working from home may have become the prime place for a large share of work activities. The function of the office is likely to stay similar, but a lower presence per employee and a lower total demand for office space is likely in the future, since working from home will have proven itself.
  • In scenario 4, the office reset, working from home is the status quo and trends are unfolding quickly. In this scenario, both the office space needed and the function of the office are likely to change. The presence per employee may be lower, leading to a falling demand for office space. The remaining office space will feature a new office concept that promotes both social interaction and collaboration between employees.

The combination of expertise in corporate real estate, human capital, IT, sustainability and mobility, makes it possible to map the impact of COVID-19 and the future trends on the office portfolio in customized scenarios.

By performing this scenario planning, a more deliberate decision will be made on how to be ready for a post-COVID world, avoiding the mind trap of acting too impulsively.

More information?

Would you like to know more about corporate real estate or the COVID-19 mind trap? For more information or questions, please contact Jurriën Veldhuizen or Mark Platier via their contact details below

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