Posted: 22 Mar. 2023 4 min. read

Navigating real estate portfolio optimization

Employee experience strategies for the hybrid workplace

Charting the course ahead: Navigating your real estate portfolio through 2023 and beyond

As organizations think about the year ahead, many will be focusing on their long-term corporate real estate footprint and how to rightsize it. More and more employees are returning to the office. In January, US office occupancy levels reached 50% for the first time since the pandemic.1 But shifts in employee workstyles, collaboration technologies, and talent pools mean that executives must reevaluate the needs of their workforce before they act on portfolio rebalancing initiatives. We have identified five key considerations for real estate decision-makers when thinking about their long-term goals:

  1. Define and align your organization’s workstyles and hybrid culture.
    Mental and physical health have become a top priority in today’s workforce. Employees are returning to work with new expectations regarding work/life balance. In July 2022, Deloitte asked Americans to reflect on how they’ve changed throughout the past year. More than 70% of respondents said they are prioritizing their overall well-being compared to 63% in September 2021.2 It has become necessary to continually invest and monitor employee well-being to attract and retain top talent. Organizations are now focusing on collecting, organizing, and analyzing the right data to understand the specific obstacles their employees are facing when it comes to achieving their well-being goals while navigating a hybrid environment. Companies that struggle with identifying, measuring, and assessing how hybrid work is positively or negatively impacting the employee experience will have a harder time understanding employee needs and how the portfolio should evolve to better enable productivity while building a positive culture.
  2. Assess what spaces and amenities are needed to enable the right employee experience.
    The advent of hybrid work has transformed how employees view the workplace and what functions an office should provide. While individual work may be done at home, the office can play a key role in building connections and enabling collaboration. Executives have also realized the potential of a reimagined office experience. Deloitte’s 2023 commercial real estate outlook reports that 41% of surveyed real estate CFOs in North America expect their company will perform a workplace redesign in the next 12 to 18 months.3 The main focus has been centered on reducing the number of individual workspaces and adding or expanding the types of spaces that promote teaming, culture-building, and co-creation. Investments in office technology are also playing an important role in ensuring that teams can work together seamlessly regardless of their location.
  3. Create flexibility in your portfolio to adapt to economic uncertainties.
    Many real estate leaders have been in a “holding pattern” as they continue to reassess their growth expectations and real estate needs. According to the Q4 2022 CFO Signals report, CFOs were split on whether they expect to have a smaller real estate footprint (37%) or a larger real estate footprint (42%) in 2023.4 As questions about the economy become clearer, it will be important to have a portfolio that is adaptable. Executives are also looking for ways to optimize the space they already have to reduce their fixed commitments without compromising the employee experience. Modifying established seating arrangements and utilizing co-working spaces are becoming increasingly widespread as executives aim to lower expenses.
  4. Understand geographic shifts in talent pools and adapt your location strategy accordingly.
    High inflation, hybrid working, and a renewed focus on well-being have contributed to significant talent pool shifts in the past several years. According to Deloitte’s global millennial and Gen Z surveys in 2021 and 2022, a growing percentage of respondents are reporting that remote work has allowed them to relocate further away from the office.Organizations are looking to attract high-quality talent in cost-effective locations amid predictions of slow economic growth. As a result, companies are redefining their critical location factors and investing in their data and analytics capabilities to better understand the talent market. Executives are also closely reexamining job descriptions and role definitions to identify which functions can operate effectively in a fully remote capacity.
  5. Develop the right tools to consistently monitor the operations of your footprint.
    Regulations pertaining to environmental protection, decarbonization, and energy consumption have added another dimension to the reprioritization of real estate objectives. Organizations are now holding themselves accountable to environmental, social, and governance (ESG) goals and investing in the required tools and technologies to track progress on their sustainability key performance indicators. According to a survey published in Deloitte’s 2023 CxO sustainability report, 65% of C-suite executives stated that the changing regulatory environment has led their organization to increase climate action over the past year.6 Executives are looking for technologies that can process, analyze, and display data from multiple sources to help them make timely and informed decisions, from smart-building energy monitoring solutions to carbon accounting software. Transforming the influx of data into actionable insights will be a major differentiator for real estate executives as they determine what portfolio strategies best support their workforce.

Endnotes

Matthew Boyle, “US offices reach 50% occupancy for first time since pandemic hit,” Bloomberg, January 30, 2023.
2 Stephen Rogers and Anthony Waelter, “Revisiting the great rethink,” Deloitte Insights, September 12, 2022.
3 Jeff Smith et al., 2023 commercial real estate outlook, Deloitte, 2022.
4 Deloitte, CFO Signals™: What North America’s top finance executives are thinking—and doing, 4th quarter 2022, 2022.
5 Deloitte, A call for accountability and action: The Deloitte Global 2021 Millennial and Gen Z Survey, 2021; Deloitte, Striving for balance: The Deloitte Global 2022 Gen Z & Millennial Survey, 2022.
6 Deloitte, Deloitte 2023 CxO sustainability report: Accelerating the green transition, 2023.

Authors

Matt Highfield
Managing Director
Deloitte Consulting LLP
mahighfield@deloitte.com

   

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