How Will the Future of Work Affect the Real Estate Market?
In the year 2020 — many of us are already living the “future of work”…
But weirdly enough, some people got the headstart like the BBC news anchor who was working from home and got disturbed by his two adorable daughters in a live interview.
Despite the funny incident, the truth is, the pandemic has changed the way we work almost overnight.
Though we were in the route of becoming a remote work first society, things turned upside down a lot faster than many of us anticipated.
With this turn of events, how will the future of work affect the real estate market?
What the future of work looks like?
Before we answer that question, let’s have a fresher first on what we all understand to be the “future of work” and what it looks like.
Basically, if you’re reading this article from your home during work hours, then you already have insider knowledge about what the future of work will be. It’s already here.
In the past, however, talks about the future of work heavily leans towards artificial intelligence and automation.
Even a 2019 article from McKinsey only mentioned “remote working” once, which shows that remote working wasn’t the main “angle” everyone was looking at a year ago.
The growing acceptance of remote working models could be a positive trend for creating jobs in rural counties, whether full-time work-at-home employee roles or contract work. But it will take a push to continue building out fast, affordable broadband in the regions that still need service.
Generally, there was little mention about working remotely though many of us can feel it’s the route we’re all going. But as you know, remote working became the new normal faster — and for other sectors, there wasn’t even a choice.
With that in mind, here’s how the future of work will likely unfold: hybrid workplace setup.
Hybrid work is the new future
The term “hybrid work” has peaked last June and has been on an upwards trajectory since then. It has picked up steam when Microsoft and ABC News mentioned it as the new normal of work.
But what do you mean by hybrid work?
This new future of work is called a “hybrid” because of how it combines traditional in-office work and remote work.
Lots of people don’t want to return to the regular office work that was the “normal” of the pre-pandemic times.
There are two primary reasons why hybrid work is more plausible:
- Work-life balance
- Productivity
People want to work flexibly — at convenient hours that balance work and personal life. That’s why employees who have tasted the “work-at-home” life will not want to be confined in the office all the time ever again.
The Kung Group firm surveyed more than 500 founds of venture-backed companies within their network. One of the interesting results is the following:
65 percent of founders stated that if stay-at-home orders were lifted tomorrow, they would not return their companies to the office.
In addition, as more millennials moved up to executive positions, remote work is quickly becoming the norm for these companies.
There are more proofs that show it’s not just venture-backed companies that are making an exodus to remote work. Giants like Facebook and Twitter announced that their employees (if possible) can work from home.
Clearly, office work will never go back to how it used to be and employees love it. Owl Labs’ State of Remote Work revealed that most workers (at around 83%) will feel much happier with remote work.
Interestingly, the opposite is also true…
Work-life balance is close to impossible for some people due to distractions brought about by working-at-home…
An example of this is those employees with children (like the BBC anchor) or those without a proper desk setup or infrastructure to maintain their productivity.
That’s why many thought leaders believe that a pure work-at-home or remote work setup will not work — at least not all the time. For many of their employees, remote working doesn’t seem to work really well. They aren’t as productive as when they’re in an office.
As to what business owners and executives think about this, many of them are starting to think that remote work isn’t that great after all, at least for longer periods of time, as reported by an article from The Wall Street Journal.
The summary is, projects are taking longer with team members not being able to meet in person. In addition, collaboration is harder, and training new employees is a struggle. Zoom calls still aren’t capable to bridge in-person training and coaching.
How hybrid work will likely affect the real estate market?
Remote work and work-from-home have a negative connotation for people in the real estate world. Looking at it from a pessimistic angle means there will be fewer demands for office spaces.
Here’s why the idea of hybrid work is more realistic than anything we’ve ever heard:
Even after the pandemic, not everyone will work from home. There are far too many challenges in completely unplugging employees from the office.
Among these challenges, the most common ones are loneliness, time management problems, and miscommunication…
Many employees feel lonely from working at home…
Some see “isolation” as the biggest challenge. This lack of interaction with teammates can also result in worse collaboration. There’s no bond built during meetings, lunches, and other impromptu conversations.
Time management will always be a pain for those working at home.
Distractions are many times stronger when you’re working in a place not originally designated as a workplace. In addition, working at home may initially blur the lines between work life and personal life — every hour can be a work hour.
As for communication, there’s a lot that can go wrong even with the presence of powerful apps like Slack, Gmail, and Skype. For one, it’s hard to get direct answers from coworkers who aren’t as communicative as the other on digital channels.
That’s why the demand for office spaces will more or less remain the same, even after the pandemic.
The demand though may come in a wide range of space solutions including owned space, leases (standard and flexible), and even co-working space.
The Chartered Institute of Personnel and Development, which represents HR professionals in the UK, is positive that firms will not give up physical office premises.
…it is unlikely that many firms will give up having physical office premises. Instead, the industry body thinks that office spaces will become places where some staff work or they work in the office at different times and on different days and that the office space will be used more for face-to-face meetings.
In terms of specific locations, the demand may both be in city centers and suburban places…
Companies may continue to put up offices in city centers to attract talent and synergize with the city’s bustling energy. At the same time, others may abandon city centers altogether to save resources.
With all of this, it doesn’t mean that the real estate market will not change one bit.
Some may opt to reinvent the space.
Did you know that a 2019 Deloitte article has successfully predicted how “people use space will change”?
We predict the amount of non-traditional space-space that supports teaming, collaboration, and co-working — will increase significantly.
Instead of the regular office schedule, some companies may use offices as a hub for meetings and events.
An example of this is the plan JPMorgan is cooking — to allow employees to work from home one to weeks a month or two days a week.
On the other hand, some will need a larger space.
On the other hand, some companies may need more office space to accommodate their employees and to comply with social distancing measures.
Companies that are not eligible for remote work, like Amazon, will need more space. In fact, Amazon did sign leases for a total of 900,000 feet of office spaces in six cities.
The real estate market in post-pandemic times
The pandemic has accelerated the turn of events and has brought the future of work right to our doorstep. Though most people expected fully remote work, the reality is more of a hybrid-work — part remote and part in-office.
In the end, here are our best guesses about the future of the real estate market in regards to “hybrid work”:
- Two in three will work from home 1–3 days a week
- Growth of suburban office space & co-working, mini-HQs
- Even more adoption of cloud computing & digital tools giving rise to new markets we don’t foresee currently
- Growth of office HQ to become a cultural meeting point & collaboration center
- People moving out of the city to remote areas
This “new work trend” will have more or less a minimal effect on the real estate market, at least commercially. Though many companies, especially those in tech, will back out of office arrangements, many businesses will not.
Some will reinvent the space to accommodate the hybrid work arrangement. Companies that can’t completely go remote will need more space.
But once artificial intelligence and machine learning catches up, will this arrangement still work? Or will we face another “future of work” scenario once again?
