What next for the office in a post-COVID world?
--
Written by OMERS Ventures Principal Michelle Killoran
It is very possible we are experiencing a seismic shift when it comes to where we work. Maybe we’ve had it wrong all along. Perhaps even in the long term, the need to justify ‘work from home’ will be replaced with ‘work from office’ as the rarer occasion?
One thing’s for sure: for the foreseeable future, the office life we’re all familiar with is gone. And with companies like Twitter saying employees have the option to work at home forever, and even traditional insurance companies like Nationwide closing offices and embracing work from home more permanently, it’s a safe bet that conversations about workspaces of the future are happening in businesses all over the world.
History tells us that we are adaptable and resilient, but also forgetful. The biggest unknown right now is the long-term reaction to the crisis created by the pandemic. Innovation may be driven by turbulent times, but it must also be more than simply a reaction to a moment in time.
Having spent the last week speaking with landlords, tenants and brokers I’ve created a matrix to start mapping the different solutions required to build out the new healthy and safe office. My goal is to prompt some questions about how these might evolve over time.
As you move across the matrix, costs go up and so does uncertainty around time to implement. I predict that the office in the short term will be different, but ultimately dollars will drive bigger decisions. The key question will be, will we all go back to office life as usual before the long-term technology-driven opportunities have the chance to become embedded?
Solutions will be very manual and procedural at first, but over time, technology will play a critical role. The big assumption I’m making is that offices will never revert back to how they operated before: highly social, minimal square foot per person, amenity rich with a focus on collaboration in person. Initially, companies making a bold investment will build employee trust and help reduce fear, but how long will that last? In this economic environment, where companies are even more cost conscious, any new technologies will really need to prove their return on investment to get traction.
We sent out an informal survey to venture backed technology companies to get their views on the topic. When asked ‘if coronavirus was no longer a threat, would your company return to the same office environment as you previously had?’, over 50% said yes. So making the assumption that businesses will never truly return to normal, might end up being a fairly big leap. Responses to the survey are shared throughout.
Why open the office at all?
It’s a natural question. With the forced move to remote working, virtually overnight, the received wisdom that the office plays a pivotal role in successful business life has been challenged. A lot of businesses seem to be making it work, so why go back at all? Based on companies surveyed, the most common primary reason to re-open the office is for collaboration.
Big tech has been public about its plans around office re-opening and work from home policies. Google has extended its remote work policies for the remainder of the year. Amazon has stated it will allow corporate employees to work remotely until October. As I mentioned above, Twitter went several steps further and announced that its employees can continue to work from home permanently. Apple on the other hand is planning to bring employees back to the office. Which way will the market overall trend? The answer to that question will have a profound impact on how the office infrastructure market reacts, and where the greatest opportunity for innovation lies.
Office barriers
There are many challenges that must be overcome to open offices, some of which are out of companies and landlords’ control. These include:
- Public transit — for employees who have to take the train, bus or subway to work, the commute is more of a risk than the office environment;
- Common spaces — landlords must manage common spaces in buildings including lobbies elevators and washrooms;
- Inability to socially distance within the office — many offices are set up in a way where the spacing between work stations and common areas do not meet social distancing guidelines; and
- Childcare — as schools are closed right now, parents must manage childcare at home which, depending on their situation could prevent them from being out of the house.
36% of companies we spoke to found that the inability to socially distance within the office was the biggest barrier to re-opening, although 53% do not expect their square footage to change in the next 12 months.
So now what?
There are two critical stages for both tenants and landlords. The short-term focus is (literally) about survival, which means meeting critical health standards. Getting this wrong would have consequences far worse than not opening.
Urgent and important (the left hand side of our matrix)
In the short-term, companies and landlords are hyper focused on making an office re-opening possible but the timeframe continues to get pushed out. According to Steffen Kammerer, Managing Director of commercial real estate broker JLL, “as companies start the process of preparing to re-open, there are so many more layers to investigate and many are hesitant to be the front-runner for reentry.”
For companies, the priority is their employees. Based on discussions I’ve had, most companies are surveying their employee base to understand sentiment around returning to the office, which will then guide the company’s approach. Our survey indicated that the majority of companies will be reorganizing workspaces to enable social distancing, staggering days people are in the office and increasing the cadence of office cleaning.
When asked how prepared your company is to re-open the office, 71% rated themselves 3/5 on preparedness. More than half anticipate opening the office in summer 2020.
The responsibilities between the landlord and tenant can get blurred, but it’s safe to say that for building owners, the lobby, elevators, restrooms and cleaning are top of mind. Whether it is a person in the lobby pushing buttons for tenants or providing PPE to people entering the building, landlords are responsible for making the buildings and common areas safe. This first phase is relatively low cost and manual.
Innovation or obsolescence (the right hand side of our matrix)
However important, these immediate procedural updates are not long-term solutions. This gives rise to an opportunity for technology to play a role in building the workplace of the future.
Paul Vallee, CEO of Tehama, says “running a remote workforce entails being willing to pay what can be thought of as a ‘productivity tax’. For some workloads, running fully-remote might actually outperform running on premises, witness the remarkable efficiency of telemedicine for some diagnostic work for instance”.
He continues: “But this is not universally true, and depending on the mission, a fully-remote team might be 5%, 10% or even 15% less productive than a team that shares an office, with its attendant intimacy and opportunities for social engagement and fluid brainstorming. However, renting commercial real estate also carries a cost. Thinking about the future of work, recognize that while the cost of commercial real estate is ever-increasing, the costs of running remote are decreasing all the time, thanks to massive innovation in the enterprise manageability tooling, workflow automation, collaboration, remote access and even virtual and augmented reality technology sectors.”
Perhaps the big discussion point is whether we should be shifting our focus instead to the home office of the future. For companies where work space and ‘the office’ are no longer inextricably linked, technology becomes critical in order to address things like health, culture and collaboration. Companies like League, Tehama, Tandem, Envoy and of course Zoom are making this all possible today.
Rethinking the office, in a world where work from home continues to play a significant role, could also have an impact on how multi-residential buildings are designed going forward, to accommodate work space. Or taken to its extreme, maybe mobile office pods that employees put in their backyards or basements will end up being supplied by companies. To go even further, will these pods be immersive so it’s as if you are sitting beside your colleagues? A whole new take on onboarding swag! In the meantime, office furniture companies like Branch are helping employees furnish their home office. When you go shopping for your next home, will you be thinking about where the home office goes?
For landlords, the technology adoption will be in phases. The imminent needs have to do with getting access and moving around offices without having to touch key pads, buttons, or door handles. According to Adam Frazier, VP — Head of New York Leasing at Oxford Properties, “where things can be touchless, they will be touchless very quickly.” This is consistent with what tenants see as important — 46% of companies surveyed deemed touchless entry/access as the most critical in the future followed by air quality / ventilation technology at 31%. Touchless systems could be solved today through facial recognition, voice and sensor technology.
Other long-term technologies that are important for landlords to consider are:
- Tenant engagement software that enables owners to communicate more effectively with people in the office. Companies in this space include HqO and Lane;
- Thermal detection technology at entrances to manage access to buildings depending on peoples’ temperatures such as Kogniz;
- Sensors for space utilization to manage proximity of people;
- UV light sanitizer technology which was focused on hospitals can now also be applicable for corporate environments (check out CleanSlate UV); and
- Air quality technology through new air filter systems.
Health care and real estate come together
All of this suggests we are seeing a new intersection between proptech and healthtech as companies traditionally focused on health care customers are expanding their base to include real estate buyers, or companies taking a greater responsibility for employee health. Even if companies and landlords are able to make offices safe from a physical health perspective, the psychological impacts of the new office are still to be determined, so a focus on holistic health care is critical.
“An office is a place of work. Technology had already taken the ‘place’ out of ‘workplace’ to a degree but the impact of COVID-19 has created a unique event to observe how far the world can go with that and the associated consequences in health (physical, mental, societal and economic),” said George Carras, CEO of R-LABS Canada.
The conversations I’ve been having have highlighted a few key things for startups. For those who currently use office space, and are contemplating a return to work strategy there’s a consistent approach:
1. Talk to your employees! Get the surveys out to truly understand how your employees are feeling, identify those at risk and get better equipped to make a plan.
2. Call your landlord. Although some are being proactive in their approach to opening buildings, not all are. Make sure you are involved in the planning so that you are adequately covered (i.e. shared restrooms with touchless entry, elevators, communication plan).
3. Plan your phased re-entry — which first includes figuring out who should be making the plan. The CEO needs to be the executive sponsor and work closely with head of people or HR that should be leading the charge.
The other insights that have been playing on my mind throughout these conversations relate to opportunity, and the intersection between healthtech, proptech, and in many cases workplace collaboration tech. The companies that can figure out where the long-term opportunities lie are the ones that will win.
I believe that home offices will be the new trend for residential developers so expect to hear more about the modular HOME office of the future. However, with a renewed recognition for the value in personal connection, I think physical offices will still play a big role in how a company defines itself…just with new social norms (RIP handshakes). And finally, technology that will address all of the concerns around safe workspaces and that can positively impact financial business economics (employee retention, premium rates etc) will thrive.
I can’t wait to see what innovation comes out of this time that we can’t even imagine yet.
