Hybrid culture forces real estate brokerages to deal with both commercial and home offices
This article appeared originally on CoStar.
The last thing you might expect to hear from any real estate brokerage is talk that doesn't push tenants to come into the office 100% of the time.
But as hybrid office work gains more traction, brokerages are coming to grips with a concept that's seeing more and more employees use home offices or remote offices away from downtown headquarters.
"People can see this is the way the world is going," Jason Jones, the Atlanta-based managing principal and lead of hybrid workforce services at Cresa, which focuses on tenants or occupiers, told CoStar News. "Our competitors are doing things to deal with hybrid working but not the way we are embracing it. We have been one of the early leads on this and it's because of our model."
With workplace strategy at the top of its agenda, Cresa made a move this year to buy Ottawa-based Agile Work Evolutions, which has technology that allows companies to analyze potential occupancy strategies and adopt hybrid and flexible workplace solutions into their leases.
It might be coming just in time with job markets leaning toward employees who now prefer less traditional models.
A PwC study released in 2021 found that only 15% of Canadian workers wanted to work entirely from home, with another 18% looking to work entirely in the office. The remaining 67% of workers were looking for some compromise, with 25% of the 2,000 employees surveyed looking for an equal split of work at the office and home.
In the United States, a Gallup survey released in March makes it clear hybrid work is the future of most office workers. The firm found 8% of the U.S. workforce was exclusively remote pre-pandemic in 2019 but that had climbed to 39% by February 2022. Hybrid work climbed from 32% to 42% during that time. Fully on-site work dropped to 19% this year from 60% in 2019.
More Home Offices
The change is real, said Carey Smith, a principal at Toronto-based Nua Office Inc., who is on the front lines designing and reinventing hybrid workplaces and even supporting home offices. He is seeing legal firms, financial services, life sciences and government sectors lead the hybrid charge.
"We pivoted during the pandemic and made a whole new line of businesses toward home offices," said Smith, adding it gives companies that offer stipends a "line of site" to where employees are spending their money. "They don't want their money spent, and poof, it's gone, and now their employees have back pain."
Smith said the home office depends on the individual, but the general basics are ergonomic task chairs and tables. "But sometimes it's really about accommodating small spaces."
He says that at the office level, more collaborative space is now being designed. "Why would they come to the office to do exactly what they can do at home," said Smith, adding a big design challenge is incorporating the reality that people are in different locations but meeting virtually and in person. "You don't want anybody left out."
The Gallup poll makes it clear the direction of the trend in the U.S. The company's survey showed 53% of workers expect to be hybrid in the future, 23% fully on-site and 24% exclusively remote. Only 9% of workers said they would choose to be on-site, compared to 59% who would choose hybrid and 32% exclusively remote.
"The No. 1 reason employees prefer hybrid work is to avoid commute time," Gallup said in the report. "People are not in a hurry to add back the time it takes to get ready for work, travel to the office and return home every day."
Cresa's Jones said brokerages can't just think solely about driving more people into buildings anymore.
"You do have corporate real estate firms with the pressure of having corporate landlords," he said, adding that the occupier-only model does take away that pressure. "I do think the traditional real estate advisory firms are resistant to some degree because of the model."
Even traditional firms such as CBRE acknowledge the change is profound.
"Office workers will return to in-person work allowing employers to test new workplace strategies that enable hybrid work," the real estate company said in its outlook for 2022 about trends to watch. "Hybrid work is here to stay. 87% of large companies plan to adopt a hybrid work approach. However, the impacts to individual occupier requirements are not yet known. For every tenant claiming they will shed space, there is another that is growing their footprint. The testing of new workplace strategies is only beginning and will be further explored in the year ahead. What is expected, however, is bifurcation."
Jones said he believes people will continue to go back to the office but maybe not in the traditional model of one downtown headquarters.
"We are agnostic. We want them to work. They want to work," says Smith. "That includes a shared central office. It includes other fresh ways of working."
Tricia Trester, head of global portfolio solutions at Cresa, says traditionally discussions about real estate with clients about where to relocate were based on price and the type of building. "Now it's all revolving around the people and who want to come back to work and what type of space do they want if they do come back. And what if they don't? That speaks to a hybrid model," said Trester. "You might not need the same type of space, or maybe you need a satellite office."
That's where Cresa's deal for Agile Work Solutions fits, because the Ottawa firm founded three years ago had already been studying a mobile, flexible workforce.
"All the pandemic has done is accelerate everything," said Meredith Thatcher, who co-founded the Ottawa company. "Even before the pandemic, there was only about 60% of utilization of people in a building at any time. It was already less than 100% of everybody going back to the office."
Thatcher laughs when asked about the timing of her company's launch, given it was almost built for the workforce now evolving.
"When the pandemic hit it was quiet for two weeks and we thought we would be irrelevant because everyone will figure out how to do this or completely relevant because they are not going to figure out how to do this," she said. "The cat is out of the bag. We are not going back to where we were in March 2020. It will be something different. Our job is to figure out how that works. For the management and the employees."
Surveying the Workforce
That's where Agile comes in. Her company has the software, but she says the Ottawa company needed a larger platform to work its software into.
Her software surveys everyone at a company, from management to employees, with the ability to separate responses. She says the employee response is just one element. Her company surveyed more than 20,000 people since the pandemic started, and she said the message has been clear.
"Many organizations are stuck. The broker will come to them, saying, 'I don't know what to do. I might as well do a short-term lease renewal," said Thatcher. "They don't know what the future will look like, and they don't know what their employees want."
This decision on what to do next comes with some major employers like Canadian banks announcing a partial return to the office.
Canadian Imperial Bank of Commerce said employees would return to the office on a hybrid basis starting March 21. The Ontario government said that employees must work one to two days in the office starting in April.
"What the software does is provide evidence to the executive team, not what the media or neighbour says," says Thatcher, noting once you have the data, she says 96% of the time, both sides of the great debate between working at home or the office can come to a compromise.
In 76% of the cases, she says the decision leads to a real estate transaction, the remaining 24% potentially representing companies that own their own space or already have enough space because hiring during the pandemic has left them with not enough seats.
"We have clients who have expanded by 20%, and people can't even come back to the office because we don't have the space," said Thatcher.