For nearly 12 months, large-scale businesses have rolled out remote-work policies in response to COVID-19. Amidst these changes, which remain present and ongoing, companies have started re-evaluating their long-term workspace strategies.
A survey conducted by McKinsey & Company during the pandemic showed 15% of executives across all sectors said at least one-tenth of their employees could work remotely two or more days a week going forward. Before the pandemic, only 8% of executives responded that they allowed employees to work remotely.
That number has grown since McKinsey conducted its survey. Research from CBRE shows 40% of companies are currently reviewing their real estate footprints and looking at new strategies. The same research found 73% of companies are exploring ways to enable hybrid-work arrangements where employees can work remotely or in the office.
In short, after experimenting with remote work for almost a year, companies are rethinking their office space needs — and what their portfolios will look like after COVID-19.
We'll explore six lessons we’ve learned about how enterprise organizations are rethinking their workspace needs:
While some industry leaders have called COVID-19 a turning point for how companies invest and leverage office space, the truth is there is no one-size-fits-all approach for bringing employees back to work — either remotely or onsite.
Even as some say workers can work from anywhere, it's important to remember 60% of US workers can't.
The easiest example to point to are essential workers, whose jobs require them to be on the factory line, in the grocery store, healthcare facilities or even technology centers.
For example, a majority of employees at the Pedernales Electrical Coop, a non-profit utility company, continue to work from their headquarters (HQ) in Johnson City, TX.
Plexiglas dividers between cubicles, limits on room capacities, and cleaning and sanitation supplies throughout the office are just some of the new norms at the utility provider's HQ. Plus, some employees are permitted to work from home if their job tasks allow it.
Another example are Apple employees who are working to develop new hardware lines. As it turns out, developing the next iPhone hardware platform is difficult to do remotely — and while Apple has limited access to its offices, it has pushed for specific engineering and hardware teams to head back to the workplace.
In comparison, big tech companies like Facebook, Twitter, and Shopify took the approach of extending remote work indefinitely. Facebook, which is taking a more aggressive approach, has hired new employees whose role won't require them to have an office.
COVID-19 has forced businesses to rethink the workplace. For some, remote work has emerged as a viable solution. But for others, the truth is more complicated as specific teams — or entire organizations — require access to physical workspaces.
The Key Takeaway
There is no one-size-fits-all approach for bringing employees back to work. Companies are testing which strategy fits best for their business, culture, and long-term success.
As millions of Americans began to work from home, companies dealt with new technology and collaboration hurdles.
Enterprise organizations fast-tracked many technology solutions to help keep workers productive, bolster collaboration, and sustain communication. McKinsey & Company's recent study shows 85% of companies have accelerated their digitization with key investments in video conferencing, chat apps and file-sharing platforms.
Source: McKinsey & Company 2020 Survey
Smaller organizations and high-growth companies have followed suit, solidifying existing technology investments and acquiring new tools and technologies to help their employees connect and collaborate remotely.
Make no mistake: These investments aren’t going away. According to McKinsey, “companies are making … crisis-related changes [and technological investments] with the long term in mind.”
Critically, different sectors have made different investments based on business pressures — and some have merely stayed the course as they utilized key tools and services they already had. But by and large, a trend towards increased digitization that was already taking place among companies across sectors was sped up by the pressures of COVID-19.
These changes are likely to inform how companies return their employees to the office and how they continue to contend with the demand for workplace flexibility.
The Key Takeaway
Businesses are accelerating their adoption of new technology to scale with the needs and expectations of the remote workforce.
As companies have started to tackle the logistical hurdle of safely bringing employees back to the office, some have turned towards adopting a hybrid-workplace strategy where some employees return to the office on staggered days and others work remotely.
The benefits are straightforward: Employees can enjoy the flexibility to continue working remotely and venture into the office for key workday needs including meetings, collaboration and more. Moreover, companies can benefit from a decrease in office occupancy rates thereby opening the door to reducing their real estate footprint.
But if the benefits are straightforward, successfully implementing a hybrid-workplace model is anything but simple.
And it’s something many companies are realizing as they they attempt to adopt a hybrid-work model.
Here are three key questions organizations are striving to solve regarding hybrid workplace strategies:
Companies such as Google are now exploring ways to operationalize a hybrid-work model — and they’re discovering how challenging it can be.
Where employees might expect to work remotely several days a week and head into the office as needed, companies are facing a more complex reality. Case in point: How many days should people work from the office? And how do you enable your employees to book days in the office?
The popular consensus seems to be that employees can work between two and three days a week in the office. Even still, different companies are taking different approaches to operationalizing hybrid work.
Some are leveraging mobile apps to enable their employees to reserve office days in advance (in a way similar to Airbnb). Others are relying on workplace policies to dictate who can go to the office and when.
As companies explore a hybrid-work model, many are asking a seemingly straightforward question: How many people will be in office on any given day?
If the question seems simple, the answer is far more complicated and has implications for workplace safety policies and office space needs.
Before COVID-19, most office workers worked in offices by definition. That meant companies would lease space with the basic assumption that on any given day, almost all of their employees would be in the office.
Under a hybrid-work model, however, companies are preparing to see anywhere from 30-70% of their employees in the office at any given time. That number will almost certainly vary from organization to organization and depend on the policies each company has in place.
But if a company can expect only half of its employees to be in the office on any given day, it likely needs less office space. According to a study by Cisco, 53% of large organizations plan to reduce their office footprint. The cost savings achieved in a smaller footprint can allow enterprise companies to meet employees' expectations who want to control their workweek schedules.
However, it will also need to anticipate peak occupancy days when all — or a majority — of its employees head into the office (think a company-wide meeting, for instance).
Taken together, companies are now exploring ways to comfortably accommodate some or all of their employees and rethinking their overall workspace footprints, too.
The prospect of hybrid work is forcing some organizations to reconsider their overall workspace design. The reason is simple: When people return to the office two-to-three days a week, they are likely to be far more intentional about being in the office — and they’ll benefit from spaces that accommodate their needs.
Early on in the COVID-19 pandemic, we conducted a survey of 1,000+ U.S. office workers to uncover changing sentiments around how people viewed the workspace. Among the biggest motivators to head back to the office? Collaborating with colleagues and in-person meetings.
Additional research from other parties has verified these findings. And it has big implications for how companies think about their workspaces.
Instead of dedicating large portions of a given office for individual workstations, companies are now thinking through how to reconfigure office space for more collaborative work.
Google’s CEO Sundar Pichai has publicly said his company is redesigning many of their workspaces with an eye towards collaboration.
According to The New York Times, Google “plans to offer options to employees like booking collaboration places for up to a dozen people and securing outdoor spaces for larger gatherings. For employees in need of a quiet space outside the home, Google will offer reservable desks at its offices.”
The Key Takeaway
A hybrid workplace gives business the ability to use the office space they need, when they need it. It provides employees a work-from-home option. Expect to see companies conduct experiments throughout 2021 to test different strategies for operationalizing hybrid-work models.
Businesses are facing competing priorities as they confront a new world of remote work, including:
A compromise to address the first two priorities is implementing non-assigned seating — which is also commonly called called free addresses or hot desking.
Before pandemic-related restrictions were in place, 57% of large-space occupiers said a majority of their workplaces were designed with dedicated seats (i.e., offices, cubicles, and conference rooms.) And only 17% of large tenants said their workspaces include free addresses.
That number has flipped with only 10% saying there will be an assigned work environment and nearly 70% planning on incorporating free addresses in some capacity.
Source: CBRE's The Future of The Office Survey
The final competing priority — supplying a "third workplace" — is another strategy that can help reduce capital expenditures on office space.
Historically, companies have sought to create “third workplaces” within the office, taking design cues from popular destinations such as coffee shops. These workspaces have included lounges and café areas, which employees can use as needed.
We expect this trend to continue — especially as companies seek to create more open, collaborative spaces for their employees to leverage.
But companies — and their employees — are also now looking towards “third workplaces” outside the office. Some organizations are considering offering their employees financial support to work out of nearby coworking space or flexible workspace.
This decision is fueled by two factors:
The Key Takeaway
Organizations will begin testing “third workplaces” inside — and outside — the office to reduce capital expenditures and meet changing workplace demands.
Even though data shows remote work will remain in some form, companies and employees agree a central place for connection is vital.
Addressing the need for a central "hub" for employee connection, interest is rising around a hub-and-spoke workspace strategy.
This strategy augments urban "hub" offices with satellite offices — either in different geographic centers to tap into other talent pools or in the surrounding urban and suburban landscapes.
Unlike some new remote work strategies that are emerging in response to COVID-19, the hub-and-spoke model has existed for decades in commercial real estate.
“The truth is, big companies have been doing hub-and-spoke for a while now," David Cairns, CBRE Senior Vice President, Office Leasing says.
Many enterprise companies have downtown headquarters where they host clients and events, in addition to smaller regional offices closer to where their employees live. However, Cairns says that our current notion of hub-and-spoke will likely evolve to meet shifting employee and employer needs after COVID-19.
The Key Takeaway
The hub-and-spoke strategy is gaining traction among business as a real-world alternative to traditional office space portfolio strategies post COVID-19.
Besides employee payrolls, one of the largest expenses for a company is their office space leases.
More than ever, companies are reviewing their expenses — and rethinking their portfolio commitments as they consider the impact of reduced office occupancy rates in a post-COVID-19 environment.
In direct response to the COVID-19 setbacks, Pinterest paid nearly $90 million in termination fees to break its lease for a 490,000 square feet office space.
However, Pinterest is an outlier. As mentioned above, the average U.S. office space lease is about six years in length. And in a market that has traditionally been conservative, many companies are unlikely to break their leases. But they are likely to begin re-evaluating their commitments as they plan for the future.
And more urgently, many are contending with the issue of how to manage excess space they either are not using or are unlikely to use in full after COVID-19.
Some are looking into working with flexible workspace operators to sublet these workspaces while retaining a smaller footprint.
Others are looking to sublease their offices to other tenants directly — but they're facing headwinds due to a lack of demand. This makes working with flexible workspace operators to sublet space a more appealing option for many large companies.
The Key Takeaway
Some organizations are looking to decrease their footprint and manage excess or unused space accordingly. At present, popular options include either directly subleasing their workspaces to other tenants — or working with a flexible workspace provider to convert part of their footprint into coworking spaces.
Companies are in the process of re-evaluating their workspace needs, policies and strategies for a post-COVID-19 world — and their decisions will have an enormous impact the future of work.
Industry leaders have spent the past year discussing and speculating on what comes next. But now, companies are turning speculation into strategies and enacting significant operational changes.
From exploring what a remote-first strategy looks like in action to determining how best to enact and operationalize a hybrid-work models, organizations are expending significant resources to rethink how and where work happens.
Learn more about the importance people place on meaningful connection at the office in our latest report, COVID-19 is accelerating the demand for flexibility and meaningful connection.