What will the new post-COVID tech-enabled workplace look like?
This is the first in a three-part series on the outlook for technology and the built environment around the globe.
ULI MEMBER–ONLY CONTENT: Experts and members of ULI’s European Technology and Real Estate Council discuss how the COVID-19 pandemic will reshape expectations, practices, and technologies in the long run; the changing relationship between building owners and tenants; the potential effects on providers of shared and flexible office environments; and other trends.
What lasting changes do you think the pandemic will have on the real estate industry?
Susan Freeman: A lot of the changes we’re seeing in the real estate industry started well before COVID struck, but for many companies, the pandemic has accelerated these trends. Many people have discovered that they don’t have to commute to an office building in the middle of London or New York City; they can work effectively at home. Professor Carlos Moreno [scientific director of entrepreneurship and innovation at the Sorbonne] predicts that our big office towers will become mixed-use towers where people live and work. I think once everyone has the vaccine, people will feel safe living in cities again and riding public transport, but people won’t be commuting the same way they did before.
Boudewijn Ruitenburg: There is a new interest in healthy working environments. Many companies are reviewing their real estate portfolios out of a desire to reduce costs where they can by cutting back on square meters, but they definitely want to end up with healthier spaces. The days of large groupings of workstations are over. So a number of buildings will be phased out earlier than expected and renovated or adapted into other uses. As the office market shrinks, there will be a flight to quality as companies seek to meet new sustainability targets. Meanwhile, workers have experienced a little more freedom, so there will not be the same push to arrive at the office by nine and stay until five or six. We believe cities will definitely bounce back because they are attractive and, from a sustainability standpoint, efficient. But people will spread out their commuting times more than in the past. They might focus on concentrated work at home, then commute to the office for the interaction and creativity they can find there.
Antony Slumbers: Things are absolutely not going to go back to the way they were. We’ve developed different ways of working. There will be two drivers of fundamental changes to the workplace. The first is related to environmental conditions, which have a real impact on physiology and cognitive function. When we return, en masse, to office buildings, landlords will have to prove their buildings are safe. Second, employee surveys show that about 70 percent of people say they are more productive working remotely than in the office. Every smart company is going to recognize that most employees don’t want to come to the office five days a week. But the office is good for when you need to work with people.
Charlie Kuntz: Lasting changes in the workplace include the increased importance of supporting collaboration, creativity, and innovation in spaces that not all employees will be occupying all the time. The office will be a central hub. So it becomes the building owner’s responsibility to support that. From a technology perspective, that means offering tools and services that make the experience better for the occupants—anything you can do to allow them to better understand that their space is being used to the best of its capabilities and that it is healthy. Owners will have to figure out how to more proactively support the culture and productivity that occurs in their tenant spaces, getting out in front of what they believe their clients’ needs will be and preparing to meet them when those needs arise.
Ronen Journo: I believe we’re entering an era where tenants are going to be treated like clients. We will see a much more human-centric, technology-enabled industry where building owners and operators are striving for intimacy with their clients, understanding how to manage the assets as efficiently as possible while being respectful of the environment and connecting tenants to the surrounding neighborhood. Owners will be making sure that the way occupants engage with services is as seamless and as transparent as possible. Also, with the rise of Uber and Airbnb, people have come to expect more choices. If they can consume the service as opposed to buying the asset, they will want to have that option.
Are there particular technologies that will be more prominent in the post-COVID real estate industry?
Journo: I think it’s important that all of us in the real estate industry not get carried away with the gold rush of property tech, but to break it down into segments. One segment is the technologies that enable us to drive efficiency in the building, reducing energy consumption and reducing waste. That’s important for our investors, our tenants, and our clients. The second segment is the way people connect with the physical assets. It’s important that whatever you put in place is easy to use and scalable so it can be adapted to mixed-use buildings, single-tenant buildings, or office campuses. The third segment includes wellness and health. I think we’re entering a period where people expect to know the quality of the air and the light and the acoustics.
Kuntz: It’s less about the end-point solution and more about reducing the friction that exists when you’re operating a building and handling several different technologies and tools. I believe large technology companies like Microsoft and Google and Salesforce are going to try to integrate technologies. There is a lucky overlap between tools that provide convenience to tenants and those that make buildings safer and healthier. They include engagement apps, touchless access control systems, space utilization sensors, and air quality sensors.
Ruitenburg: Companies want to know how office space is being used, they want to measure the air quality and energy consumption and the amount of daylight, and they want to optimize the use of meeting rooms. And tenants will confront landlords with these expectations. Landlords don’t tend to measure these factors. So these new demands will have to be negotiated in contracts going forward. Touchless technology will also take flight. That will push the use of apps that make it possible to control the workplace environment—building access, doors, elevators—without having to touch the surfaces.
Freeman: I’m fascinated by platforms like Equiem that can help connect disparate workforces. At the outset of the pandemic, these platforms were used to enable workers at a particular office building or campus to stay connected with each other and to book meeting rooms. Now, they can help people get back in the office safely by allowing people to book a lift in a high-rise, or check out how busy a building is so they can come at a time when it is less occupied. The kind of data we can gather from these apps will be incredibly valuable. Technology that monitors energy use and air quality will also be increasingly important. A lot of investment needs to be made in R&D to reduce carbon emissions. That will be dictated by carbon neutrality legislation, by lenders, and by tenants who want to make sure they lease space in buildings with low energy emissions and healthy air.
Slumbers: Technologies targeted at measuring environmental conditions are already going strong because they enable landlords to operate their buildings at a more granular level and cater to the individual needs of the occupants. Also, we will need spaces that are easier to reconfigure on short notice: a coffee shop during the day becomes an event space in the evening, for example. There are new technologies for enabling walls and partitions to be moved more easily.
What do you think will be the role for providers of shared and flexible office environments?
Ruitenburg: Over the past five or 10 years, flexible workplace providers started popping up. Now, they are suffering because they offer relatively short leases and so many of these leases have been terminated. But I believe these companies will stay because traditional landlords don’t offer this flexibility. I expect a few investors will start supporting the bigger flexible workplace platforms. The majority of space will be leased traditionally because it provides companies with a dedicated place with its own identity, but these tenants also want access to additional services such as flex space, overflow space, different kinds of meeting facilities in the immediate area. If you develop a new building, you should offer not only traditional workspaces, but also these kinds of flexible spaces.
Journo: Providers of flexible offices are going to have a challenge on their hands. Larger occupiers are accelerating the optimization of their footprints. At the same time, large companies have to repurpose their offices to become collaboration hubs. They will be seeking out the prime assets in the prime locations, with well-serviced, technology-enabled, healthy buildings ideally in mixed-use locations. Flexible office operators will be challenged to compete with well-financed, very experienced landlords who can fine-tune their offerings much more quickly.
Kuntz: At Hines, we are focused on providing flexibility within the buildings that our tenants are already in—their long-term spaces. Flexibility and access to collaboration spaces are not incompatible with long-term leases. Tenants can get everything in one place from a building owner who can simplify a complicated industry for them.
Slumbers: The more flexible buildings become, the more real estate becomes about delivering a service rather than selling a product. There’s a good argument to be made that any company that requires less than 10,000 square feet [930 sq m] of space should be outsourcing their real estate completely because constantly monitoring and optimizing space is a complicated business. I have a slide that I use in my presentations that says, “No company wants an office; what they want is a productive workforce.”
What other trends are you seeing?
Slumbers: I think there will be a new breed of real estate company whose job is to enable companies to have productive workforces. To create a great workplace, you need people with real estate knowledge, people with IoT [internet of things] networking knowledge, people who understand data, people who understand work environments, people who understand human resources, and people who understand hospitality. At the moment, these are six siloed industries. I think we’ll start to see new companies that can package all of those areas of expertise in one ecosystem of suppliers. The question is which players in the industry will be able to pull all that together.
Journo: Tenants don’t care who owns the building or who operates the building. They care about the experience that their employees and their own clients are having. Currently, we have a fragmented industry, with investors, operators, and landlords, and we need to make the experience seamless for our clients. By having a vertically integrated way of managing buildings and the strategic deployment of technology, we can shield the end user from the fragmentation of the industry.
Kuntz: Often, the real estate operator stands between the investor and the customer, trying to meet both parties’ needs. Now operators will be much more customer-centric than they have been in the past, and they will have to find ways to pilot and explore new technologies in a way that insulates the customer from too much disruption and insulates the investors from too much risk. That requires operators to carry out a lot of R&D. The trick is to conduct the testing of new solutions in a safe, isolated place. Sometimes that occurs in the buildings of the investors who are partnering on the solution; sometimes that occurs in your own amenity spaces.
Freeman: Traffic is a real problem in larger cities, especially because so many of us are relying on online ordering for purchases, not thinking about the fact that our packages arrive in a carbon-emitting van. So why aren’t we using our airspace for drone deliveries? In big cities, people are worried that this would be dangerous or difficult, so there won’t be a rush to switch to drones for deliveries. But it’s too important not to consider. In the City of London, cars are discouraged and parking is discouraged. So if we’re building new high-rise residences in the city center, how are we getting deliveries to these buildings? Weaning ourselves off our reliance on the car is going to be a challenge, but our cities are so much nicer and more livable if they can offer pedestrian areas and outdoor tables and trees and grass.
RON NYREN is a freelance architecture, urban planning, and real estate writer based in the San Francisco Bay area.