It is becoming increasingly clear that the hybrid work model is more than just a trend—it’s a proven success story for employers and employees positively impacting productivity and revenue growth.
Still, a third guest at the table must be addressed. As companies across the board are right-sizing their workspace commitments office vacancy rates are at an all-time high. In her recent article, Expansive Managing Director, Andrea Pirrotti-Dranchak addresses steps forward-thinking landlords are taking to activate their assets as they navigate the changing landscape of work.
Reprinted from Allwork.com, published December 11, 2023.
Historically, decisions about where and when people work were made from an ivory tower by the C-Suite. Today, this choice is being influenced and indeed made by every human who reports to an office. And that power is real. A LinkedIn study reported in the Guardian indicates that more than a third of U.K. workers would “quit if told to return to the office full-time.” In short, employers who don’t offer hybrid solutions will see their talent walk out the door.
The good news is that hybrid work appears to provide a win-win solution for employees and employers. Research shows that there is a clear upside for employers in terms of productivity and profitability. A Stanford University study revealed that remote employees are 13.5% more productive than their counterparts who work in the office. And, a study conducted by Scoop in collaboration with Boston Consulting Group indicates that companies whose employees have the option to work in-office or remotely have demonstrated a 16-percentage-point advantage in revenue growth over the last three years, as opposed to companies with more rigid policies.
With data like this to support the practice, it is becoming increasingly clear that the hybrid work model is more than just a trend — it’s a proven success story. Still, there is a third guest at the decision-making table that must be addressed. What about the landlords who are sitting on a bunch of vacant spaces?
Companies across the board are right-sizing their workspace commitment and landlords are feeling the squeeze. Negative absorption and new supply have pushed the office vacancy rate to another all-time high at 13.3% in August of 2023. Major cities, including San Francisco, downtown San Jose, Oakland, Chicago, and Seattle, are experiencing record-high office vacancy rates, impacting city centers. New forecasts indicate office vacancy rates in downtown Montreal could approach 25 percent in the next two years as employers shrink their footprint and new buildings are delivered.
In the face of this significant shift in the way people work, forward-thinking landlords are reimagining their assets. They know it’s not about merely adding a gym or restaurant; yesterday’s tools won’t cut it. To meet this challenge, some notable buildings have raised the bar, showcasing a need for innovative solutions that go beyond the basics. It’s time for landlords to embrace a new perspective and proactively adapt to the evolving landscape of workspaces.
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We are seeing some big time moves from some owners. 22 Bishopsgate in London is a great example. Danny Lemon, Head of 22 Bishopsgate has been quoted as saying, “We curated a unique 22 Team, with roles not often found in property management, but required to meet our equally unique building ambition.” 22 Bishopsgate leadership has curated an ecosystem, designed to elevate the health, wellbeing, and happiness of tenants and visitors. And, while 22 Bishopsgate is simply brick and mortar, the success of the strategy begins and ends with humans.
Visitors realize this the moment they walk through the front door and are warmly greeted by the 22 Bishopsgate team. These individuals are not sitting behind a reception desk, they are approachable and actively walking the lobby floor expertly guiding the visitor experience, step by step. A vertical village, the building features a biker commuter park with showers and lockers, an observation deck, a marketplace of healthy and delectable food choices, an upscale restaurant, an events floor, a membership lounge, a viewing gallery, and of course a gym. Every partner is meticulously selected to bring the vision to life and sustain it. The building, in the heart of London, is 91% occupied.
Transforming spaces like 22 Bishopsgate is a big lift. Yet Giovanni Palavicini, President and Founder of Fronteras Commercial Real Estate and Co-President of the Board for the Global Workspace Association doesn’t think it’s that complicated. He suggests three things landlords can do right now to impact change: First, understand their tenant’s needs for flexibility. Second, create a strategy to meet those flexibility needs. Third, implement the strategy. “Seems simple, but it’s true,” he says.
Additional low-friction tactics landlords can implement now to impact change include prioritizing the human element by placing tenants and their employees first, offering a welcoming environment, and addressing issues promptly. Invest in cost-effective, high-impact physical enhancements. Collaborate with flexible workspace providers to broaden tenant appeal, with the potential for small space members to evolve into larger, traditional tenants. View flex spaces not only as leased areas but also as building amenities, providing additional lounges, meetings, overflow, and project spaces.
As we navigate an uncertain future, one certainty remains: a full return to the office is unlikely. Employers are embracing a transformative approach to hiring, training, management, and assessment. Forward-thinking owners are wielding innovative tools to reshape the traditional commercial real estate paradigm, and their efforts are yielding rewarding outcomes. The evolving landscape calls for resilience, adaptability, and a visionary outlook as businesses redefine the way they operate in a dynamic and ever-changing environment.