A “distributed operational workforce” with a net reduction in demand for office space facing a business premised on endless growth.
By Wolf Richter for WOLF STREET.
The office sector of commercial real estate is having a special moment: How on earth are all those offices going to get filled – meaning leased – when neither the companies nor the employees want to fill them like they used to?
So here are two surveys, one of tech companies and their intentions for their offices; and the other of office employees who now work at home and what they think about going back to the office. To round off the picture, we start out with a third survey, this one by Fannie Mae of mortgage lenders.
Fannie: mortgage lenders found that remote work increases productivity.
Corporate cost cutters are all over this whopper: 62% of the mortgage lenders (banks and nonbanks) said that shifting to a remote workforce improved productivity and 51% said it lowered operating costs.
The drawback is that 52% of the mortgage lenders said employee collaboration within and across business functions declined, according to the survey. But that’s not high on the priority list. On top of the priority list is productivity.
Of these lenders, 79% preferred a hybrid model with 21% to 80% of the employees working remotely. The most important factors in deciding their workplace strategy were in that order:
- Company culture
- Talent retention
- Customer experience.
And which employees would most likely have to return to working in-office? According to the mortgage lenders, these are the two most often cited:
- Senior management; “in-person executive presence helps facilitate communication, collaboration, and decision-making.”
- Customer-facing personnel; “many consumers prefer face-to-face interactions, and lenders indicated this to be key to success.”
A Chicago mortgage banker working in Alabama? Or overseas? Yup. The investment in remote-work tech capabilities, IT security, and IT infrastructure has allowed mortgage lenders to:
- Recruit talent without geographic limitations.
- Retain talent, as many lenders expect employee requests for permanent remote work to increase.
“The trend of a distributed operational workforce,” is what Fannie sees in all this:
“A workplace model might emerge among mortgage lenders that features managerial roles and consumer-facing personnel working in central offices while more operational roles work remotely in geographically diverse locations.
“Through a hybrid work model, organizations expect to execute on improved flexibility and reap the benefits of enhanced productivity, an expanded talent pool, and potentially reduced operating costs.”
Tech companies: 95% expect remote work for at least a few days a week.
Real estate services provider Savills released a survey of tech companies, 90% of which are headquartered in the US. Nearly one third has over 1,000 employees and a quarter has between 251 and 1000 employees.
Only 9% said that they will never return to the office. That’s the good thing. The rest will have some sort of office needs. Over the next 12-18 months, they need:
- Less office space: 47%
- The same office space: 40%
- More office space: 13%.
This means a major net reduction in demand for office space, in a business model (commercial real estate) based on endless growth and new construction, which will be a hard nut to crack.
Work from anywhere, even far away, is becoming a common option:
- 26% of the companies allow all employees to permanently relocate away from the office.
- 54% allow employees to relocate away on a case by case basis.
- 17% nope, everyone has to live where they can commute to the office.
Hiring software engineers in India instead of in Oakland? You bet: 72% of the companies said yes, they’re “open to recruiting talent from new geographies given that some roles will be able to be remote.”
And 95% said that “flexible work” – a mix of working remotely and working in the office – will become “normalized” in their organization.
How many days per week do they envision that the average employee will work in the office in a typical week? 76% of the companies said the average employee will spend 2-3 days a week at the office
- 1 day a week in the office: 9% of the companies
- 2 days a week in the office: 18% of the companies
- 3 days: 58%
- 4 days: 11%
- 5 days: 4%
And office design will move away from desk farms where everyone is married to a dedicated desk, and move toward the “hoteling desk model” where employees book a desk for specific time slots, and “collaboration spaces.”
Most employees who work at home want to continue.
A survey of Californian residents, conducted by the University of Southern California, showed that 38% of workers with access to broadband have been working at home full-time and that 17% have been working at home part-time, for a total of 55%, either full or part-time.
But work from home favors high-income earners, confirming every study and common-sense observation on this topic: Only 32% of the lowest income group reported working from home full or part-time, versus 60% making between $60,000 and $100,000, and 73% making over $100,000.
So those are the people already working remotely. And what do they want going forward?
82% want to work at home at least some of the time. Only 18% don’t want to work remotely at all:
- 31% want to work remotely 5 days a week
- 22% want to work remotely 3-4 days a week
- 29% want to work remotely 1-2 days a week.
- 18% don’t want to work remotely at all.
Clearly, companies are going to have to offer flexibility as part of the package in order to hire and retain good people.
Given these tendencies, offices are still mostly empty. Vacant offices are piling up on the market in a historic manner. And it’s not just temporary: the office slump is getting particularly ugly in Houston, San Francisco, Los Angeles, Manhattan, Chicago, and Washington DC.
In terms of workers going back to the office: in the 10 largest metros, office occupancy is still only 26% of the old normal level in early March 2020, according to Kastle Systems, whose electronic access systems are installed in thousands of office buildings around the country:
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