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Emerging from the pandemic and the future of workplaces

In mid-2020, we explored some of the potential impacts from the pandemic on the demand for office space. At the time, the pandemic had forced the world into lockdowns and every person that could work from home was doing so.

The rise of technology

Over the past two decades, the substitution between the traditional office and remote working or work from home (WFH) arrangements has been possible because of the steady progressive advancement of communicative technologies.

The global lockdown forced the accelerated adoption of these technologies, which prompted further advancement of platforms such as Microsoft Teams, Zoom, GoToMeeting, and Webex. It also simultaneously shifted perspectives on working away from the traditional office, as many people were forced to experience working from home firsthand.

With improved technology, shifting perspectives, and the prospect of a post-COVID world with the vaccine roll out, we can now explore the potential impact on the demand for office space.

Office work

The key benefits to functional offices are well understood. At its foundation, a quality office provides an environment which incubates, facilitates and promotes productivity, collaboration, culture and success. Corporations across most industries work in offices, including some of the fastest growing corporations – technology firms.

Technology firms and office strategies

Over the past year the world’s largest technology companies recorded significant growth in revenue and the demand for their products. The pandemic advanced remote working technologies and accelerated other digital trends, such as payments to online retailing. Interestingly, over this period some of these global technology leaders also made decisions regarding their office workplace strategies.

  • Amazon announced in excess of US$1 billion in office investment across six cities, including Dallas, Detroit and Denver. In Australia, Amazon also pre-committed to Charter Hall’s development at 555 Collins Street, Melbourne.
  • Facebook’s total office leases in New York topped 2.2 million square feet occupying the office space available at the Farley Building.
  • Google leased 1.3 million square feet of space as part of a new US$1 billion (1.7 million square foot) campus to be called Google Hudson Square in New York City and intends to double its current 7,000 staff in the city over the medium term. It also added another 42,000 square feet to its offices in San Francisco, adding to its Mountain View headquarters.
  • One of Australia’s most successful technology firms, Atlassian, announced a new Sydney headquarters worth approximately $1 billion to open in 2025 and located near Central station in the Sydney CBD.
  • Microsoft executed a 523,000 square foot office lease in May at Atlantic Yards, an office development within Atlantic Station in Atlanta. It plans to invest $75 million as the sole tenant at the building. Microsoft also recently announced its intention to open new offices in the Washington D.C. area in 2022.

Microsoft in focus

Microsoft has been one of the largest beneficiaries from the shift to WFH routines. Amongst its suite of communication software like Outlook (email) and other technologies offered by the Office suite, the adoption of Microsoft Teams and Windows Virtual Desktop grew significantly.

Microsoft’s cloud-computing service Azure, its gaming systems, and Windows have also recorded rapid growth amid the WFH shift.

With this rapid product growth, Microsoft has invested in research to better understand WFH technologies and their impact on workers.

Microsoft’s latest Work Index Trend study was centred around the finding: Brainwaves reveal remote meeting fatigue is real. The following sections are extracted from the report.

“More remote work can lead to elongated working hours, meeting fatigue, and missed in-person connections like spontaneous hallway conversations that can bond a team and make collaboration feel easier. And the lack of connected and comfortable home workspaces remains a productivity challenge for most of us.

The study found that remote collaboration is more mentally challenging than in-person collaboration. Specifically, brainwave patterns associated with stress and overwork were much higher when collaborating remotely than in-person. But they found something unexpected as well: If the pair first worked together remotely, their brainwaves suggested it was more difficult for them to work together in-person afterwards. It seems that the social connection and work strategies created when working in-person transfers to a remote setting, but the opposite is untrue.

A second study found that brainwave markers associated with overwork and stress are significantly higher in video meetings than non-meeting work like writing emails. Further, due to high levels of sustained concentration, fatigue begins to set in 30-40 minutes into a meeting. Looking at days filled with video meetings, stress begins to set in at about two hours into the day. The research suggests several factors lead to this sense of meeting fatigue: having to focus continuously on the screen to extract relevant information and stay engaged; reduced nonverbal cues that help you read the room or know whose turn it is to talk; and screen-sharing with very little view of the people you are interacting with.”

Three other major findings were published, based on analysis of users of Microsoft’s ‘Teams’ product, that many companies, including Charter Hall – use for online and virtual meetings.

1. The pandemic will have a lasting impact on work

One of the most consistent themes was that this unique circumstance has accelerated the blending of work and life – which could soften dynamics of the workplace forever. Over half of the parents surveyed (54%) said it’s been difficult balancing household demands while WFH. This burden was felt most heavily by millennials as well as new entrants to the workforce, Generation Z. This may be because this group is more likely tasked with caring for younger children or sharing workspaces with roommates while managing a full-time job.

2. The 9 to 5 workday may be fading away

The average time between Microsoft customer’s first and last use of Teams had increased by over one hour. In this report, we explore this concept further – is the 9 to 5, five-day workweek still disappearing? The data suggests, yes. In Teams, people are working more frequently in the morning and evening hours, but also on the weekends. Teams chats outside of the typical workday, from 8-9 a.m. and 6-8 p.m., have increased more than any other time during the day – between 15% and 23%. Weekend work is spiking as well – Teams chats on Saturday and Sunday have increased over 200%.

3. Physical offices will not disappear in the future of work

Many workers around the world have spent the last four months working remotely at least part-time. As teams have adjusted to this new reality, many are wondering – will physical offices disappear in the future of work? Microsoft research indicates that work will likely be a fluid mix of in-person and remote collaboration.

Still, several pain points associated with working from home were uncovered. Nearly 60% of people surveyed feel less connected to their colleagues since working remotely more often. In China, this number spiked to 70%.

In addition, an ongoing study conducted by Microsoft found that 35.3% of full- time information workers work remotely in a dedicated home office. And only 5% of the people surveyed in the Harris Poll live alone. So it’s no surprise that distractions, connection issues, and lack of ergonomic work environments were noted throughout the research as some of the top pain points of remote work. This indicates that while the future of work will be more remote than before, the physical office space – which brings benefits like connected, ergonomic workspaces and opportunities for social connecting and team bonding – will likely remain a core part of the future of work.

For instance, 82% of managers surveyed expect to have more flexible work from home policies post-pandemic.”

Our view

These findings appear to be consistent with a vast majority of workplace studies that we have seen. Employees value WFH flexibility but they also enjoy – and benefit from – the office environment. Some organisations will need to adjust their workplace strategies to provide greater flexibility. However, many firms were already on this path.

Our tenants are telling us that office work will remain essential in stimulating productivity, growth, maintaining culture, managing risk and driving innovation.

The onus is on corporate landlords and occupiers to ensure that the workplace environment remains a compelling proposition through provision of a high level of amenity and facilities to ensure that the office is an enjoyable, meaningful and productive experience.

 

Steve Bennett is CEO of Charter Hall's Direct Property business. Charter Hall is a sponsor of Firstlinks. This article is for general information purposes only and does not consider the circumstances of any person, and investors should take professional investment advice before acting.

For more articles and papers from Charter Hall, please click here.

 

5 Comments
Grumpy
February 05, 2021

Maybe I'm old school, but there's another reason why I want people back at work which is far less PC: I want to know they are working, not spending half the day with the kids or shopping. In jobs where output cannot be measured by widgets produced or billable hours, I don't know what my staff are doing half the time. Come back to work!

Warren Bird
February 05, 2021

Yes, Grumpy, you are old school. There are all sorts of ways of checking on the productivity of staff working remotely. In the business that I run, that includes things like seeing how many customers they've responded to, seeing the reports that they've written, seeing the documents they've assessed and filed, etc, etc.

I can tell you that my team has been MORE productive since they're not spending 2 hours or more a day on a train or bus.

And I actually have no problems with them ducking out to do some shopping, because I can see at the end of the week that they've still done their jobs. Giving them the flexibility to do those things is actually productivity-enhancing. Going forward, if a workplace doesn't offer that sort of possibility then it will struggle to attract good staff in my view.

The clues are culture and technology.

Culture, that might sound a bit "PC" for you, but it's actually a critical thing. Personally I'd hate to work in a team that you ran, because I can tell you don't trust me. Put in some effort to build trust among your teams, stay in touch through regular team catchups on Zoom, etc, expect integrity and collaboration and openness, and you won't have to wonder what they're up to.

Technology - we put a lot of work into getting our technology right before we went to remote working and it's been one of the reasons we haven't skipped a beat in terms of customer service and efficient delivery of the many things that different teams have to work on. We don't produce widgets and we don't have billable hours, but technology supports us as we manage the business to continue to be effective even at a time like this.

If I were you, I'd start planning for a shrinking business as you'll struggle to retain or attract good staff with that kind of attitude.

stefy
February 06, 2021

Warren Bird, I'm old school too. I will never ever buy a financial/insurance product from someone over the internet or phone.

Warren Bird
February 08, 2021

Fair enough Stefy. Of course if you run a business that has a customer base that needs to or chooses to deal with you in person, you have to take that into account in your management of return to work.

But that's a very different issue to the one that Grumpy raised which would require all his staff back in the workplace even if all customers were happy to deal with them remotely. His issue is trust of his employees, not the needs of his customers.


Chris
February 06, 2021

So Grumpy, let's go even more old school; a "trade", and building a house. You can't measure that very easily in terms of tangible stuff, apart from "you built a house". How long is it going to take ? As long as it takes, somewhere between "X" and "Y" months. Are you on site with a whip in hand, threatening to dock wages because they've just hit rock, they can't get the steel, it's rained out, the wall's been put in the wrong place, the truss was cut too short ? No.

 

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