How COVID is transforming the property sector

The COVID-19 pandemic has had a significant influence on where we work. It has caused much uncertainty about the future workspace conditions as organisations try to deal with the problem of abundant space. But it has also given us a chance to rethink and rework our workplace environment.

In March 2020, most organisations would have seen their offices as essential to their business. But now, companies are left with offices that aren’t fully used and may not support the type of work they want to do in the future.

In June, offices across Melbourne sat empty as the city endured its fourth lockdown, reducing the number of staff travelling to work to 26 percent of pre-pandemic levels, survey data from the Property Council showed.

In PwC’s Changing Places: How hybrid working is reinventing the Australian CBD report, we estimated that as of December 2020, there was enough sublease availability in Sydney’s CBD for 14,000 new workers, or around 430 dynamic start-ups, who could take advantage of lower rents, replace departing workers and reinvigorate the city.

So, what is the answer? Is subletting office space a long-term strategy? And what are the alternatives for the future of their office design? Also, can technology help?

The CFO alone can no longer make all the real estate decisions. Operations, HR, and even the CEO need to be involved in creating a strategy and aligning it with plans for your office and workforce.

Office design in the new normal

Before COVID-19, many businesses were after offices with gyms, lounge areas, shared kitchens and large meeting rooms. But the requirements have changed. Organisations are now more concerned with health and safety essentials, such as indoor air quality, touchless technologies and appropriate distancing.

Organisations are also looking to reconfigure their space by making slight changes to accommodate social distancing. Meanwhile, others are entirely remodelling to introduce collaboration spaces, quiet working areas and Zoom rooms. Further, more and more companies are offering a blended remote and in-office model to allow the physical office space to continue being a part of team get-togethers and social events.

As businesses transform their office designs, I expect to see more zoom rooms, fewer cubicles and more hubs for teamwork – with enough variability to meet different needs and expectations.

What should businesses do with their space?

Businesses need to create a long-term strategy for their offices to answer questions like: How much space do I need? Was my office too crowded before? Did our previous office support the type of work we want to do? How can our space be repurposed?

Organisations tend to think about their real estate footprint exclusively in terms of financial overhead, but its value is much more. We are now seeing more companies exploring ways to repurpose their real estate to incubate start-ups and not-for-profits that align with their mission.

Businesses also need to understand the trade-off between maintaining office space versus shrinking their footprint. For example, nearly half of all big global companies are looking to make changes to their property portfolios, according to a survey of several hundred ASX300 and Fortune 500 firms. More than a quarter are planning to reduce the amount of space they own or lease, while another 30 percent are looking to change how they use their premises to suit future work trends.

Research done by global workplace company Unispace found that their clients – located in more than 60 countries – hope to achieve more than $390 million in savings from space changes.

However, the opportunity to save money may be outweighed by the costs of breaking leases early, whether through penalties or your employees’ experience. While many discussions about property start with: how much space will be needed? They must also consider how employees will use the space.

Decisions on real estate shouldn’t be made on cost alone, given the impact the office has on employee experience, retention, and productivity. Businesses need to get their organisational work strategy right first because real estate forms the basis of a future of work strategy.

Property technology: The next wave of organisational innovation

What the 2008 global financial crisis was for fintech, COVID-19 is for proptech (property technology). It has changed real estate almost overnight. Office occupancy levels drastically decreased, people began embracing hybrid work, and technology became central to continuing day-to-day business.

The real estate sector had been moving toward digitisation for some time. But the lockdown and restrictions magnified the role technology plays in our work. The property industry quickly spurred into action by organising virtual viewings and inspections to having meetings over Microsoft Teams or Zoom.

The real estate industry has risen to the challenge, creating several organisational and structural changes. Businesses are also continuing to invest in technology and integrate digital tools into their operations. Examples of these new additions include zero-touch technology, air monitoring and water penetration sensors, and proximity sensors for individuals’ movement.

Delivering highly successful offices is a conversation that starts well before office fit-outs. There must also be greater collaboration between the CFO, operations, HR, CEO and the employees using the space. With continued observation and insight, we can meet the needs of today while looking forward to the opportunities and challenges of the future.

Tony Massaro, Partner and Real Estate Advisory at PwC

Image: https://hga.com/locations/milwaukee/