The office market is about to get highly polarised with vast opportunities for those taking an HR centric approach.
Services industry companies don’t want an office, they want a productive workforce. That workforce needs a workplace, and an office building has been the sole home of the workplace, right?
This former truism has been just that for a number of years, we were just too busy to properly lift the lid on the workplace. Its relationship with the office had shifted and will now evolve at an accelerated pace for the next five years as part of the war for talent in the drive for productivity.
The correlation between wellbeing and productivity is unequivocal. Driven by the rapidly increasing availability and dissemination of science backed wellbeing data and a realisation desk utilisation rates were averaging 50% across most service sectors, the rocket launch of workplace reorganisation was already underway, lift off had happened and the pace of change accelerating.
Companies moving office were changing towards more flexible workplaces with varied breakout spaces and unassigned seating central components in the drive for wellbeing. The workplace was already a key battle ground in the war for talent, and not just for millennials as many commentators have espoused. The data shows all age groups want high quality workplaces that are flexible to their needs and offer choice.
Covid-19 will lead to a minority of office workers to permanently ‘WFH’, jettisoned like the External Tanks on space rockets. This minority will never return, but most will in some form and there is now a high level of consensus of the drivers for that.
Those that do return have all had a taste of the good and the bad ‘WFH’ brings and were only using their desk 50% of the time pre-Covid.
The geographic pool of potential employers for employees has increased significantly driven by employee willingness to travel longer as commute frequency decreases. The war for talent just went nuclear and the afterburners of workplace reorganisation just activated. Employers will double down on workplace quality and location to attract the best talent.
The best quality workplaces help improve employee wellbeing and productivity. This helps attract the best talent and as proven by Leesman (2020) data significantly increases the desire of employees to spend more time in the office. This provides a positive-feedback loop directing tenant demand to the best quality office buildings in any particular location. This demand will focus on the limited best in class product, driving rents and landlord returns. APAM has seen this first-hand in CBD offices such as 1 City Square, Leeds and office park locations such as Arlington Business Park, Reading.
Grade A office space has largely become commoditized. The best buildings have extensive, flexible and bookable tenant amenities as a minimum. Defining characteristics will be tech enabled, encompass space as a service and boast the highest ESG credentials.
Landlords can show prospective tenants their buildings can make their employees healthier, happier and more productive. Those that do will outperform, those that don’t will find themselves in the trenches amongst the vast supply of similar product all fighting in the race to the bottom to sign tenants. These offices may burn up on re-entry to the market with landlords having their fingers burnt too.