Redefining the workplace

By
/ EdgeProp Singapore
|
July 24, 2020 5:50 AM SGT
Grade-A office rent in the CBD fell by 2.3% q-o-q to $10.37 psf per month in 2Q2020 (Credit: Albert Chua/ The Edge Singapore)
SINGAPORE (EDGEPROP) - The office market has been one of the casualties of the pandemic. Over Singapore’s “circuit breaker” period, activity in the CBD came to a standstill: the district became a ghost town, with streets lacking the usual buzz of traffic, and buildings devoid of people.
As most employees worked from home, office leasing activity came to a near halt in 2Q2020. Office rents corrected for a second straight quarter, and at a steeper rate. Grade-A office rent in the CBD fell by 2.3% q-o-q to $10.37 psf per month in 2Q2020. The decline is more pronounced in buildings with premium rents, with those in Marina Bay recording a 3.4% q-o-q fall to $12.10 psf per month, according to Cushman & Wakefield (C&W). Meanwhile, overall rental growth for the quarter marked a decline of 3% q-o-q, JLL says.
By the end of June, most workplaces were able to resume operations as the city-state entered Phase Two of reopening. But in an effort to thin the crowds in the CBD, the government urged that, where possible, telecommuting should remain the default for employees.
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With the end-date of the pandemic still unknown, JLL expects that office rents will stay soft and occupiers are likely to keep cautious throughout the year. It cites three factors: a further economic contraction; safe-distancing requirements constricting business operating capacity; and the risk of repeated lockdowns arising from a surge in Covid-19 cases. As it is, Singapore’s economy contracted by 41.2% in the second quarter, falling into recession for the first time since the global financial crisis.
EDGEPROP SINGAPORE - As most employees worked from home over the circuit breaker period, office leasing activity came to a near halt in 2Q2020 (Credit: Albert Chua/ The Edge Singapore)
As most employees worked from home over the circuit breaker period, office leasing activity came to a near halt in 2Q2020 (Credit: Albert Chua/ The Edge Singapore)

The impact of changing work

While the future timeline is lined with uncertainties, the pandemic has drastically changed the future of work, and with it, the role of the office. “We’ve had the capability to work remotely for decades but have been held back by management attitudes, cultural differences, and a lack of trust,” highlights Dominic Browne, head of insight & analysis, Asia Pacific, at Cushman & Wakefield (C&W), in a webinar. Having to work remotely for months, companies soon realised that virtual collaboration was indeed possible for most industries and not just confined to those in the tech sector.
“We moved from a world where the default is everyone going to the office because they don’t have a reason not to, to a world where nobody’s at the office — how do we convince them to come back?” notes corporate real estate futurist Dror Poleg in a separate webinar by JLL.
Already, corporations have embraced new remote working policies. French car manufacturer Groupe PSA announced in May that under new rules, work at the office will be limited to 1–1.5 days per week for activities not directly related to production for its staff of 80,000. Over the past few years, up to 18,000 PSA workers were already working remotely occasionally, but Covid-19 has ramped up this number.
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EDGEPROP SINGAPORE - Over Singapore's "circuit breaker" period, activity in the CBD came to a standstill (Credit: Albert Chua/ The Edge Singapore)
Over Singapore's "circuit breaker" period, activity in the CBD came to a standstill (Credit: Albert Chua/ The Edge Singapore)
Even banks, considered traditional office-occupiers, are not exempt from this trend. Moving forward, Morgan Stanley will be operating with “much less real estate”, its chief executive officer James Gorman said in a televised interview in April. “We’ve proven we can operate with no footprint,” he says. “Can I see a future where part of every week, certainly part of every month, a lot of our employees will be at home? Absolutely.”
From the perspective of an employee, “the biggest change is that now people have a choice — and it’s clear to everyone involved”, says Poleg, who also co-chairs the Urban Land Institute’s Technology and Innovation Council in New York. While this does not mean most people will continue to work from home, it also does not necessarily translate to a return to the traditional office, he says. “More and more people will no longer be willing to endure a long commute, or even a short or medium commute, which ultimately adds up to an hour or two a day.”
An even far-reaching change would be the impact on the nature of work. “For operations that can be virtual, people would be able to choose where they live, and proximity to work becomes less important,” says Despina Katsikakis, international partner, head of occupier business performance at C&W. On the other hand, “companies will be able to source talent globally and gain access to untapped talent pools”, unbounded by location, Katsikakis says.
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As staff are no longer tied to a physical workplace, this could potentially lead to a rise in independent contractors who work on multiple gigs. LinkedIn data shows that remote job listings rose by 28% in March, while search data on the platform over the same period registered a 42% leap for job searches involving the keywords “remote” or “work at home”.
“This new confidence that people can work remotely opens up significant opportunities for talent to become independent contractors and develop portfolio careers that will suit their convenience, their personal growth, and opportunities, alongside a better work-life balance and well-being,” continues Katsikakis.
If proximity to the office is no longer a determinant of where one lives, then it could be possible that cities — where living costs are high and jobs are abundant — would attract fewer people. By 2025, Poleg believes that “we will be in a world that is much more dispersed”. He says: “I think the movement of people will flow along different lines so we [may] not all flow into a single centre.” Instead, it is likely people will live in various neighbourhoods within cities, he adds.
EDGEPROP SINGAPORE - GRADE A OFFICE CBD (Source: Cushman & Wakefield)
(Source: Cushman & Wakefield)

The office, revamped

To be sure, the office as a convening place for work will have to adapt to the needs of its inhabitants. In a post-pandemic world, attracting workers back to the office means that the space offered needs to be “truly activated and engaging”, one that provides conducive opportunities to learn, collaborate, and interact with people, notes Poleg.
If employees can work productively anywhere and hold virtual meetings with each other, then no longer will societal norms warrant them to be confined to their office cubicles. The offices of tomorrow will have to up their game. “The mandatory minimum requirement to create a market rate space is going to be a very solid baseline of health and well-being protocols,” says Julanne Minster, senior vice president at Delos, which researches and advises on innovation solutions for the built environment.
The future of offices could also see a nuanced shift, from a business-to-business product, to one marketed as a consumer offering, says Poleg. This will be much like what co-working operators offer: a workplace packaged solution of design, furniture and services, instead of how offices are normally leased out in today’s market, by floor space.
Near-term costs, however, could increase. “If you divide [such a workplace solution] into square metres or square feet, it does look much more expensive, sometimes 2–2.5 times more of traditional rent,” says Poleg. But it could average out over time as the space is more versatile: “You don’t have to keep breaking up walls and throwing stuff away every two years or five years” to meet evolving needs, he explains.
EDGEPROP SINGAPORE - GRADE A CBD OFFICE RENT & VACANCY (Source: Cushman & Wakefield)
(Source: Cushman & Wakefield)

The employers’ onus

At a time when work is shifting to remote practices, companies will have to figure out how to maintain and preserve culture among its staff. “The strain of an organisational culture and how connected people feel to that culture is one of the most important drivers of experience and engagement,” says Katsikakis.
“Highly motivated and engaged employees are more likely to stay with their company, produce the highest quality work, and help their colleagues succeed against the most important objectives,” she adds.
Maintaining company culture will now have to be done virtually and physically, within an office setting. The role of senior leaders will therefore be paramount as cultural ambassadors, communicating more than ever before in a virtual working context, says Katsikakis. On the other hand, this also reinforces the future role of the office as a place that embodies and supports culture, connection and learning. “Whether companies choose to manage it or not, their office is the physical manifestation of their culture and brand, and today this will become more critical than ever before,” she says.
Increasingly, employees will also be measured by impact rather than presenteeism. Firms will have to change measurement metrics, such as how they hold their employees accountable, measure their performance, encourage collaboration, and work synchronously, says Poleg.
Looking ahead, the office might not even be a physical workplace at all, he notes. “What companies want is a productivity solution, which means, enable them to enable their valuable employees to produce their best work and to be as happy as they can be so that they will want to stay with the organisation,” he explains.
As a corporation, “my goal is to make these people productive and to justify what I pay them and to make sure that they have even more great people coming in. And that means actually allowing them access to a network of locations, whether they’re mine, or their anyone else’s, based on their needs”, says Poleg.
The office of the future could very well be your home.
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