Welcome to this week’s blog. If you’d prefer you can access the audio version.
‘Freedom Day’ will mark a significant milestone in the fight against COVID. It’s the point that the Government, (and to a lesser degree the scientists) feel that the threat of the virus is sufficiently subdued that we can start to live a pretty much normal life again. This means the end of restrictions around mask wearing and social distancing, the reopening of nightclubs and the ability to meet in large groups. Basically, everything’s back on. Importantly, this also includes the Government dropping its advice that those who can do so should work from home.
Corporates across the UK will have been planning for this event for some time now. The fact that Freedom Day was due to be this week means that, even if they aren’t yet published, policies are likely to have been drafted and signed off. In most cases this will involve asking employees to return to the office in some shape or form, ramping up from 19th July. In most cases it seems that this will take the form of flexible / hybrid working. The important implication is that for most employees this therefore also means flexible / hybrid living. It is impossible to look at work in isolation of life.
In today’s blog I consider the complexities around ‘hybrid living’; probably the biggest shift in how people conduct their lives in modern history. Is this a road paved with productivity and freedoms? And if so, what will employers and employees have to give up to achieve it? And of course, what does this mean for real estate?
First a few points of clarity. At the top of the list (per previous blogs on the subject), this doesn’t actually apply to most people, because most people (teachers, bus drivers, nurses) don’t work in an office and have an absolute requirement for physical presence in their workplace. Secondly, there are many definitions of hybrid working; the more aspirational being the equivalent of shopping’s omnichannel model – connect and transact anywhere through multiple channels. This may be true for some; but for most it will simply involve spending some days at home and some at the office. It’s binary for a couple of reasons: (1) most people find it really difficult to work in a coffee shop or a park, and most don’t have flex space memberships to allow for ad hoc drop-ins; so for most it will be home or office, and (2) most people won’t carve their day into smaller units due to the inconvenience of travel, so morning and afternoon shifts are less likely.
Let’s consider the challenges. There are many inefficiencies to hybrid working that need to be addressed as part of a well thought through policy. Here are a few:
Doubling up. Doing work regularly in (at least) two different places, in theory means that you need double the equipment. If you used to spend a day a fortnight working from home, you could probably make that work using your laptop; flicking through spreadsheets using that terrible red button or tracker-pad on your laptop keyboard, whilst perched on your dining chair, squinting at a 13” screen. If you’re working 3-days a week at home, you’ll need a full set-up, with mouse, keyboard, monitor and chair. And you’ll need the same again in the office. Granted, hotdesking might mean that this isn’t double, but businesses will inevitably need to buy in more equipment.
Hotdesking. Speaking of which… if you now want to work 3-days a week at home, don’t expect your private cubicle with pictures of your children and your favourite pot plant to be there when you pitch up at the office. In the medium term, the inevitable shift for most businesses will be to increase utilisation through desk sharing. This is the sacrifice that hybrid workers will need to make.
Missing out. Whilst policies might have moved on, the same is not likely to be true of management styles. It takes more thoughtful management to lead a hybrid workforce. This includes ensuring that all members of the team are engaged and can collaborate regardless of where they are that day. A few difficult managers who don’t approve of homeworking are likely to actively undermine hybrid working implementation. A great deal more are likely to passively undermine it through failure to adjust their style to accommodate the new status quo. In some cases this may well lead to an unintended full return to the office for those who fear missing out on career development opportunities.
Planning ahead. Hybrid working has come about largely as a talent retention initiative. However, many businesses will, over the medium-term, also view this as a cost reduction opportunity. The challenge is that real estate can only be rationalised if utilisation rates increase significantly. Apparently, preferred days in the office of the future will be Tuesdays, Wednesdays and Thursdays (or as has been described to me, hybrid workers will become TWaTs). If everyone follows this plan, utilisation on Monday and Friday will be akin to weekends and the rest of the week will be full occupancy; hence the aggregate real estate requirement will be unaffected, with no cost saving opportunity. Whilst there be some natural / psychological smoothing and random chance, the only real alternative is shift stacking (agreeing to come in on different days / different times). This requires a consideration of who needs to come in at the same time as who (and who trumps who in choosing their days), which requires compromise. Having such rigid plans also takes a chunk of the ‘flexible’ out of flexible working.
Unexpected changes to plan. Even if you manage to put this in place, what happens if a client or senior colleague calls asking for a meeting on one of your home-working days? After all, they probably won’t have the same home working days as you. Some clients may be happy to accept a remote call; others might not, and the employee needs to make a call on whether to go in after all. I suspect that most will choose / be required to do so. This combined with the point above will I believe lead to people being in the office much more than they initially plan to be.
Meetings. We have become used over the past year to having a series of thumbnail videos of those attending a meeting. It has led to positive developments like agile screen sharing, meeting chat and being able to put your virtual hand up to join a discussion; not always possible in a room full of domineering voices. If say half of the attendees at any meeting are remote, will the others go into a meeting room, or dial in from their desks? What is the tipping point? And if the physically present employees go to a meeting room, will each join via their own laptop, or as a large group from a central screen? If the latter, then virtual hands-up, chat functionality and ad hoc screen sharing will be a privilege of the remote group?
In short, it strikes me that hybrid working raises many new questions that don’t have great answers. The uncertainty that it creates will then bleed into our home lives, to become ‘hybrid living’.
Commuting. The reason that most people want a degree of home working in their schedule is in order to avoid commuting. However, there are significant unit cost penalties to travelling less frequently, that won’t result in a pro-rata spend reduction. The new flexible season tickets announced this week (allowing up to 8 days travel per month – envisaging 2-days per week in the office?) do not offer the same discount or unlimited use as a traditional ticket. There are also likely to be fewer services as operators mark capacity to demand. If many people end up underbudgeting the time they will spend in the office, they run the risk of in fact being worse off, and with more cramped trains.
Organising and planning. In a 100% office-based model, things like child-care and pick-up arrangements are simple. When you don’t know where you will be at different points in the week, school drop-offs etc will require more planning and adaption. I predict an increase in phone-calls from the school reminding parents that junior hasn’t been picked up, when each parent thought that the other was doing this as part of a home-working day, and both had made a call to work late in the office.
Amenity. If fewer people are spending time in CBDs during the week (which feels inevitable) then some amenities will suffer and disappear. In particular, amenities used every day, such as sandwich and coffee shops are in the frame. That will mean less choice for office workers. I reject the same argument for semi-frequent amenity. Hairdressers, bars, destination shops etc which people visit once a week or once a month will remain in demand, because people will logically adapt their schedule to visit these on one of their office working days, rather than reduce their demand.
What does this mean for those working in real estate? A few concluding thoughts.
Those that manage workplaces are in for one of the most challenging, dynamic and potentially exciting times of their careers as new practices flush through. In recent years we have talked about real estate becoming a c-suite focus, but that has never been more true than now. Real estate professionals will need to operate hand in glove with HR and operations teams, and those on the board setting company strategy and culture.
It is dangerous to see things in the binary. We all probably have a view on what our own preferred work model of the future will look like. What has become clear in the past months is (1) the diversity of opinion on the subject, (2) the emotions that this elicits, and (3) the need for compromise on all sides if the future of work is to be effective. For most organisations this will be a middle ground; however as noted above, the middle ground is often the most difficult space to occupy. It adds complexity and trade-offs which need to be actively managed. If as an occupier, you aren’t thinking beyond the policy, now’s the time to do so.
Office investors are of course eyeing this debate with some interest. Again, it would be easy to assess 2 days of home working as a 40% demand reduction. That is of course simply not true due to too many factors to go into here (talk to our research team for a full forecast). Those who have drawn battle lines in this discussion announce victories each time an occupier goes fully virtual or back to 5-days in the office. My addition to this debate is that whatever people state will be their work-from-home quota will end up being less than that in reality, due to some of the inefficiencies outlined above, and we will need to wait a while to find out the answer.
If you found this interesting, then why not check out our other articles.