The challenges of the office
The social and economic trends that have been growing over the past decades are now changing our perceptions of what a modern office is. Commercial brokers can’t ignore these trends, which are both a challenge and an opportunity.
These trends began in 1973 when gridlock and the OPEC oil crises brought the USA to a halt. The idea of bringing in hundreds of employees to large corporate headquarters every day wasn’t sustainable.
The World Trade Center, a 1,24 million m2 office complex with the tallest building in the world at the time, was opened on the east coast of America that year.
On the west coast meanwhile, Jack Nilles, a NASA engineer, was working on ideas that would make buildings such as the WTC redundant. He came up with a concept called ‘telecommuting,’ in the shadow of energy crisis. He envisioned a network that connected small offices to homes, allowing people to bike or walk to work.
The digital technologies that enable telecommuting have become affordable and widespread enough for millions to realize Jack Nilles dream. Regus research shows that 54% of employees in the world now work half their week somewhere other than the main office location.
Our cities and offices are changing as new flexible ways of working become more popular. Commercial brokering strategies are also changing – business as usual in this environment is not an option.
Seizing the moment will allow those who are willing to take advantage of it, to start a new type of business. This paper explores the trends that are reshaping markets, what clients and employees want, and the financial benefits to you.
Remote working has become a reality
The OPEC energy crises prompted the invention of telecommuting, but in reality the growth of remote work has been driven by a more valuable commodity: time.
According to a Regus study, 61% of respondents chose the desire for greater work-life harmony as the main reason for the rise of flexible working.
Maybe that’s why a typical home-worker doesn’t fit the stereotype of the young freelancer who works from a cafe. The US Census Bureau discovered that the average telecommuter was a 49-year old man or woman who earned a salary of PS44,000, and worked for a company employing more than 100 people. These are people who have to juggle high-level work and home demands.
Around 52% of employees worldwide telecommute on a regular basis. In South Africa, that figure is 56%; in the USA it’s 59%, and in Argentina, it’s more than 60%.
Remote working has been a popular concept for years. It is also important to change cultural attitudes. We may have reached a tipping-point: 54% say that their employer allows them to work from home at times, and 70% believe flexible working arrangements are essential. Nearly a quarter of employees say they’re more productive when working away from their office.
The desire for a better work-life balance is driving these cultural changes. They are changing what companies expect from their office building. Changes in the economic environment give them even greater impact. These trends can transform the office space business.
Understanding the needs and requirements of businesses
Is the popularity of traditional offices at its peak? Many experts think so. Financial pressures are driving companies to smaller, flexible and cheaper office spaces. A study conducted by Norm Miller at the University of San Diego’s Real Estate Finance Professor, analyzed the amount of office space that the average employee has used since 2000.
He found that the office space in the 54 biggest markets in the US peaked in 2009 and has dropped 50% since then. New leases in 2013, on average, were only 17m2 per individual. Professor Miller claims that the 2008 global recession ended cheap rents and led businesses to seek out significant financial savings.
The trend is continuing, as further data from Deutsche Asset Management show. Office space density per employee in the US has continued to decline between 2013 and 2016.
The trend is not a recent one: office space has been decreasing since 1990, despite a notable acceleration in the last few years. It’s happening worldwide: Asia and Europe are experiencing more drastic changes, as space in these regions is usually more expensive than the USA.
London is undergoing a transformation due to the increasing pressure on the residential real estate market, and the shifting balance between home and work. London’s office space has been declining for six months in a row, which is the biggest decline since the 1990s. Westminster alone has converted 409,000 square meters of office space into homes.
Not all companies are rushing to reduce the size of their offices and encourage remote working. Ironically, it is possible that the technology industry, which has enabled telecommuting, has also been one of those who has pushed for the traditional office.
Apple is building 260,000 square meters of new corporate headquarters in California. Google paid $1.9 billion for an entire New York City building. Yahoo! Marissa Mayer, CEO of Yahoo!, made headlines by banning working from home to encourage collaboration.
The overall trend is clear. Brokers could find themselves chasing fewer traditional office deals in the future. They could invest more time and money in securing dozens of smaller deals that would equal the value of a major deal. There’s also a third choice: change their way of working and adapt to the new realities in the business world and property market.
Understanding the needs and wants of employees
Employees also ask for more flexibility in the workplace to achieve a better balance between work and life.
The daily commute can be detrimental to our health and happiness. Regus’ research found that more than 20% were considering quitting because of their excessively long commutes. Over 27% of employees consider their commute a waste of time and productivity.
Long commutes can also be harmful to our health. They are associated with obesity, stress, lack of sleep and neck or back pain.
Employers are increasingly concerned about their employees’ health, not least because less absences and increased happiness lead to greater productivity. They can’t ignore the harm caused by the commute.
In addition, they are responding to the clear preference of their employees when it comes time to recruit and retain staff. According to Regus, 61% of employees would change jobs to get flexible working. 93% of them would prefer a company that offered remote working. Your clients must respond to the employees who are voting by their feet.
However, allowing employees to work at home is not enough to meet this need. Home-working is often resisted by companies because of the collaborative nature that occurs between employees in the same office. However, this also applies to employees. According to the Regus Home Working Survey, home-workers miss the team environment of the office. 56% of respondents said that the absence of interaction with co-workers and a team atmosphere was the most difficult part of working from home.
Both workers and employers are searching for new solutions. The old model, which involved a long commute to a corporate headquarters in the middle of nowhere, isn’t working. They’ve tried working from home, but they miss the professionalism of the office and the collaboration.
It’s a desire for something that offers the best of both. When you do, the changing property market can become an exciting opportunity.
The Right Space at the Right Time
In our hyper-connected world, we want to give people exactly what they need when they need them. In the 1970s, the “just-in time” approach revolutionized manufacturing. It eliminated waste by only providing materials that would be used immediately. You can join a similar revolution by offering both traditional and flexible office solutions. This will allow companies to acquire the exact space they require, at the time they need it.
Your clients can choose to work in one of thousands locations around the world on a part-time basis or pay as you go. Satellite offices are also available near residential areas. This model is important because it allows clients to only pay for the services they require, at the time they need them.
This type of workspace offers many advantages to companies that are looking to achieve tighter financial targets. It is also more cost-effective than signing a long term office lease.
They can also respond to the needs of employees for a professional, inspiring work environment and allow them to share ideas with their colleagues in a more convenient location. The staff who are forced to choose a long commute or unproductive work at home have an alternative. If their work requires them to travel they can check in at a local office and take their office along with them.
Brokers will benefit most from the new brokerage. This new brokering model not only meets the challenges of tomorrow, but also ensures that your clients will continue to come back to you when they need workspace. The traditional office deal offers a number of advantages.
Closing deals is much faster because you don’t have to spend time negotiating contracts or searching for the perfect location. Leases and capital commitments can be flexible, so companies will sign quicker.
Brokers will benefit from a faster cash flow. You can expect to receive a 10% upfront commission on all completed leases, instead of waiting years for the commission to trickle-in. The fees are paid in 30 days and not over years.