The impact of Hybrid Workplaces on commercial real estate

Hybrid workplaces on commercial real estate

The outbreak of COVID-19 and prolonged lockdowns led to the adoption of remote working all over the world. However, companies across major industries are slowly permitting physical work from offices, as more employees are getting fully vaccinated. But, the hybrid work environment has forced companies to rethink their office portfolios and reconfigure their workplaces to accommodate more flexibility, socialization, and collaboration. 

Therefore, companies are prioritizing employee experience and the need to create an office space that suits an integrated suite of flexible work arrangements- remote work or work from the office.

Why Hybrid Workplaces are important?

Although virtual working has kept organizations moving even during peak pandemic waves, a large proportion of the workforce also craves to return to the office for at least a part of the week.

This is because, although work-from-home serves the purpose, it is no longer the preferred mode of work. Employee burnout, a dispersed workforce, and a lack of organizational culture have been the rising causes of concern among companies.

Moreover, in the absence of collaboration, teamwork, and connections failed to nurture mentorship and interactions between teams and leadership. Hence, “less face-time with bosses and leaders” thwarted opportunities for professional learning. 

As a result, remote working setup negatively impacted the career trajectory of employees. Besides, loneliness and mental health became major health risks.

Therefore, companies are desiring to be at a nexus between flexibility, employee freedom, and greater productivity. 

The companies are reimagining hybrid workplaces that increase productivity by ensuring that remote working employees are visible, engaged, and offered the same opportunities as the employees in the office.

Thus, a hybrid workplace maximizes the impact and value of the time that employees spend in the office.

Hybrid work = hybrid workplaces

A hybrid workplace allows some proportion of employees to work from the office, while others work remotely. 

It is unlikely that traditional office spaces will undergo complete a revamp. However, many organizations are looking to redefine the traditional confines of work. 

Therefore, hybrid workplaces have become the new normal now.

1. Office designs

Traditionally, Offices have been built around individual workstations and cubicles. But, employers are now keen on making the office a social anchor of in-person collaboration and meaningful employee connection.

Therefore, workplaces are making a shift towards a flexible, intentional work setting. Hence, office designs and planning our focusing on creating new-age commercial spaces. 

The key is to create open and expanded spaces that facilitate collaboration and interaction while maintaining social distancing norms.

Employees primarily conduct a host of their individual work remotely and come to the office only for attending scheduled meetings and events. 

Hence, in such cases, the office must dedicate spaces for collaboration and engagement with business partners, clients, and the community.

Furthermore, employees can also participate in creative brainstorming sessions while socializing and learning.

Employees divide that time between office and homes. They come to the office primarily to engage with their team and collaborate with them on a specific project or task.

Therefore in such cases, the office can build a ‘Campsite’ where the employees can report to their teams.

The right technology

In addition to this, employees are allocating capital to build collaborative work zones and invest in the right Proptech tools. To maintain productivity and to preserve the corporate culture, organizations are keen on collapsing the boundaries between virtual working and Working out of the office.

Companies must improve their video conferencing, chat applications, and audiovisual setups in meeting rooms. So the attendees can interact with one another in a more streamlined and better way.

Always-on video conferencing and virtual whiteboards are rapidly being converted into actionable strategies

Furthermore, some companies are considering investing in employee experience applications and workplace sensors. The employee experience software allows employees to book meetings and reserve time in the office. 

And workplace sensors enable tracking workplace occupancy rates. It also identifies which workstations are not used by employees.

Therefore, a newly built hybrid workforce must have a stronger digital infrastructure to bring people and teams together. 

For instance, Google is building ‘Team Pods’. These, they state, are rooms with flexible rearrangements with desks, chairs, whiteboards, and storage units. 

In addition to this, they are also developing new meeting rooms called ‘campfire’. They are modular, Circular Rooms with seating spaces and large displays for virtual employees.

Microsoft is also revamping the distribution of spaces within its office buildings with modernized conference rooms. 

With eye-level cameras and screens on the wall, even the virtual participants can interact with their colleagues in a more engaging way.

2. Suburban commercial real estate office spaces

Companies have continued to expand their office portfolio by investing in office spaces in densely populated urban cores. 

But, employers are expanding their suburban office markets keeping in mind the suburban exodus. 

Although commercial real estate office buildings are still experiencing record vacancies, Chicago and Minneapolis-St Paul are growing under the hybrid work revolution.

Compact and enclosed spaces in the suburbs suit employees who are keen on working from their office without their daily commute downtown. Therefore enterprise companies have revived their interest in the hub and spoke office models. 

Others have a headquarters downtown with regional offices that accommodate the local workforce and facilitate employee mobility.

The hub and spoke model enables the companies to have a centralized hub where people can collaborate together. On the other hand, a majority of the employees can work from informal ‘spokes’- satellite offices or homes.

Commercial real estate owners are incorporating the required amenities for the hybrid workplace and charging premium rents for their office tenants. 

Moreover, investors and owners of distressed commercial real estate are including larger conference centers, fitness areas, and wider outdoor activity areas. 

These intend to serve the long-term employee needs of cohesive work culture. Moreover, owners can make large-scale capital improvements.

3. Organizations keen on cutting down operational costs

Some organizations have opted to create or join shared office spaces. 

The co-working office models not only reduce operational costs but co-working tenants can share a wide range of facilities. These include office spaces, internet, operational and technical support, and energy.

Therefore, leasing space on a membership basis can be cheaper than renting a traditional-serviced office model. Small and rapidly growing companies with a millennial workforce can boost collaboration and network through co-working.

In addition, shared offices may shrink down individual workspaces, but firms are prioritizing the quality of the spaces. Therefore, firms can also cut down on their real estate footprints this way.

Furthermore, some companies have even relocated their headquarters to tax-friendly states.

Read Lilypads’ article that discusses tax-friendly states in the US here.

4. Employee health and safety remains a priority in redesigned hybrid workplaces

Besides office space size and location, commercial real estate leaders and organizations are focusing on the quality of an office space itself.

Whether they are adopting Coworking spaces, suburban offices, or full office models, companies are prioritizing employee health and safety. 

Therefore, commercial real estate owners looking to lease their spaces out should implement extensive sanitation protocols and ensure that thorough ventilation allows sufficient airflow and improves indoor air quality.

Moreover, these spaces should have built-in spaces for adequate social distancing. So, commercial real estate investors should commit to solutions that keep the workforce safe as they return to work in hybrid workplaces.

The Lilypads bottom line: The time to reinvent yourselves would be now

In any case, the ongoing transformation will capitalize on a portfolio of space solutions. So commercial real estate leaders must welcome the demand for owned space, standard leases, flex space, flexible leases, co-working space, and remote work. 

While in the pre-Covid era, flexible space solutions accounted for about 3% of the US office market, the hybrid work model is rapidly disrupting the traditional inertia. A well-planned office that can accommodate flexibility and collaboration while reducing the real estate footprint could be the new normal.

Hybrid work solutions can also lead to savings in rent, capital costs, maintenance, facilities operations, and management. Therefore, commercial real estate investors and industry leaders who understand the shifting needs of tenants and reinvent their assets will stay ahead in the competition.