The New Office Playbook - How a Different-Looking Office is Key to the Future of Work

Offices at Polaris - Columbus, OH - New Outside Social Hub with Food Truck Space

It’s no secret that the workforce’s relationship with the office looks very different today than it did five years ago. After a rapid and unplanned transition to remote work with all its advantages and drawbacks, the vast majority of firms have either transitioned back to the office or are in the process of doing so. But our collective experiences away from the office have given us a new perspective on what we really need from the office and how we can best use it as an asset going forward.

The Decision

Researchers in innovation and organizational behavior widely agree that there is a great deal of value that derives from informal connections among colleagues. While some may lament the lost productivity from employees discussing weekend plans, fantasy football leagues or any number of other idle chatter, experts recognize this connectivity among people forms important linkages that are the basis for much of the creativity and innovation that propel companies forward within the marketplace. To these experts, it’s no surprise that executives are seeing the imperative to return to the office, nor is it surprising that it’s happening now. It takes many months for innovation to form, develop and enter the market and many more to show in traditional operational results. The inherent creative benefits of firms that returned to the office earlier are beginning to present an undeniable advantage for those firms, putting pressure on those companies that have yet to do so to act or risk damage to their competitive position.

The Challenge

Of course the decision is not quite so simple. While employers have a heightened appreciation for the value of having employees gathered together, employees have grown fond of the flexibility that remote work offers with a large percentage indicating they would look for a different job rather than return to their pre-COVID work routine. Executives are looking to thread a narrow needle by bringing their workforce back to the office while not losing a significant portion of their human capital in the process.

The Playbook

As more and more companies have taken the plunge and insisted on a return to the office, a common set of criteria has emerged.  Employers are pairing more flexible HR policies such as flexible work locations for certain days with new office assets geared toward capturing the collaborative innovation that was missed from fully remote work. Companies quickly realized that their office investment dollars pale in comparison to the investment they have in human capital. With this in mind, offices are being relocated and redesigned at an unprecedented pace to accommodate the new work environment. Employers are shrinking or eliminating downtown offices with their painful commutes and instead focusing on suburban locations with nearby amenities. In addition, companies are moving away from lower-quality buildings and into higher-quality buildings. Within their spaces, firms are reducing individual offices and focusing heavily on conference rooms and alternative collaborative spaces, encouraging employees to spend their time in the office working together.

Office Owners Respond

For the owners of office buildings, this presents a tremendous challenge but also an opportunity. The wholesale change in how the office is being utilized is quickly changing the landscape of winners and losers within the space. Older buildings and those poorly located for today’s demand face extreme difficulty, but even modern product in good locations face significant challenges. Very high levels of tenant remodeling and turnover combined with extremely difficult capital markets mean that many buildings will be unable to deliver the capital improvements necessary to compete in the new environment. So while outside observers comment on gross market vacancy numbers and tremendous amounts of available space, the actual amount of competitive space will be limited to a relative few that have been proactively positioned to meet the new demand and remain capitalized sufficiently to make the capital investments that are necessary to secure tenants. Those who can aggressively respond to the new demands of tenants will be rewarded with an asset that remains viable as others fade into irrelevance.

The Future of Office Ownership

Depending on positioning, the immediate outlook for office ownership ranges from challenging to dire. However, successful real estate ownership is not about understanding the immediate future, but rather addressing the immediate future while understanding the longer term. Through that lens, we can see that though there are some properties that face an existential challenge, the majority of office properties face a manageable test, and with proper management and capitalization, these assets can expect to endure the current market and thrive in the future.

Dan Andrews
CEO