From our Thought Leader Contributor, EY.

By Francisco Acoba and Kim Frahm, Ernst & Young LLP

With hybrid work becoming the new norm, companies need corporate real estate portfolio and workplace strategies that prioritize flexibility.

In brief

  • After quickly adopting remote and hybrid workplace strategies, employers likely need to better deploy technology and gather the right data for longer-term decisions.
  • Hybrid workplace models present significant opportunities to reduce costs, while also improving environmental, social and governance (ESG) performance.

With more than 70% of employees working from home at least two to three days a week, according to the 2022 EY Future Workplace Index, we expect an equally dramatic shift in how companies will manage their real estate portfolios. Making changes to the real estate portfolio to align with hybrid working may be critical to increased agility and to attracting and retaining talent.

Developing a high-performing corporate real estate portfolio that effectively supports a hybrid workplace while optimizing total cost includes three actions:

  1. Activate workplace and real estate technology that enables occupancy and utilization analysis, real-time decision-making and an improved hybrid workplace experience for employees.
  2. Explore agile options that reduce the total cost of occupancy, optimize capital expenditures and utilize effective portfolio strategies.
  3. Embed ESG programs to enable workplace and workforce resilience.

1. Double down on technology to understand actual use of space and predict workplace patterns

After an accelerated shift to remote work during the pandemic, workplace utilization is upside down. The 2022 EY Future Workplace index revealed that only about 30% of employees are working from the office five days a week.

Even prior to the pandemic, the idea some executives had that their people were all working from the office every day isn’t backed up by the data on actual use. Pre-2020 workplace utilization data on an average day shows office desks were in use only 47% of the time. ¹ This fact creates a dramatically different perspective on utilization rates and total occupancy costs per full-time employee or per workspace. Based on a traditional one-person-per-workspace seating model, many businesses were leaving valuable office space sitting empty.

The focus on data, however, extends beyond occupancy. Look for workplace management technology such as digital twins, integrated workplace management solutions and smart building solutions — to gather the real-time data that allows your working environments to flex to employee needs. If your real estate portfolio can be equally adaptable as your workplace programs are, the ability to reduce cost, improve retention and enhance productivity can grow exponentially.

You need to know who’s coming to the office, why, when and how they’re using the workplace when they get there. Corporate real estate and HR/Talent teams can work together to develop a full and nuanced picture of workforce and workplace data, drawing from both quantitative sources and listening to employees and leaders.

Key questions to consider include:

  • Which technologies can you use to collect, analyze and visualize your real estate and workplace data?
  • Do you have an occupancy strategy that can adapt quickly and withstand disruption?
  • How are you improving your workplace experience to enable the changing workforce?
  • How do the personas of your workforce affect your workplace design, planning and management?
  • When people come into the office, what type of space will help them be the most productive?
  • Which workspace components and spaces are being utilized most often by employees?

2. Explore both fixed and flexible office space options

More than 75% of employer respondents in a recent EY survey indicate they are planning moderate to extensive changes to their real estate portfolio strategies. It’s critical for these companies to weigh the benefits of monetizing selected assets or restructuring their real estate portfolios to increase flexibility while reducing costs.

An effective hybrid work experience may mean a blend of fixed and flexible office space, such as coworking space, also known as shared or serviced office space. Once the domain of startups and solopreneurs, coworking spaces are growing in popularity as an on-demand solution for larger companies looking to increase real estate portfolio flexibility to support remote and hybrid work models. Offered by national, regional and local companies alike, coworking spaces typically offer full office and technology amenities, often with a mix of workspace types available.

Advantages of flexible office and coworking spaces may include:

  • Avoiding fixed, long-term leases
  • Reduced occupancy costs, based on the “on-demand” use of space
  • More agility to scale the portfolio up or down
  • Ability to minimize capital expenditures
  • Option to offer locations convenient to employees, reducing commute times

Most companies, even those choosing fully remote work, will continue to maintain fixed office space, albeit likely higher quality spaces with smaller footprints. With less space on the books, downsizing your real estate portfolio will have a positive impact on your balance sheet while lowering your company’s long-term capital commitment.

Lower occupancy costs are often a large part of the long-term goal, but there may be initial expenses related to reconfiguring or replacing existing leased space with smaller and smarter workplaces that attract employees to the office.

Employers who see the positive impact hybrid working has on culture and productivity are investing in creating supportive workplaces. A recent EY survey shows:

  • 47% are investing in better workplace technology
  • 39% are spending more to provide onsite amenities
  • 93% see a need for moderate or extensive changes to ensure safety and wellbeing

3. Elevate ESG as part of your corporate real estate strategy

The ongoing tidal wave of turnover and changes in employee attitudes toward work add urgency to the connection between workplace strategies and talent attraction and retention. For example, 54% of employees surveyed in the EY study say they will consider changing jobs if their workplaces can’t accommodate their health and safety concerns in the coming post-pandemic world. As employees and investors increasingly expect sustainability performance and reporting, ESG factors need to be embedded into your corporate real estate strategy and planning for hybrid workplaces. The employee experience is generally the most significant aspect of social performance, and the workplace environment and policies play a central role.

Incorporating ESG considerations into your corporate real estate and hybrid workplace strategies can help strengthen your business and help save costs. In addition to corporate real estate leaders, your facilities management professionals can also play an essential role in ensuring ESG performance that goes beyond compliance.

Environment

Many large employers require facilities to meet green building standards such as those in the Leadership in Energy and Environmental Design (LEED) certification framework. Standards can help employers prioritize building efficiency; decrease operational costs; increase asset value; and enhance productivity, comfort, health and wellbeing for employees and customers. Buildings that meet LEED standards help improve environmental performance in multiple ways, including reductions in energy use and carbon emissions, water use and stormwater runoff, and landfill waste. Work environments can be improved through better indoor air quality, lighting and an emphasis on locations that reduce commute time and increase transportation choices.

Health and Safety

With the increasing emphasis on employee well-being, some employers are taking the next step by adopting WELL standards, a performance-based system for measuring, certifying and monitoring building features that impact health and well-being. These standards highlight aspects such as air quality, natural lighting, fitness and healthy food options. In addition, the International Well Building Institute and National Institute of Environmental Health Sciences (NIEHS) collaborated with scientists and virologists to develop a health and safety rating to help facilities managers implement cleaning, sanitation, emergency preparedness and other protocols in light of the COVID-19 pandemic.

Comfort and Productivity

Workplace technologies including digital twins and smart building systems can help quickly identify and mitigate unhealthy and uncomfortable conditions in a specific area or floor. For instance, when an area is too hot or cold, the temperature and environmental control systems will automatically be adjusted – improving employee comfort and productivity — while also avoiding wasted energy and costs.

Social responsibility and Inclusion

By increasing flexibility, a well-designed hybrid workplace experience helps break down barriers and allows for any working style, supporting diversity, equity and inclusion.

Governance

Inefficient buildings and unproductive work environments are major costs to businesses, even though they may not show up as a line item on the balance sheet. Putting the governance in place to better manage and monitor these costs will make a positive impact on the bottom line.

Summary

Out of necessity, many employers have been operating hastily implemented hybrid work setups and real estate portfolios that were designed for pre-2020 conditions, resulting in a significant amount of wasted space. Now is the time to develop new hybrid workplace strategies that can strengthen resilience, improve both environmental and financial performance, and enhance the employee experience.

Amanda Alexander of Ernst & Young LLP contributed to this article.

References

  1.  “The Workplace Net.work,” Knoll, Inc. © 2015 https://www.knoll.com/knollnewsdetail/the-workplace-network

The views reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.