Avison Young, realestateworks and HLM Architects have launched a report on evolving workplace and portfolio strategies.

Over 100 private and public sector companies were asked about their evolving real estate strategies in the context of multiple forces of change, including greater resilience, the decarbonisation agenda, personalisation, remote working and the integration of physical and virtual workspaces.

Survey results show how attitudes towards the workplace have shifted due to the pandemic, in some cases accelerating existing trends. Employees are demanding a better work-life balance and a choice of when and where to work. The political and social drive for environmental sustainability has intensified over recent years, and the pandemic has further encouraged companies to adapt buildings to become more energy efficient. In addition, the need for many to work from home has accelerated digital transformation across all sectors.

Corporate real estate directors shared the impact that these trends are having on their portfolio and workplace strategies, including on workplace design, location, portfolio scale and flexibility, and financial strategy.

It is likely that the role of the workplace will be increasingly reviewed, extending beyond simply a place to ‘do work’. For many, offices will evolve as a place of collaboration, mentorship and belonging. 79% of respondents expect the workplace to be adapted to perform additional social functions.

While most organisations are confident that their portfolios are currently fit for purpose to fulfil medium-term business requirements, 92% expect their workplace to be re-designed in the future to improve productivity as a consequence of the pandemic. The enforced working-from-home experiment has further highlighted the need to provide a variety of controllable and adjustable environments to cater to a range of different personalities and tasks, to ensure the office facilitates employee wellbeing, productivity and job satisfaction.

The geographic distribution of a typical occupier’s portfolio is anticipated to change in response to evolving workforce preferences, cost pressures, business resilience and a stronger focus on wellbeing. 22% of survey respondents anticipate that they will disperse their portfolios to be closer to where their workforce lives and wants to work, with a further 37% neutral on the subject.

While the majority of organisations are yet to conclude a locational review, just 21% were confident that their city centre footprint will not change. The growth of ‘central hubs’ with ‘spokes’ and rural satellites is likely to gather pace in the near future.

There is also pressure on businesses to strengthen the resilience of their supply chains, which brings an international perspective to locational change. A number of global companies reported that some production and distribution centres are likely to be re-shored to increase supply chain resilience.

58% of all respondents predict a reduction in the scale of their real estate portfolio as a direct result of COVID-19, with over half attributing their intention to downsize to changes in their business operating models. The top three factors behind changes to the footprint are saving costs, adapting to remote working and improving health and wellbeing.

Portfolios need to be right-sized to align with new business needs, but permanent remote working will not suit all job requirements or personality types. To balance the increased desire to support a wider range of work styles with ongoing spatial requirements, organisations are looking for flexibility. 85% of survey respondents expect their estate to become even more flexible than before, and 50% expect an increasing proportion of their estate to be held on shorter terms or flexible leases.

In the short term, the economic impact of COVID-19 and the recessionary environment is likely to drive the most significant changes. However, 72% of respondents expect increased active management of property related costs to continue post-pandemic and slightly under half expect their cost base to reduce in support of a new operating model. Over a third of respondents are expecting to release value in their freehold or long leasehold buildings, although this is not an option available to all.

Guy Brett, Principal, Strategic Business Advisory at Avison Young, said:

“This is an exciting time for innovative real estate leaders who have been championing the transformation of their property portfolios and workplaces.

“The health crisis has undoubtedly cut through change management barriers to flexible, distributed working and provided a stage for real estate leaders to deliver transformative real estate and workplace strategies.

“While our research has highlighted several emerging trends, there is no one-size fits all solution. Holistic strategies will need to be tailored to each business, to focus on financial, social, and environmental benefits, while providing spaces that help attract, nurture and retain employees.”

Richard O’Neil, Chairman, HLM Architects, said:

“Few could have foreseen the fundamental changes we have witnessed over the last year regarding the way we work. Not surprisingly, more organisations are embracing trends such as agile working and re-evaluating their workplace strategy to help them continue to attract and retain the best talent and remain competitive.

"This research study uncovers a variety of real estate portfolio and workplace strategy insight. One such insight demonstrates that more organisations than expected aim to retain their valuable city centre locations, which seems at odds with initial fears that our city centres will drain out following the pandemic.

"Aspects of improved accessibility, innovative workplace design that fosters business culture, collaboration and employee wellbeing will be central to forward direction. Crucially, workplace environments will need adapting so that they can respond to change and reach their true potential as well as bringing flexibility with gains to bottom line value.”

Brian Thompson, Director, Realestateworks, said:

“We thought we would uncover some fundamental and long-lasting changes when we embarked on this research – and our expectations were met. Our report talks to a shift in the balance of power between employee and employer, and between landlord and tenant with both identified trends reflecting a rebalance of supply and demand for certain types of space.

“The purpose of holding space will also be challenged more rigorously, and the wellbeing benefits to occupiers will be more widely understood, captured and measured. The language of real estate leaders, their advisors, and social scientists will need to coalesce if our predictions for the future are to materialise!”

Read the full report, Fit for Future: The impact of Covid-19 on workplace and portfolio strategies, by clicking here.