• Ulrich Prien, Partner |

With the vaccination program rolled-out on a global scale, the light at the end of the tunnel is beginning to come closer. All of us are wondering what post-pandemic life will look like and how each country will find its way back to normality. Flexible work is here to stay – it is only the question what rationale will be applied and what implication this will have on office life and space. On top of that, our next collective challenge is just around the corner: the implementation of the Paris Climate Agreement, where global mobility as well as infrastructure both are major factors.

Because of the sudden changes caused by COVID-19, many companies had to quickly and pragmatically set up a remote work environment. These efforts now are leading to discussions focused on more flexible and climate neutral “work-from-anywhere” approaches. Accordingly, many see it as an opportunity to strategically reduce, expand, or reposition their portfolios of leased and owned properties. While some companies have even expanded their commercial footprint in the past year – such as tech giants Amazon, Facebook and Google, for example – the KPMG CEO Outlook survey found that 69% of global CEOs reported that they will be downsizing office space. With the general success of the mass pivot to remote working in response to the pandemic, the unknown is whether people will eventually return to the office – how, where, and when – and how much of remote working is here to stay. All of this has companies rethinking the value proposition of their leased and owned properties.

There are five critical issues to consider when developing a successful real estate strategy in the current environment

  1. Strategic real estate planning: While it is certain that space will be utilized differently, it is less clear what exactly remaining workplaces will look like. It is likely that fewer workers will fully return to commercial offices for the traditional 8-to-5 shift, with workers tending to more flexible schedules, i.e. coming in a for a limited number of days per week, if at all. What will remain consistent, however, is the need for real estate portfolios to support broad organizational strategy and objectives. We are seeing executives grappling with three strategic questions: (1) Should the current real estate footprint increase or decrease; (2) What locations should be prioritized, while minimizing costs; and (3) What are the opportunities to restructure, divest or relocate in order to drive efficiencies and savings?

  2. Target operating model alignment: Companies responding to the pandemic have been faced with a transformation of their workplaces. Many have adopted new ways of working, including new technologies to support remote and hybrid working dynamics, and evolved their teams to be cross-functional. This nimble approach is resulting in an evolution of operating models to meet new ways of doing business. As models evolve, their alignment to the real estate portfolio is critical to ensure that the portfolio supports the business strategy. Streamlined and restructured operations – often accomplished through automation, centralization, or outsourcing – will impact real estate needs. Considerations such as lease-versus-buy, location options, space configurations, surface per employee / headcount and safety measures come into play.

  3. Technology shifts: Technology is also changing how office space is being used. Advances in personal connectivity alternatives, coupled with enhanced access to key company platforms, demonstrated that it is often possible for employees to be productive anywhere. In a recent KPMG survey, 71% of workers said they would want to work remotely at least a quarter of the time post-COVID-19. Technology is also impacting the ability to effectively manage real estate and facility portfolios. Smart building designs, using sensors and digitized data, provide usage-driven metrics that allow costs to be scrutinized. This data serves to identify opportunities for meeting key criteria, such as climate goals and hygiene standards.

  4. Return to the workplace: Beyond enhanced technology, a smooth transition back to the workplace may require a reconfigured design of space, shaped by social distancing requirements and other health and safety measures. For net new space to accommodate health mandates, companies will need to provide more fluid environments. This may involve the adoption of a hybrid model, mixing office-based and home-office-based work, along with a staggered return to work, dedicated individual workspaces, rotational shifts, and repurposed team spaces, among other creative changes in order to enhance efficiency.

  5.  Tax, accounting, and other impacts: The business case for changes to real estate and facilities portfolios must include an understanding of the attendant impact on tax and accounting. As companies enable long-term remote working, they will continue to face complex tax and accounting issues, due to the location decisions of the organization on the one hand and its employees on the other hand. The growing influence of environmental, social and governance (ESG) factors is also reshaping the business landscape, affecting financial performance and long-term business success. ESG goals are a significant driver in the development of smart buildings that are an important part of a responsible corporate culture.

The pandemic has changed our attitude to working in offices. In the aftermath of the crisis, new work concepts will be established with a considerable effect on commercial properties. Companies should redefine their strategy with this fundamental change in mind. A “gig economy” may evolve in a place “B” environment, where specific skills may be pooled at specific working hubs. This will not be the “We work” concept, but rather knowledge-based clusters that will be partly virtual and global and partly local. Working hubs will have strong eco ambitions and reiterate the Paris goals to become carbon neutral as quickly as possible.

Get more insight: Work anywhere, together - Real Estate (Factsheet, PDF)

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