For most of Europe’s office-based workers, ‘the office’ is a place they haven’t seen for months – or very little. Forced since March into mass work-from-home programmes as governments rushed to contain the Covid-19 pandemic, they unwittingly became part of the biggest remote working experiment ever undertaken in corporate history. And it isn’t over yet.

As employees return to work from their – mostly – domestic holidays and staycations, more is set to change in the office than just the introduction of hand sanitizers, routing stickers and socially distanced desks.  With terms such as reimagine, redefine, repurpose and reconfigure, it is clear the thinking in corporate boardrooms about future work practices and the role of the office has only just begun.

‘Corporates have been trying to manage an incredibly complex picture of firstly mothballing and maintaining office space and business continuity,’ says Tom Carroll, head of EMEA corporate research and strategy at JLL. ‘Following wide-scale working from home they are now starting the process of re-entry, reactivating spaces at reduced capacity, reconfiguring that space to create a safe and compliant environment with social distancing which requires increased space per person, even at reduced capacity levels.’

End of the office?
Numerous studies have already been carried out on the post-Covid workplace and employee preferences, with some even questioning the need for a central physical office at all. The tech industry, including giants Google, Twitter and Facebook, led the charge on remote working following the coronavirus outbreak and, as the pandemic advanced, publicly embraced the idea of implementing ‘work-from-home’ models indefinitely. Google recently announced it will let employees work from home until at least July 2021 for roles ‘that don't need to be in the office’. In some areas of the financial services industry, too, work from home options are being extended until the end of the year.

‘Working from home during the pandemic was driven by necessity not choice, but overall it’s been a remarkable success – it will accelerate a trend we’ve been observing for a while,’ says Carroll. At the same time, despite clear benefits in terms of flexibility, efficiency and productivity, it will not mean the end of the physical office, he believes.

‘The simplistic narrative that we’re seeing in some parts of the media is that large-scale remote working means a reduction in long-term office space. The reality is way more complex than that. What we’re seeing at the moment are multiple pressures and some of these trends will play out over many years.’

A global survey of over 3,000 employees published by JLL in June concluded that, despite its overall success during the lockdown, wholesale working from home will not become ‘the new normal’ in a post-Covid world. While most employees enjoy the flexibility of working from home, they need or want to be in the office for the majority of the working week.

Unsurprisingly, perhaps, it’s the things least related to work that people miss the most about the office. The JLL study, ‘The Future of Office Demand’, found that 58% of respondents missed the office ‘substantially’, with socialising and human interaction cited as the top reason (see chart). Among younger cohorts (aged 35 and under), the desire to return to the office was even greater (65%).

Ecosytem of workplaces
As businesses prepare for an autumn reopening, their workplace strategies are likely to extend beyond Covid to factoring in the impact from the economic recession and longer-term structural trends. Together, these will spawn new ways of working, leading to what experts are describing as ‘the rise of the liquid workforce’ and ‘a more diversified ecosystem of workplaces’.

Listed pan-European property giant Covivio, which has a 3.4 million m2 office portfolio across France, Italy and Germany, says it is well prepared for the anticipated trend among occupiers towards a mix of different workplaces. The Paris-listed REIT launched a flexible office subsidiary, Wellio, three years ago and earlier this year boosted its traditional office holdings by acquiring German office landlord Godewind with 290,000 m2 of assets. Offices now account for around 60% of Covivio’s total €25 bn portfolio.

‘What we can conclude based on feedback from clients is that Covid-19 has accelerated trends which were already on the table, especially regarding remote working,’ says deputy CEO Olivier Estève. ‘In terms of real estate, occupiers would ideally like to have a more agile solution to safeguard the future of their business. They are looking at managing this flexibility through a mix of remote working, leasing offices, and coworking or flexible office space,’ he explains. ‘I think Covid will lead to a new equilibrium between these three possibilities and from a landlord point of view we will have to adapt our proposals to follow the requests of our tenants.’

How companies organise the way they work and the future of the physical office in a post-Covid environment has become a hot issue, attests Estève. ‘I am in lots of discussions with tenants and working with them to find suitable solutions. On the one hand everyone says working from home is better for people because it cuts out the commute to the office and is therefore more efficient. But on the other hand there are also some negative aspects in terms of collaboration, inspiration, creativity, and the onboarding and training of new staff. All these issues are on the table and we are now having discussions not only with companies’ real estate departments but also with their HR teams and senior management.’

De-densification trend
Estève predicts corporates will probably seek to reduce their overall real estate footprint as a cost-cutting measure as pressure from the recession mounts. ‘Most of our tenants say that in the end they will probably be able to reduce their office footprint as a result of mixing home or remote working and desk sharing. So, for example, for 100 employees you would only need to have about 80 desks in the office. It will be a bit like in the past, say 20 years ago, when we were at maybe 20-22 m² of space per person on average. Today we are probably at 12 m² per person on average in an office building, so nearly half that space.’

New ways of working will also lead to the main office or office headquarters of a company becoming a ‘collective destination’, Estève believes. In future, more attention and surface area will be devoted to shared and collaborative spaces, which will be mirrored by a reduction in individual space. ‘The focus in future will be on spaces that encourage collaboration, interaction, inspiration and team building,’ he says.

The French executive’s views are borne out by multiple studies pointing to a new paradigm in working life. ‘As companies start the process of evaluating which roles and functions and which teams can work in a more mobile way - and how to build that into an overall strategy - what we will see is a different mix,’ says JLL’s Carroll. ‘The purpose, design and structure of the office will change, from the cubicle-style environment of the 1980s towards collaborative, amenity-rich environments that act as a hub for the organisation and where teams come together to collaborate and innovate – basically do all the things that are difficult with a digital interface.’

A survey of almost 1,000 European occupiers conducted by Knight Frank in June found that over half (51%) of businesses are looking to implement a new workplace strategy in response to Covid-19. Almost a third of businesses (29%) said they are considering how their workforce could work closer to home, with under half (40%) having determined that they will require less office space in the future. Only 11% of respondents indicated they would require more space to accommodate social distancing, and only 8% are considering relocating to cheaper sub-markets for space.

Meanwhile, a report from Colliers International covering 14 CEE capital cities forecasts that flexible and hybrid solutions are likely to grow in popularity as office space requirements change. The report suggests that landlords will spend much of the year in ‘challenging negotiations’ with occupiers, as the latter review their real estate strategies. A recent global survey by the firm found that many employees would like to continue working from home at least once or twice per week after Covid-19 has settled down.

Brand identity and war for talent
The role of the office in maintaining a corporate culture and brand identity will also become important post-Covid. ‘I had a discussion with a large corporate recently and they are thinking about conceiving a sort of “house of the company” which mainly comprises collaborative space and a place to welcome clients,’ says Covivio’s Estève. This ties in with survey findings that one of the key functions of the office in future will be as showcase for a company’s brand and culture. ‘A lot of companies are asking how they can maintain a corporate culture in a completely remote and distributed space – it’s an intangible factor but one which CEOs think is really important,’ says JLL’s Carroll.  

For major corporates, the drive to attract young talent is another strong reason for nurturing an office culture and maintaining a high level of workplace amenities. ‘For the last 5-10 years we have seen an incredible race to attract and retain the best talent across a number of industries, often competing in key gateway cities where talent globally was flocking for the opportunity, the culture, the amenity. That war for talent will continue when we come out of the cyclical downturn,’ Carroll predicts. ‘The younger under-35 cohort is so central to driving organisations forward in key sectors like technology and consulting and banking. That group want an office as part of the mix – they see that as a core part of how they want to work going forward.’

Tony Wiltshire, director of workplace and facilities for the UK and Ireland at global PR firm Edelman, which has 600 staff in the UK and close to 70 offices worldwide, likewise highlights the importance of the office to younger workers. ‘An interesting thing, particularly among younger members of staff, is that the office is almost like a “comfort blanket” for a lot of people – they just like to know that it is there,’ he told a virtual roundtable in June on how Covid-19 will shape the workplace of the future.

Overstating Covid’s impact
Prior to the pandemic, Wiltshire explained, Edelman had already been a strong proponent of ‘agile working’ - providing employees with a variety of flexible settings as part of an activity-based environment. ‘The future will actually be much more about agile working than it is at the moment,’ he said. However, he warned that companies should not base their long-term workplace strategies solely on Covid experiences. ‘You can’t base a five- or 10-year property strategy on 11 weeks of craziness.’

In a report published in July, UBS Asset Management forecasts the trend for home working will accelerate but is cautious on some of the ‘more extreme recent claims’ on future workplace strategy as a result of the pandemic. UBS foresees occupiers paying an increasing premium for flexibility, quality office space and for core central locations. ‘There is a temptation to assume that what might work today, could potentially work indefinitely into the future,’ says a UBS spokesperson. ‘In reality the real impact will not be measurable until several years into the future, which makes it very easy for bold claims to be made based on the limited anecdotal evidence currently available.’

One outcome of the pandemic many agree will play a big role in the evolution of the office is the use of technology. ‘This crisis will accelerate the adoption of technology and digitalisation,’ says JLL’s Carroll. ‘The future office will be much more digitally enabled so that teams working remotely will be able to interact with teams in the office in a seamless way. There will be a greater proportion of mobile and remote workers who need to be digitally supported. We will see continued evolution around this.’

‘Collaborative environments will need to be blended with an increased use of technology to enable seamless working in the future,’ concurs Neil McLocklin, head of strategic consultancy at Knight Frank. The firm’s EMEA re-occupancy survey which covered 34 countries in Europe found that 54% of occupiers expect to accommodate less international travel in future. ‘With the use of virtual tools for interaction becoming more prevalent this is now a viable option,’ he says.

Experts believe that in the longer term, occupier demand is expected to gravitate towards technology-heavy smart buildings which are able to support companies’ environmental, sustainable, health and worker wellbeing initiatives. For Covivio as a developer, this means building offices that take all these parameters into account. ‘The challenge is to produce more and more flexible buildings to be able to adapt in real time to the needs of tenants,’ says Estève. ‘Although companies may be taking less surface area, per m² they will pay a higher rent in order to have better and more efficient buildings with a higher level of services. So in the end the challenge for us is to have the right building in the right location.’  

Recessionary impact
Covid aside, the economic fallout from the pandemic is likely to reverberate across markets for months to come, hitting businesses and dampening demand for office space. ‘In many markets we are facing a process of localised lockdowns so it’s very clear we’re not in a post-Covid environment yet,’ observes Carroll. ‘Certainly we expect pressure on companies and in key sectors to continue and that will influence real estate strategy in Q3 2020 and as we get into 2021.’

Key countries across Europe and key markets have had strong fiscal and government support over the past months which has helped to mitigate some of the impact economically. ‘But we’re at the stage where some of that is being phased out and withdrawn so there is clearly more to come in terms of the economic impact across industries,’ he says.

Covivio’s Estève remains optimistic despite the economic headwinds. ‘In terms of the impact from the recession, most of our buildings have long leases, so we hope the consequences for the vacancy rate will be limited,’ he notes. ‘It may take longer to rent a development but the pre-let rate for our committed pipeline is 50-53% which is pretty normal.’

Nonetheless, he predicts a lot of projects generally will be postponed. ‘We are moving forward with our committed projects, following a three-month delay due to Covid which will result in a slight increase in contractor costs although the impact will be very limited.’ Covivio has a €2 bn committed office pipeline, financed mainly from its own resources, ‘and we are very cautious about launching new projects,’ says the deputy CEO.

‘The world is changing fast and you have to be able to adapt your offer and approach more quickly than ever before. The pandemic and its fallout is by no means nearing its end. We are just in the middle of it. There is a lot of uncertainty about the situation globally, so it is important to be in constant dialogue with the market and our clients about what is important for them.’