Mankind is a slow student, wary of change. But Covid-19 has an impact on our ways that will be prove to be nothing short of ‘historic’. Past decades, the corporate office market stayed much the same. Now, ‘our’ pandemic will even force Commercial Real Estate to rethink their business. And fast.
A couple of days ago, Audrey, our comms manager, asked me if I could write a small piece on how we have prepared our Co.working spaces for the 4 May Grand Reception of residents coming out of lockdown.
Well, we’ve read the ‘Safe At Work’-generic guide issued by our federal Labour Department, looked at and listened to our peers what they were doing, made a company specific guide for our residents, put up posters on the walls and signs on the floor, marked chairs and tables ‘off limits’ and provided gels and wipes.
And that is about all I have to say about that.
Because, guess what? There was no ‘grand reception’. Most people stayed at home. Working. They did not come to their office, even if we took all precautions for them to be ‘safe at work’. And it seems that this will continue for some time to come, no matter what government imposes.
Telework: a shooting star or shining new light?
Past couple of days I have had interesting talks with several of our key residents, amongst who a couple of long standing ones.
Quite a few of them are sitting out the storm. Even though they haven’t seen their work desk for weeks, business may have slowed down, but continued. Others are really struggling because of a dried up cashflow. For one or two this was a catalyst for breaking new ground. Amazing how a crisis can kindle creativity and bring out the best in some of us.
All of them have in common that they have learnt that telework works. The ‘spatiotemporal’ freedom and flexibility suits the modern day workforce. How liberating to be done with commuting, with taking a whole afternoon off for that special delivery, with stressing out to get to work on time for that meeting and back home on time for the kids, etc. How sweet it is to start your work day with a 3 mile run or, heck, in your jammies (a small indulgence every now and then)?
Business leaders who did not think much of telework before, now admit that telework can improve productivity. Whether to trust or keep their workforce under surveillance (see: Linkedin Article @LaurentVanryckeghem, ‘Hidden impacts on the Real Estate sector’), they find that accommodating tools are aplenty. Honestly, do you know how many video conferencing apps there are out there?
Traditional CRE providers may not yet feel any heat. Their long-term leases may give them a sense of security. Some believe that workers are dying to get back to the office. Some think that “at least in the short term, the need for social distancing will reverse commercial real estate’s “densification” trend, which for years saw more people crammed into smaller spaces” (See article of D. Thomas and S. Morris, ‘The end of the office? Coronavirus may change work forever’, in Financial Times of 1 May 2020). From the looks of a PwC survey conducted end of last month, this may seem true: “49% of CFOs say remote work is here to stay for some roles, as companies plan to alternate work crews and reconfigure worksites” (https://www.pwc.com/us/en/library/covid-19/pwc-covid-19-cfo-pulse-survey.html).
Question of the day is: where will those remote workers work?
A challenge for shared workspaces? An opportunity!
That is today’s playing field.
Business leaders see an opportunity to reduce costs and free up a bundle of work capital. Typically, CRE represents a big chunk of a company’s cost base. Institutionalizing telework holds the possibility to cut that cost drastically, and to shift economic risk to the landlord. Such cost cut is very welcome in these times of economic stand still. Even more: it could save jobs. So, chances are slim that businesses will just get more traditional office space.
Working from home works. But it does not offer the thing that most people value most: social contact. And I mean with others than partners and toddlers. Having a daily digital coffee moment is fine. But after 8 weeks, it seems we always talk about the same things. Every now and then, we want to be physically close to others in a professional environment. Body language and facial expression make up for more than half of a conversation, and with video, it is just not the same.
Which leaves the serviced office market, with an edge for those workspaces with a community spirit. There is a large group of CRE leaders who believe that this crisis is a tipping point for the demand for flexible (‘agile’) workspace.
When the markets will reopen, demand is expected to bounce back quickly. It is also expected that a lot of businesses won’t make it. Indeed, we will hear more Uber and Airbnb stories alike, I am afraid. And that will leave a lot of empty office space.
Today, serviced office space is 2 to 3% of the professional real estate market. Before covid-19 some said that this market share would go up to 30% by 2030. The same say that covid-19 will accelerate that process. This can only mean that a large part of the traditional real estate market will have to be transformed.
Now there is a challenge for traditional CRE providers. They are used to wining and dining, and getting the contract signed. And you will hear from them again when your lease is up for renewal. They are not used to keeping the coffee machine filled and the office temperature under control. Getting in short term community memberships and holding on to them takes a lot more than catching your client at that classy reception downtown.
In this race, flexible workspace operators have a head start. But that does not mean that we will get rich sleeping.
Shape up or fade away
Some of the Co.Station residents may sit out the storm, but covid-19 surely has made them to also sit down and run the numbers. Their conclusions?
They need fewer workstations, and enough office space to be safe at work. Moving them to another office may be a quick first fix, but is not a structural solution. In the long run we will need to change the floorplan.
They also expect to pay less. If the lease of your coworking space is fixed for some years to come, this means changing the business model: on the one hand super flex formulas for small businesses with a standard service package, and on the other hand premium bespoke offices with custom services for corporates. Do you provide floorage or workstations? How do you (re-)arrange common spaces?
Diversifying services and offering custom amenities means a solid administrative follow up. If you don’t want to loose money, you will want to know who has been where and for how long, and what they took or used. This will require more manpower or…looking into smart office building solutions.You will also want to stand out from the coworking space crowd. You will need a clear vision, and one or – preferably – more unique selling points. Co.Station, for example, focuses on creating open innovation communities. With teams rotating and super flexers entering the work space quite irregularly, the community also needs to go (even more) virtual. This means installing the right digital platform.
Marketing and branding will be much more so important. You can double each euro spent wisely on smart targeting and reputation building.
These are just the things on top of mind. It is clear that it will not be ‘business as usual’ for CRE either. The corona-crisis is disrupting the flexible workspace market. The front runners have understood this and are leading a ‘global reset’ of our business.
The future of our workplace will also be a subject of Co.Responsibility, a Co.Station initiative to assemble 20 companies and “co-create future proof solutions for people and business beyond covid-19”. I for one am very curious to see what those companies have experienced and what they propose to deal with this in the post-pandemic era.