Covid-19 update: The (Y)OUR SPACE report
Editor Dr Lee Elliott looks at this ground-breaking report’s five key themes in the light of the pandemic and finds them even more relevant to occupiers, investors and landlords
6 minutes to read
The ambition of (Y)OUR SPACE – one of Knight Frank’s flagship commercial research reports – when it was launched eighteen months ago, was to provide insights from the changing global workplace.
With around 50% (3.9 billion people) of the world’s population currently in lockdown, those in employment are active and enforced participants in the world’s greatest ever workplace experiment - an experiment where residences rather than offices have become the dominant place of work.
Against this backdrop, you would be forgiven for thinking that (Y)OUR SPACE has little contemporary relevance. You would, however, be wrong.
The rapid mobilisation of remote working as a corporate response to the Covid-19 crisis has clearly been driven by a fundamental short-term need to keep the business wheels turning.
Long-term implications
Yet the relative success of such a move is likely to have longer-term implications for the way that businesses think about, and structure, their real estate portfolios.
It will lead some to question whether they need office space and many more to agonise over whether they have the right space in the right places for the post-Covid-19 world.
It is in this sense, as a guide to best-practice and leading-edge thinking about the workplace, that (Y)OUR SPACE, and the five themes around which it is structured, has growing, not diminishing, relevance.
Let’s take a brief look at the pertinence of those themes to the future workplace.
Productivity
The first theme in the report – productivity push v2.0 – unpacks a trend evident since around 2010, which sees businesses utilising real estate as a strategic device to support, facilitate or portray transformation.
This behaviour is in stark contrast to the cost and space-cutting attitudes witnessed in the immediate aftermath of the post-2008 global financial crisis (GFC).
When we ultimately emerge from the Covid-19 crisis, business users will need to balance the utilisation of their real estate to support inevitable business transformation requirements (the move towards a greater digital footprint, for example) and the economic pressures generated by the crisis.
A key question for the future form of the workplace will be to what extent do financial considerations take the upper hand? Will business see real estate simply as a cost or something to invest in to drive change, productivity and efficiency?
Next wave technologies
Our second theme highlighted the growing influence of next wave technologies as a source of demand within occupational markets.
The current crisis is all about the development and rapid adoption of such technologies, whether it is innovation in the life sciences to come up with vaccines or diagnostic tests; the repurposing of plant to increase the volume manufacturing of much needed ventilators; or the widespread utilisation of virtual communications technology, such as Teams or Zoom, to enhance connectivity at a time of social distancing.
These sectors, and the companies at the forefront of such innovations, are likely to show growth and generate strong demand for commercial real estate post-crisis.
Corporate constitutions
The third theme within (Y)OUR SPACE was entitled ‘Changing Corporate Constitutions’ and focused on how the structure, culture and constituents of business were changing markedly and influencing the form and function of the workplace.
It is quite clear that most commentators believe the Covid-19 crisis will lead to some fundamental changes in business, government and society.
Talk of re-sets, re-tooling and, in some quarters, revolution, are widespread. What is clear is that business will need to be more balanced in its views of who and what is important to their operations.
The work of front-line employees during the crisis, many of whom have perhaps been overlooked historically, will sharpen focus on more equitable business structures and will increase demand for workplaces that support a broader spectrum of needs. Amenities, which have become such a dominant feature of best in class offices, will need to focus on this broader and more balanced business structure.
The current situation is leading to great debate about the future of the co-working market that has flourished globally over the last five years.
Space as a service
Again, social distancing may serve to threaten true co-working, where staff from multiple businesses work cheek by jowl. But, ‘space as a service’, which was the fourth theme in (Y)OUR SPACE, is likely to flourish post-crisis.
This theme is all about the transition of real estate from a fixed physical product to a flexible business service that is tightly aligned to the realities of the customer and provides them with amenities, services and an experience not associated with the traditional workplace.
Flexibility will continue to be in demand from business users, given the inherent uncertainty of post-crisis periods. Furthermore, as the office competes with home as a place of work, the services and experiences it presents will be part of its allure.
Companies will need to work harder in the environment and experience they provide if they are to be successful in getting staff to invest in their commutes – space as a service will be accentuated by the crisis.
The challenge for the market is how to deliver such a service given the financial crunch currently being felt by many co-working operators and conventional landlords. In our view, the answer will be via a growing partnership between both parties.
Mobility and mergers
The final theme within the report focused on the role of mobility and mergers in underpinning occupational demand. Of course, presently, given the focus on operational and financial resilience by business, the pause button has been hit on the lion’s share of transactional activity.
However, evidence from those Asian markets that went into the crisis first suggests that occupier activity is beginning to return and there is growing attention on creating portfolios fit for the post Covid-19 world.
In our view, this will ultimately lead to a greater dispersal of the corporate portfolio, hence underpinning occupier mobility, as well as the use of both formal and informal workplace settings.
Merger activity has slowed dramatically during the crisis, but many analysts are predicting that the tech titans, which have been generating strong revenue due to the demand for their remote working products, may well go on an acquisition spree imminently and particularly within the tech start-up arena. This will serve to generate activity in global real estate markets over the medium to longer term.
The global workplace is clearly changing.
Rather than the radical or revolutionary thinking that has characterised much popular treatment of the workplace during the crisis, we believe that the post Covid-19 workplace will reflect many of the themes and trends promoted in (Y)OUR SPACE some eighteen months ago.
Far from representing the death of the office, Covid-19 will turbo-charge trends that were already transforming the workplace and which will ultimately reconfigure both space and place in the post crisis era.
Find the original (Y)OUR SPACE report here: http://knightfrank.digitalmagazines.online/your-space-issue-1/p/1