‘Fit for Future’ - Avison Young, realestateworks and HLM Architects launch report on evolving Workplace and Portfolio Strategies

16 December 2020

Avison Young, realestateworks and HLM Architects launch report that assesses the pandemic’s impact on workplace and portfolio strategies in the longer-term.

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 the physical and virtual workspaces.

The survey’s results show how leading organisations are redesigning their workplace and portfolio strategies to be ‘fit for future’, in some cases accelerating existing trends. Corporate real estate directors shared the impact that these trends are having on their strategies, including on workplace design, location, portfolio scale and flexibility, and financial strategy. Their shared insight suggests that the opportunity to cut space has been exaggerated in some quarters and that the move of office space out of city centres is likely to be a more drawn out process.

Workplace design – Making the workplace work

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. 78% 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, 55% expect their workplace to be re-designed and better managed 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.

Location – Right place, right time

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 well-being. 20% of survey respondents anticipate that they will disperse their portfolios to be closer to where their workforce lives and wants to work.

While the majority of organisations are yet to conclude a locational review, a quarter of UK respondents were confident that their city centre footprint would not change. It is likely that ‘central hubs’ with ‘spokes’ and rural satellites will 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.

Portfolio scale and flexibility – More with less

Over half of respondents expect to see a reduction in the scale of their estate, with the majority attributing their intention to downsize their office and retail space to a change in their operating model.

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.

Financial strategy – Bottom line

In the short term, the economic impact of Covid-19 and the recessionary environment is likely to drive the most significant changes. However, 69% of respondents expect increased active management of property related costs to continue post-pandemic and approaching 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.”

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.”

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 insights. 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.”

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