As we move away from the once habitual 9-5 office routine, this two-part series by Lewis Silkin LLP explores emerging trends in relation to the future of the office and considers how different organisations are approaching the role of the office in the context of new ways of working.
Introduction - Reimagining the office of the future
With nearly all Covid-19 related rules being removed across the UK (for the time being, at least) and increasing numbers returning to the workplace, the office is moving into a new era – one of transition and trial and error, but also one of stability and optimism. Employers and employees alike are now finally starting to experience their new working lives in full technicolour.
A year ago we wrote an article for the Future of Work Hub, Reimaging the office of the future and considered how the pandemic was challenging established norms and forcing organisations to rethink workplace purpose and office design. In this article, we revisit these ideas and consider the range of different approaches being taken in the market to the role of the office and identify a number of emerging challenges arising from these new ways of working.
In our second article we consider the opportunities for organisations to overcome these challenges and the role the office has to play in meeting the shifting needs of the workforce in the context of the “Great Resignation”.
Emerging approaches to the office over the last 12 months
Hybrid working? Fully remote working? Remote-first? Office based?
Last year, in the thick of a pandemic-induced global homeworking experiment, we considered what place ‘bricks and mortar’ might have in the design of the future office. Twelve months on, it appears that the physical office will remain part of the future workplace for most organisations.
Fully remote working
Although adverts for fully remote working are becoming more common (for example, Irish non-profit organisation, Grow Remote, host a job board of ‘location-less’ employers in Ireland), only a few companies, largely in the tech sector, have decided to go fully remote (in other words, they have disbanded the physical office in its entirety).
Remote-first working
More commonly, organisations across the UK, Europe and the US are choosing a ‘remote-first’ strategy, which means working remotely is the primary option for most or all employees. Unlike remote-only, remote-first organisations maintain a physical workplace of some kind, which is available for certain types of work tasks which are unsuited to home working or for employees who need or prefer a traditional office space. We featured the approach of one remote-first organisation in a recent podcast for the Future of Work Hub.
Fully in-office working
With some notable exceptions, few organisations have opted to return to a fully in-office workforce model. In these cases, employers will still be expected to take a flexible approach to remote working requests, particularly where employees have been successfully performing their roles remotely for the last two years. Organisations who are insisting on a full return to the office are likely to face resistance from both from their current employees and potential future candidates. For example, a survey conducted by Slack found that almost one third of workers in the UK would be less inclined to apply for a job in an organisation who did not offer remote working.
Hybrid working
The clear winner looks to be the hybrid model, with the vast majority of companies seeking to combine the best of both home and office working. Certainly this seems to be the preferred approach among financial and professional services firms. The trend appears to be geared towards allowing employees to make the choice of what works for them. Those who have opted for a hybrid model tend to be focused on making the office a productive/collaborative space. While the hybrid model sounds great in theory, it brings with it its own challenges. According to People Management, proximity bias and the right to disconnect are just some of the challenges arising from hybrid working that HR can expect in 2022.
How has the physical office footprint changed?
Reduced office footprint
The collective ‘pause’ resulting from the Covid-19 pandemic has undoubtedly given companies time to reflect on how they might use the physical office differently going forwards. While some continue to adopt a “wait and see” approach (either by choice or because they are tied into long lease agreements), other occupiers are now making significant changes to office portfolios as they look to embrace new ways of working. For example, Lloyds Banking Group has announced that it intends to reduce its office footprint by 30 per cent in two years’ time in a response to hybrid working, and the results of a survey by accountancy group Grant Thornton indicate that over a third of mid-sized companies in the UK expect to reduce their respective office spaces in some way or another (and in some cases, by up to a half).
Increased office footprint
However, although a pattern of companies using the pandemic as an opportunity to downsize their workspaces and reduce operating costs is emerging, other organisations are going the other way and increasing their investment in real estate instead. Some may feel that this approach is surprising given the turbulence of the last two years, but many also believe that it could pay dividends when it comes to increasing employee satisfaction and creating a positive framework for the future of office work.
Google’s recent move to buy its colourful central London building in Central Saint Giles for approximately $1billion (£871million) and to commit £730million in renovation costs it is just one (albeit quite extreme) example of this, but there has been lots of other market activity too. For instance, it’s reported 40% of the office space within the City of London is now pre-let, with JLL, Allen & Overy and Kirkman & Ellis committing to new office space during the last year and our own firm, Lewis Silkin, has recently agreed to enter into a lease of new all-electric premises at Bankside Yards. All of these examples demonstrate that there is certainly confidence in the future of the office and, indeed, Google's UK boss Ronan Harris told the BBC that Google’s “investment [in Central Saint Giles] reflected the firm's faith in the office as a place of work” and that the main aim of the renovation works is “to reinvigorate the work environment.”
Reconfiguring the office footprint
Elsewhere, other employers are doing what they can to entice their employees back to the physical workplace with headquarter transformations and new office-based perks. US investment bank Citi has announced plans to completely refurbish its 42-storey Citi Tower in Canary Wharf with a renewed focus on wellbeing and technology, whilst high-end soft drinks maker Fever Tree turned half of its Hammersmith HQ into a fully-stocked bar, acknowledging that full time office attendance is no longer a feasible option. As such, it is evident that office footprints are evolving as companies respond in different ways to new forms of working and, as we commented last year, there is no longer going to be a one-size-fits-all approach to the office experience.
Embracing the ‘hub and spoke’ model
One potential change to office footprints which perhaps hasn’t emerged with any real force yet is the wider adoption of the ‘hub and spoke’ model. This model is where an organisation has a primary office ‘hub’ located in an urban area with a network of smaller, local ‘spoke’ offices closer to where employees live in suburban areas.
As we commented in another article for the Future of Work Hub, the hub and spoke model has the potential to foster the best of both worlds in terms of home and office working. Employees could benefit from a better work/life balance with less time commuting to ‘spoke’ spaces coupled with the advantages of a purpose-built working environment, while employers would reap the rewards of lower overhead costs for smaller ‘spoke’ offices and hopefully higher productivity from a less stressed workforce.
But, we have yet to see the ‘hub and spoke’ model really emerge as a template for office working. Darren Mansfield, Partner, Commercial Research at Knight Frank explains that “with the pandemic unresolved, firms will be reluctant to pursue a new strategy without indication of the business environment in which they will be operating.” Indeed, even as more people return to the physical office this Spring, it still feels too early to say with any certainty that the turmoil brought about by the Covid-19 pandemic is set to settle down once and for all. Mansfield goes onto say that one possibility is for flexible office space to provide the hub and spoke model with a lifeline, as “coworking and serviced office providers would be the obvious candidates to create this [hub and spoke] network” in the first instance at least. It may be that this will allow employers to test the waters of the model before investing in longer term leases in ‘spoke’ locations.
How will governments influence the future of the office?
Organisations who are resisting the move to embrace remote working may find it difficult to maintain their stance against it.
Right to request remote working
Many European governments have or intend to introduce a right for employees to request remote working. At the start of the pandemic, Portugal introduced a temporary legal regime for remote working and last year passed a new remote working law. Spain was also an early mover, passing a law on remote working, defined as working from home or remotely for at least 30% of the time within a three-month reference period. At the end of 2021, Ireland reportedly had one of the highest share of remote workers in the continent, with over 20 per cent of people still performing their jobs remotely from home. So it is no wonder that the Irish government followed Portugal’s and Spain’s lead, launching a National Remote Work Strategy in 2021, and as part of that strategy, it has published a draft general scheme on the right to request remote working for employees based in Ireland.
In the UK, employees already have a right to request to work remotely as part of the general right to request flexible working. The Employment Bill is expected to include a new day-one right to request flexible working, including remote work (at the moment, employees in the UK have the right to request flexible working after 26 weeks’ service). It is yet to be seen whether the UK will introduce bespoke legislation to regulate remote working. Although the Employment Bill did not feature in the Queen’s Speech, when published, it will likely form the backdrop to discussions about “new normal” working arrangements as employers look to codify practices.
Outside of Europe, Argentina also adopted new laws regulating all aspects of remote working, including working hours, the employer’s responsibility to provide equipment, and the employee’s right to be reimbursed for expenses.
The right to disconnect
The blurring of lines between work and home life is a well reported consequence of remote working. To combat the negative impact of home working, some countries have introduced a ‘right to disconnect’ outside of working hours. Among the first countries to implement legislation relating to the right to disconnect, were Italy, Spain and France, who famously pioneered measures to create work-life boundaries well before the pandemic in 2016, while Ireland and Portugal were among the first countries to introduce right to disconnect measures in the post-Covid, work-from-home era. While Europe is far ahead of the United States on these matters, similar legislation has been implemented in jurisdictions outside of Europe such as the Philippines, India, and Argentina.
In the UK, there are existing legal obligations regarding working time and health and safety which are relevant to work life balance, but at the time of writing the UK government has no plans to supplement these with a specific legal right to disconnect, potentially becoming an outlier in Europe.
Employee demands for flexibility have increased in recent times, with employees wanting more autonomy to define their own working hours. Added to the reality of cross-border employment, it will be challenging to marry the need to disconnect from work with the freedom to work flexibly and remotely, which on the face of it appear to be inherently incompatible. Len Shackleton, a Professor of Economics at the University of Buckingham, warns that increased regulation of when employees are allowed to ‘connect’, may have the unintended effect of diminishing much of the flexibility of working at home, which has allowed employees to “nip out to the supermarket or pick up the kids and make up the time later”. Furthermore, the effectiveness of legislating for the right to disconnect is questionable. Nevertheless, there has clearly been a fundamental shift in how we view working outside of normal working hours and a call to recognise work-life balance as a legal right.
What challenges lie ahead in the return to office life?
Psychological perspective
An individual’s feelings towards returning to the office will very much depend on their particular experience of remote working during the pandemic.
Flexibility vs isolation
Some employees will have reaped the benefits of flexibility and better work life balance offered by working from home. For others, the experience will have been one of isolation, monotony, and anxiety. Whatever the individual’s experience, employees are also likely to find it challenging to re-adapt to office life and to part with their well-established home-working routine.
Neurodiversity
Different ways of working suit different personality types. Nonetheless, until recently almost all white-collar employees worked normal working hours from a physical office, irrespective of what suited their personality best. Increased flexibility in terms of hours and location of work, accelerated by the pandemic, means that many employees will have an opportunity to explore what works the best for them and the hybrid model will empower many employees to bring more of themselves to work. Employers may find it challenging to coax more introverted employees back into the office, where they have been comfortable working in their own home office with minimal face-to-face interaction. In a survey by MicKinsey, one-third of respondents said their return to work has had a negative impact on their mental health. The Future of Work Hub’s article on Emotional intelligence in the workplace explains the importance of having a neurodiverse workforce - a hybrid model, guided by the individual employee’s needs, may help to support employees with neuro-differences.
Even though the hybrid model is the preferred approach for the vast majority of employees, it will be a new experience for most employees and employers alike. And while flexibility is often claimed to be every employee’s ideal, for personality types who prefer a fixed routine, too much flexibility and change to work environment and schedule might cause stress and anxiety. For others, the daily reality of juggling two workspaces could prove frustrating.
Reinforcing inequalities
The potential for flexibility and hybrid models of remote work effects a minority of the workforce and is concentrated among highly skilled, highly educated, and well-paid employees located in a few regions. An analysis by McKinsey of 2,000 tasks, 800 jobs, and nine countries found that more than half of the workforce, has little or no opportunity for remote work. According to the Office for National Statistics: workers who have access to home working tend to earn more; frontline workers are among the least likely to work from home; and men are less likely to be able to work from home than women. Commentators warn that unequal opportunities for remote work could exacerbate socio-economic and racial inequalities, while emerging divides between remote and in-office workers could lead to increased exclusion of traditionally marginalised demographics such as women and people with disabilities. In his report ‘Eight drivers of change – the future of work’ for the Future of Work Hub, Lewis Silkin partner James Davies predicts that inequality and division will be an emerging theme for the future world of work.
Proximity bias
Extroverted employees who are eager to return to the buzz of the office, might be perceived by their remote colleagues to benefit from having more face time with managers. A common worry amongst homeworking employees is that office-based employees will be praised for making the effort to come into the office and deemed more invested or committed to their work. Michael Smets, professor of management at University of Oxford, believes that a system in which employees can choose to show up more than others can create “artificial siloes and cliques”, meaning that managers will have to ensure “that biases are avoided, presenteeism is not rewarded and projects and promotions are awarded fairly”. We discussed this issue of proximity bias in our article Hybrid working: What are the pros and cons?
Ultimately people’s circumstances and natures are different, so much like the design of the physical office, there will be no “one-size-fits-all” solution for returning to the office. Fostering a culture of empathy and inclusion in the workplace will be crucial to ensure the success of a full or partial return to the physical office.
Social perspective
Emotional impact of transitions
An undesired consequence of Covid rules, such as social distancing, is that it has encouraged people to become more reclusive and anti-social. The return to in-person work and socialisation will represent a major change to many employees’ daily experience over the past two years. Even more extroverted employees will feel out of practice socialising with people outside of their bubble or immediate social circle. They may feel nervous meeting new people and making small talk, especially with changing Covid etiquette around handshakes and mask wearing. Periods of transition tend to increase our anxiety which can make us feel exhausted. Employers should be mindful that the return to the office will be physically and emotionally draining for employees, having to relearn all of the social airs and graces that they haven’t been actively practicing during the pandemic.
Socialisation and belonging
As we discussed last year, corporate culture has been under pressure during the Covid-19 pandemic, largely due to the effects of long-term home working. In James Davies’ report ‘Eight drivers of change – the future of work’, he writes that socialisation and sense of belonging is a major motivation for many to work or to take a particular job for a particular employer. This is one factor driving the return to the physical office. Many employers are eager to bring their people back together in a physical setting with the aim of reigniting employee connection and to encourage idea sharing and innovation. However, rushing headfirst back to work might cause more harm than good and risks employee burnout. Psychologists like Dr Meg Arroll have recommended a slow easing back into our social lives, and the same must go for workplaces. Employers should not overdo the organised social events, at least initially, and to allow for connections to be restored organically through tea breaks and water cooler catch ups, before building up to a team or organisation wide event.
Physical perspective
Repurposing the office
Another challenge created by new ways of working relates to office size and configuration, particularly as existing space may no longer be fit for purpose in its current form. As mentioned above, some companies will be aware that they could make do with less space if their intention is to continue to embrace remote working for a significant part of the working week. But many employers will also realise that they will need to use their workspaces differently than they did before. In particular, the best hybrid workplaces are likely to be those which are flexible and adaptable, and which can expand and contract depending on the number of employees attending each day and the type of activities being carried out.
But while this all sounds sensible on paper, the reality of creating adaptable and resilient workspaces is potentially exhausting and a logistical nightmare for both office managers and landlords alike. If offices need to be frequently re-calibrated to make the best use of space, the time, cost, and energy implications of this may start to take their toll and present further challenges for employers to contend with. Employers may ask: How can we have enhanced amenity and social facilities to help build a shared culture, whilst also making sure the head-down working areas are still of a decent size? How easy might it be for formal client meeting areas to be adapted into genuinely comfortable social spaces on a few hours’ notice? Can we spill out into other areas of the building mid-week when our office is likely to be much busier than on Mondays and Fridays?
Furthermore, it isn’t just corporate tenants who face challenges here. Hybrid occupiers are also likely to cause headaches for landlords, who have been used to only incremental shifts in occupier demand. Indeed, it seems that occupier demand for better, high quality space (from a content and services, rather than just a luxury, perspective) will only increase and that the fervent flight to office quality will continue. In light of this, landlords may be well advised to focus on offering modern, flexible office space filled with services which help occupiers to be more productive when working in their buildings – perhaps by offering wellness solutions or improved digital technology. But, while such ambitions might be easily met by those who own modern buildings, those with older, less malleable assets may struggle to meet the aspirations of occupiers in the new working world.
Concluding remarks - reimagining the office of the future
Reflecting on the past 12 months, it is clear there are challenges to be met on all sides of the debate as office life steps into a new age. However, most of these challenges are temporary in nature, and as workforces get used to new routines and re-learn how to socialise, and employers adapt the office and workplace offering to meet changing workforce demands.
In our second article we will consider the opportunities for organisations to overcome these challenges and the role the office has to play in meeting the shifting needs of the workforce in the context of the “Great Resignation”.
To find out more about the challenges of future work spaces read our Great Office Occupier & Developer Debate series.
This first article in our two-part series was written by Laura Bougourd and Niamh Crotty, lawyers in Lewis Silkin LLP’s Real Estate and Employment practices.