By Robert M. Steeg
I just returned from the 2018 Advanced Commercial Leasing Institute at Georgetown Law School. This two-day intensive seminar is an invitation-only program for 140 attorneys from the U.S. and Canada that covers the latest issues and trends in the industry and the latest lease provisions and techniques to deal with them.
I was treated to several presentations that gave some key insights into the future of real estate in this country and around the globe. It is important for property owners and developers to understand the trends so that they can try to get ahead of—or at least stay current with—the curve. And the curve is moving rapidly.
Commercial Real Estate is a Service
Start with this proposition: Commercial real estate is a service. It is not primarily a product or a physical place. It is primarily a service by which its users—the owners and tenants of properties—can attract talented, productive employees and maintain space that allows them to adapt to rapidly changing conditions and demands.
Trends in Office Space
Let’s focus primarily on office space. Companies today need flexibility. They may need to scale up rapidly, or they may need to scale down. They need space that is adaptable, not fixed.
A major trend in office space is that a worker does not necessarily work in one “office” for all of his or her work day. Instead, the worker may move through several different spaces in the course of a day, depending on the task at hand. This is “activity-based” work space, where an employee does different things in different places throughout his or her day. There are quiet rooms where an employee can concentrate in silence, group spaces for collaboration, conference rooms for collective work across different locations, and open spaces where the energy of the group drives the productivity of each and every employee.
The mindset of employees is changing, and employers are keeping pace and looking for office space that does, too. In a somewhat surprising reversal, many people’s homes are more technologically advance than their offices. That needs to change. The office of the future needs to have full connectivity, and will ultimately be totally wireless.
In 20 or 30 years, maybe sooner, the experts believe that what we currently think of as an “office” will probably not exist. A walled room containing one employee, a desk, and devices like a phone and computer will be a rarity. Open space will predominate—totally wireless, with few or no devices like phones or computers. Instead, computing power will be available on work panels or other similar means that are accessible throughout the various spaces. No desks, but rather many places where a person can connect and access everything needed to do his or her work.
Offices will be close to the employees’ homes, so they can seamlessly move back and forth, working in both. Offices will have more and more amenities so that they are part of the employees’ overall lifestyle, rather than being a place where the employees go to engage in constant work activities for a fixed time period like 9-to-5.
Class C space close to the urban core will be a prime prospect for re-development into the open-space “campuses” that will constitute the office of the future.
This is what the talented employees will want, and this is where they will be most productive. So, this is what the employers will be looking to provide, and this is what owners and developers of office space will need to be able to be able to offer.
“Well” Buildings and Communities
Speaking of employee productivity, there is a parallel movement afoot in the office sector, promoting the importance of “well” buildings and communities. Moving beyond “green” and beyond “LEED,” these are spaces that pro-actively promote the health and well-being of the people living and working there.
The mantra is productivity and value. Healthy, comfortable employees miss less work, think and create better, work longer, and produce better work. Buildings that promote these values will be ahead of the curve and will command higher rents and be more valuable, thus justifying the expense of making a “well” building.
It may sound farfetched, but remember that it wasn’t too long ago that everyone could smoke in their offices, or the idea of being “green” was relegated to a very small (but hip) minority.
Here is an example: “Sitting is the new smoking.” Evidence of the adverse health effects of being seated at a desk all day is mounting, so spaces will promote standing, moving around, and not remaining sedentary.
Another: “Workplace stress is the new second-hand smoke.” Softer lighting, more natural light, more open spaces, more comfortable space, amenities for fitness and nutrition, less noise, facilities for mental health and stress reduction—all of these are components of a “well” building.
The goal is for the workplace to actually have a positive effect on workers’ health and well-being. Productivity follows, and profits follow that.
Ignore These Trends in Real Estate at Your Own Risk
These are the trends in real estate. It remains to be seen how long they will take to mature and how extensive they will be. But to scoff at them or ignore them could be risky. These are glimpses into the future from experts in the field, and the movement toward them seems well-established and building momentum.