The future of the office - June 2021 Amber Schiada Senior Director, Research
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The future of the office June 2021 Amber Schiada Senior Director, Research JLL Los Angeles © 2021 Jones Lang LaSalle IP, Inc. All rights reserved.
The future of the office is not a binary equation – there are
many factors influencing the future of office work
Future demand impact more complex with a
Current conversation is too simplistic…
broad mix of factors at play…
Increase in
work-from-home Innovation Culture Collaboration Productivity
Decrease in
Employee
demand for recruitment
Automation Return on Risk
and offshoring investment management
office space and retention
Economic Vaccine Government
growth development De-densification
guidelines
Housing Work-life Commuting Environmental
affordability balance patterns impact
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved. 2Observed and projected U.S. office re-entry timeline
December 14, 2020: first Most organizations encouraging
100% COVID-19 vaccine employees to return to the office Share of pre-COVID
8% Metropolitan region
administered in the U.S. near Fourth of July or Labor Day
15%
occupancy
90% 20%
30% Austin 43.3%
80% 40%
45%
50% Houston 42.9%
70%
65%
75% 75%
70% Dallas 43.3%
60% 80% 80% 80% 80%
Occupancy level (%)
85% 85%
90% Philadelphia 27.2%
50% 98% 98% 96% 96% 95%
92% Los Angeles 24.4%
85%
40% 80%
70% Washington, DC 23.6%
30% 60%
55%
50% Chicago 23.3%
20%
35%
25% 25%
30% New York Tri-State 17.0%
10% 20% 20% 20% 20%
15% 15%
10% San Francisco Bay Area 15.6%
2% 2% 4% 4% 5%
0%
U.S. average 27.8%
Note: includes non-desk-using employees, such as janitorial and mail room
staff, which reported to the office throughout the pandemic.
In Office
Companies are generally targeting Q3 2021 for large-scale employee re-entry
Source: JLL Strategic Consulting Group survey of Fortune 500 office users, WSJ, McKinsey & Co., Kastle Systems 3JLL occupancy planning survey highlights
51%
of companies plan to expand work-from-home policies
94%
of employees want the option of returning to the office
#1
diminished culture is cited by employers as the #1 reason to
return to the office
Remote work will provide greater optionality for employees but COVID’s disruption of habits will gradually diminish
Source: JLL Workplace Survey 4Corporate workplace strategies
“Work from
Office-centric Office-first hybrid (mainstream choice for most organizations) Fully remote
anywhere”
“Our new way of working will “Dropbox is becoming a ‘Virtual
“Working from home is an “Remote work isn’t “Coming together in “We’re a fully distributed
empower employees to design their First’ company… remote work
aberration that we’re going to sustainable – we need person to collaborate and company – all of our
own working week. The pandemic will be the primary experience
correct as soon as possible… colleagues to be office- build community is core to employees work remotely and
has proven it's not about where you for all employees and the day-
it’s not a new normal” based” Google’s culture” will continue to even after the
work, but how you work” to-day default for individual
– David Solomon, CEO – Jes Staley, CEO – Sundar Pichai, CEO pandemic”
– Jon Holt, CEO work”
– Steven Galanis, CEO
– Drew Houston, CEO
“We believe there is value in
“I can’t wait for everybody to be “We’ve been investing in our “Employees don’t have to
“I don’t see any positives to “We believe most of us benefit employees being together in
working from home” back at the office – there’s no the workplace” technological capabilities for choose between staying close
by being physically together” replacement for face-to-face years to transition quickly to a
– Reed Hastings, CEO – Kathleen Hogan, to their families or pursuing a
– Charles Scharf, CEO collaboration” work-from-home model”
Chief People Officer career they love”
– Tim Cook, CEO – Kirt Walker, CEO – Barbie Brewer,
Chief Culture Officer
“Real estate is where our “Our plan is to return to an office-
“I’m about to cancel all my Zoom “The firm has been performing extremely “We will provide alternatives, enabling “We've committed to having no
heart is, and we are staunch centric culture... we believe it enables
meetings – I’m done with it.” well under remote working conditions – our employees to work closer to clients HQ, and it’s important to show
advocates of the importance us to invent, collaborate, and learn
– Jamie Dimon, CEO and colleagues, as well as reducing our decentralized workforce that
of the office” together most effectively” we expect that less space will be
required in many of our offices ” commute time, travel costs and our no one location is important than
– John Gates, Markets CEO – Andy Jassy, Incoming CEO
– Michele Farquhar, carbon footprint” the another”
Managing Partner – Andy Halford, CFO – Brian Armstrong, Coinbase,
CEO
Executives are defining office culture and real estate requirements on a spectrum
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved.The pandemic accelerated relocation and expansion decisions
Cost savings and greater talent acquisition are main motivators
Microsoft
Palantir
J.P. Morgan
Oracle
Tesla Liberty Mutual Mercedes Benz
Hewlett Packard Google
Honeywell
CBRE Papa John’s Goldman Sachs
Healthpeak Properties
Elliott
Starwood
Icahn Enterprises
Source: JLL Research
Pro-business and low-cost-of-living markets have benefitted from corporate migration
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved. 6Migration shifts are occurring throughout the U.S.
Corporate and talent movement to new markets is being driven by several factors
Affordability Quality of life Health & Safety
Business environment Taxes & governance Culture & amenities
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved. 7More households are moving out of California than
moving in, but the trend isn’t new
California Household Migration Trends
15,000
10,000
5,000
0
-5,000
-10,000
-15,000
California Inbound HHs California Outbound HHs California Net
Source: JLL Research, Atlas Van Lines 8Apartment rents reflect shifting demand from high-cost
urban markets to emerging markets and suburbs
12%
Urban Suburban 9.8%
10%
8.5%
7.5% 7.6%
8%
6.5%
YoY change in apartment rents Q1 2021
5.7% 6.0% 6.0%
6% 4.7%
4.3% 4.3% 4.0%
3.7% 3.9% 3.6%
4% 2.7%
3.2%
2.7%
2.3% 2.3%
1.5% 1.5%
2% 0.9% 1.1%
0.3% 0.4%
0%
-0.5% -0.3%
-0.8%
-2%
-4% -3.0%
-3.7%
-4.4%
-6%
-8% -7.7%
-7.8%
-10%
Source: Zillow
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved. 9Remote work will expand, but won’t decimate office demand
What do you expect will be your company's
future office space needs?
47%
Expect to use about the same amount of space post-COVID
We will need a lot more space
4% (an increase of more than 20%)
7%
23%
We will need a little more space
(an increase of 20% or less) 23%
Our company will need the same Expect to significantly reduce the size of their office portfolio
amount of office space
19%
47%
We will need a little less space
(a reduction of 20% or less) 11%
We will need a lot less space
Expect to expand their office footprint to accommodate growth and
(a reduction of more than 20%)
provide greater distancing
Workplace strategy will vary by industry, company and job function, with back-office roles more suitable to long-term WFH
Source: JLL Research survey of 98 senior CRE corporate decision makers
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved. 10The essential role of the office
Business and/or personal need Key considerations
• Office space is essential for services-sector companies like law firms and banks to project a powerful image
Projecting brand image • Consumer brands often use office space to serve as a showcase for their products
• Meeting spaces in offices are critical for generating and executing business.
• Studies show that innovation is driven by collaboration and unplanned encounters at the office (“collective brainstorming” and
“creative collisions”)
Innovation and culture
• Bureau of Labor Statistics data shows the number of employees working partly or primarily from home dropped by two percentage
points year-over-year, driven in part by high-profile rollbacks of WFH programs by the likes of Aetna, Bank of America and IBM.
• Over 90% of employees want the option of working in a physical office space
Talent attraction and retention • Office space can help lure “engine room” talent, which may lack a suitable home office; according to studies, young employees
are likely to move jobs up to 15 times in their career.
• 84% of IT professionals say data loss is a significant concern given more people temporarily working from home
Protecting intellectual capital
• Lack of physical safeguards and reduced compliance in following IT procedures increase the risk of losing proprietary data.
• Social events and professional development programs facilitate team-building and career growth
Culture and socialization
• Personal bonds help improve employee engagement, teamwork and comraderie.
• Distractions at home may divert attention from work tasks and inhibit productivity
Productivity and boundaries
• Mental health professionals cite the lack of physical separation between the home and office as a source of stress.
The physical office serves a profound purpose in meeting personal and business needs
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved. 11Aggregate office demand is expected to decline slightly,
but with a wide performance spread across the market
Offsetting forces impacting demand Top quality well positioned assets expected to
significantly outperform
6%
Expected shift from 10% to 25%
WFH, with potential reversion
-10% given likely impairment to 4%
productivity and innovation Differentiated assets
2% Historical
performance
40-50% of employees could spread
Demand index
0%
end up in hybrid work mode, Wider
-10% spending some time in the Future
office and some at home -2% performance
spread
-4%
50% of tenants are planning Commodity/
permanent space redesign, with -6% Functional
+8% Undifferentiated assets
de-densification and more obsolescence
collaboration space
-8%
5-8% office employment growth -10%
+7%
from previous peak by 2025
-12%
Pre-2020 2020 2021 2022 2023 2024 2025
© 2021 Jones Lang LaSalle IP, Inc. All rights reserved.Thank you © 2021 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.
You can also read
