• As More People Return to the Office, Here’s How the 2023 Workplace May Get a New Look

    As employers shift away from remote work and bring employees back to the office, the next phase of pandemic-related workplace design is expected to kick into gear as employers reimagine how and where they bring employees back.

    A new formula for space is emerging as companies shrink their total square footage, swap private desks for collaboration areas and incorporate perks aimed at enticing employees back to physical spaces. And while a crowd of companies was quick to try to offload as much unused office space as they could over the past couple of years, some are beginning to once again reevaluate how much space they need.

    "People are still spending less time in the office than they were before the pandemic, and companies now, especially with rising interest rates, are looking at what they should do with underutilized space as they enter cost-containment mode," Jessica Morin, CBRE's head of office research in the United States, told CoStar News. "Some have tried putting excess space on the sublease market, but other tenants are holding back on putting that underutilized space on the market because there's a fear that they may eventually need it back to support future growth or if they want to increase office attendance."

    If 2021 was the year of operating remotely and 2022 the year of trying to ease employees back to in-person work, real estate professionals say the next 12 months are expected to feature companies investing in long-term real estate decisions as they begin requiring more consistent office attendance.

    Concerns of a potential recession aside, recent statistics show there is a large pool of office tenants reducing their square footage, said Kay Sargent, global architecture firm HOK's director of workplace design. Those tenants fall into one of two categories, the largest of which is filled with companies that leased too much space prior to the pandemic or didn't use their space efficiently and are now taking advantage of the chance to adjust their footprints. The second category, Sargent said, is made up of tenants that "have gone in hard" on remote work.

    Either way, companies are using their office space far differently than they were in the weeks leading up to the pandemic's outbreak. And while there's no guarantee current trends or expectations will hold up in the coming year, companies are now anticipating that workplace trends can change faster than they did in the past and the office may serve a different role.

    "Many companies have embraced the hybrid office and are shifting the way they use space," Sargent told CoStar News, adding that it makes little sense for tenants to pay for office space filled with empty desks and few workers. "The office is now all about using space differently and freeing up space to create gathering, amenity or services spaces that will make it so the office is commute worthy and a better experience."

    Moment of Truth

    If successful, office property professionals say, that investment in an improved employee experience could be a turning point for a national office market struggling against record-high sublet availability, declining leasing volume and a potential economic recession. With about 230 million square feet of sublease space available — a roughly 90% increase compared to the end of 2019, according to CoStar data — CBRE's Morin said the market will probably stabilize in 2023 as tenants near lease expirations and many have already decided how much space they think they need.

    Morin said, "Tenants can't completely reduce the amount of space they have since they also have to account for peak utilization. Companies don't want to over-adjust how much office space they have as they continue to adapt to the impact of hybrid work and want to make sure they have enough space for all of their employees. It is becoming more about having less space for each individual and more for collaborative and shared work."

    Roughly 30% of paid workdays across the country are now done at home, half of what they were during the first year of the pandemic, according to the latest "Survey of Working Arrangements and Attitudes" research conducted by Nicholas Bloom, an economics professor at Stanford University. Bloom said that number appears to have plateaued as employers become increasingly willing to make longer-term commitments to their work schedules and real estate footprints.

    When it comes to remote work trends across corporate America, he told CoStar News, “I think we’ve landed in a much better place. It has been stable for the last six months.”

    That shift to accommodate a long-term hybrid work model is already beginning to translate into more — but far smaller — leases as the office sector kicks off the new year. Morin said the combination between the return-to-office movement and a renewed value on in-person work has helped fuel leasing volume in recent months, even if deals now average about 18% less than those reported prior to the pandemic.

    Yet the emerging focus on smaller, upgraded offices by companies could present a new host of challenges if tenants prioritize pandemic-driven trends rather than how people actually work.

    "Real estate is shifting to be more heavy on communal and gathering spaces, but we're cautioning clients that, when people return to the office, there will be a big emphasis" on what they were missing working from home, HOK's Sargent said, such as socialization, faster internet and no distractions from family members.

    She added that "once that void is filled, people will need to get their work done. Clients that convert all of their space to communal areas will probably think they went too far. It will be a delicate balance to make it so that the office can morph from one function to another."

    More Than Doughnuts

    So what will that look like? For starters, offices in 2023 will be built out to accommodate a range of spaces in which employees can work privately and quietly or with colleagues in a louder, more social environment, office property professionals say. Office designs in the upcoming year will pay more attention to factors such as noise volume and spatial sequencing, such as avoiding the setting up of collaboration stations right next to quiet desk spaces.

    Even more than spatial balancing, however, will be balancing the realities of hybrid and in-office work, Sargent said, especially as more companies try to get employees to return to the workplace.

    "When you think about what you want in the office, you have to consider what you can't get from home," the workplace design executive said. "I can design the most amazing amenities on the planet, but if they're empty, it won't draw employees in. If companies think they can just throw out a box of doughnuts on Wednesdays to get employees back to the office, they're mistaken."

    After nearly three years of working from desks at home and seeing their colleagues' faces in little boxes on a screen, the trendiest office amenity for 2023 isn't expected to be anything like a flashy rooftop lounge or on-site cafe with beer and kombucha taps. Rather, Sargent said, it will be the socialization that comes with once again working face to face and creating a vibrant workplace that is able to boost in-office attendance rates.

    "If I'm returning to an office where I'm all by myself, it will be kind of creepy and I'll question why I'm there," she said. "We have to think about how we spend the time and ensure we're creating vibrancy in those areas — it can't just be empty spaces that feel dead. Once companies have that, only then can they start to think about other amenities or features. But I won't drive all the way to the office for that doughnut."

    Source: www.CoStar.com