HOW THE CHANGES IN WORKPLACE IMPACT ON REAL ESTATE MARKET IN THE UK MARISTELLA ARIFI by MariStella Arifi

HOW THE CHANGES IN WORKPLACE IMPACT ON REAL ESTATE MARKET IN THE UK MARISTELLA ARIFI

MSc Real Estate Development Westminster Business School

Acknowledgements This dissertation has been conducted at the University of Westminster in London and constitutes the final element for the MSc programme in Real Estate Development. During the writing of this dissertation, I have received a great deal of support and assistance. First and foremost, I would like to acknowledge my supervisor Haris Middleton, Senior lecturer for inspiring my interest in the workplace real estate strategies and has been a support throughout the writing process. I am very grateful for the commitment and constructive feedback she has given me during the writing of this research. Furthermore, I would like to thank all professionals, who have taken their time to be interviewed for this dissertation and providing me with their expertise and knowledge.

Abstract The purpose of this research is to conduct an in-depth analysis of the impact of workplace changes on the real estate market in the United Kingdom. The research objectives analyse the changes in office properties

and

the

factors

that

contributed

these

changes.

Furthermore, this study explores the trends, amenities and services which including within workplaces and has as ultimate purpose to define the future office market and its demand. This dissertation followed an inductive research approach and adopted the interpretivism philosophy. This study used the triangulation research method, which combines quantitative and qualitative analysis and offers the opportunity to be used multiplies different sources both primary and secondary data. These include a comprehensive literature review, semistructured interviews and two case studies in order to increase the validity of the research. The key findings have shown that the constantly changing nature of the way that people work, sharing economy, agility, sustainability, technology and wellness have to change workspace over the decade. The research also provided proof of the main impacts on the real estate industry of all these changes. Overall, the research reveals the major effects which are summarised to the decreasing of office leases, the changes in workplace design, the addition of various desirable amenities and services. In conclusion, the principal finding of this research indicates that the role of the commercial office real estate industry is to decode the demands of workers and businesses and transform the workplace into a place

that

adapts

the

changing

demands,

aspirations

and

expectations of the demand of both end-users and customers. The contribution of technology is mandatory in order to support these

changes. The future office property portfolio will look the same as a network of digitalized workplaces.

iii

Declaration I hereby certify that all material in this dissertation which is not my own work has been identified through the proper use of citations and references. I also confirm that I have fully acknowledged by name all of those individuals and organisations that have contributed to the research for this dissertation, or that their participation has been anonymised if confidentiality applies. I further declare that this dissertation has not been accepted in part or in full for any other degree, nor is it being submitted currently for any other degree. The dissertation contains 17,865 words, exclusive of diagrams, tables, bibliography and appendices. I confirm that a copy of this dissertation may be made available to future students of the University of Westminster. Student’s name………………………………………………………… Student’s signature…………………………………………………. Date of declaration………………………………………………..

vii

Table of contents Abstract ..................................................................................... ii Declaration ................................................................................ iv Table of contents......................................................................... v List of Figures ........................................................................... vii List of Tables ............................................................................ vii Introduction ............................................................................... 1 Research Aim ........................................................................... 2 Research Objectives .................................................................. 2 Research question .................................................................... 3 Research rationale .................................................................... 3 Literature Review ........................................................................ 4 Introduction ............................................................................. 4 Overview of the office market .....................................................4 Factors that affect office spaces ..................................................7 Changes in workspaces and new trends ..................................... 11 Corporate Real Estate Management ........................................... 14 Impact on real estate .............................................................. 15 Future workplace .................................................................... 22 Research Design and Methodology ............................................... 25 Introduction ........................................................................... 25 Conceptual Framework ............................................................ 25 Research philosophy............................................................. 26 Research paradigm .............................................................. 28 Research approach ............................................................... 29 Research Strategy .................................................................. 31 Research Tools .................................................................... 32 Research Design ..................................................................... 35 Selection of data .................................................................. 35 Design of research tools........................................................ 37 Data Analysis ...................................................................... 38

Ethics ................................................................................... 39 Results and Interpretation .......................................................... 40 Introduction ........................................................................... 40 Case Studies .......................................................................... 40 Case study 1: Bloomberg’s new European headquarters ............ 41 Case study 2: We Work ........................................................ 49 Results of the interviews .......................................................... 57 Today’s office market demand ............................................... 57 Changes on workplace .......................................................... 59 Drives of those changes on workplace ..................................... 60 Impact on the real estate industry .......................................... 62 The Future workplace ........................................................... 65 Conclusion................................................................................ 68 Limitations ............................................................................... 74 Further work............................................................................. 75 References ............................................................................... 76 Appendices ............................................................................... 90 Appendix 1 – Interview Questions ............................................. 91

List of Figures Figure 1: The research process ‘’onion'' ........................................ 25 Figure 2: Bloomberg's office façade.............................................. 41 Figure 3: Bloomberg’s office floor plan level 6 ............................... 46 Figure 4: Bloomberg’s office section ............................................. 46 Figure 5: Sustainable solutions .................................................... 47 Figure 6: Ramp ......................................................................... 47 Figure 7: Desks design ............................................................... 48 Figure 8: Communal areas .......................................................... 48 Figure 9: Private office – Standard ............................................... 55 Figure 10: Private office – Office suites ......................................... 55 Figure 11: Private office – Headquarters by WeWork ..................... 55 Figure 12: Hot Desk................................................................... 56 Figure 13: Dedicated desk .......................................................... 56 Figure 14: Labs desk ................................................................. 56 Figure 15: Office layout demand .................................................. 57 Figure 16: Desirable amenities .................................................... 58 Figure 17: Most significant changes on workplace .......................... 59 Figure 18: Ranking of importance of drivers .................................. 60

List of Tables Table 1: Research philosophies................................................... 28 Table 2: Research approaches ..................................................... 30 Table 3: Comparison of research methods .................................... 31 Table 4: Description of participants .............................................. 36

List of Appendices Appendix 1 – Interview Questions ................................................ 91 Appendix 2 – Interview participants transcripts .............................. 93

vii

Introduction During the last decade, the way that people work has changed significantly in a lot of aspects. Essential changes in economy, technology, and corporate behaviour have influenced the way that corporates approach their real estate decisions More and more business become complex and volatile as a result, companies and organizations seek agile strategies in order to rapidly set up again their business and support functions with the ultimate goal to create and protect value. Nowadays, the workplace is undergoing a revolution in reorganisation and innovation. Office market or ''workplace'' as known today is under revolutionary changes. All types and sizes of organizations and companies are avoiding traditional office solutions. On the contrary, they are now giving attention to open, flexible and activity-based spaces which give the opportunity to achieve higher degrees of efficiency and cost-optimization. Findings of recent researches have shown that in the past large-scale office buildings was a prestige for business and it was reflecting its successful. At present, this idea has changed totally and more and more companies drift apart from the traditional office model. In the last yeats, flexible workplaces have become a common solution and its demand has increased considerably. In the UK, 15% of employees work from home and 54% of employees now spent many hours working somewhere else expect their companyâ&#x20AC;&#x2122;s main office locations. (Regus, 2018) Traditional office work is giving way to a new vision that, in turn, is leading to new considerations about office buildings and designs. Organizations and companies are aware of how workplace affect people and have recognised that taking care of their employees they can benefit significantly. The three key aspects of the design of a workplace are communication,

collaboration

and

interaction.

Consequently,

the

traditional large office buildings of the past have turned into less

practical for Millenials. Social hubs and Hot-desking shared workspaces are demonstrated to be attractive on the present day. Due to the fact that the work environment is in constant progress real implications affect the real estate industry. This alteration from traditional offices to flexible workspaces represents challenges and opportunities for landlords, who changed their tenant requirements in order to ensure the protections of their investments. Moreover, property owners increased the flexibility of their leases and make them more attractive to potential tenants in order to cover the needs and trends of the new market. (Regus, 2018) Property owners, occupiers and service providers are looking for new models based on agility in order to provide highly

effective

workplaces,

differentiated

assets

and

optimized

portfolios. (CBRE, 2018)

Research Aim The aim of this research is to clarify several aspects of workspace and its impact on the UK commercial office market. The main purpose of this dissertation is to investigate the main changes in occupier businesses, which have an impact upon the demand for office properties, and eventually in the entire commercial office market.

Research Objectives Further to the primary research question which focuses on finding out the results of workplace changes in the commercial office market, this research tries to address and find answers to the following objectives: 1. To provide an overview of the UK office market. 2. To discover the changes in workspaces and analyse the new trends and demand of the office property market. 3. To establish the reasons that contributed to the changes in office spaces. 4. To assess the impact of these changes on real estate and the consequences for landlords

5. To identify what the future holds for the office market. The key purpose of this research is to contribute to the accomplishment of these objectives. This will be achieved through observations from the analysis of both primary data and secondary data.

Research question The key research question of this dissertation is: How the office market has changed and how it will be in the future?

Research rationale There is a gap in the research of an assessment on the impact of the changes in office spaces in the UK. Heretofore, many types of research have focused on the impact of the working environment on employees' productivity, employees' motivation, employees' management and companies. Nevertheless, there is not thoroughgoing evidence on impact into the commercial office market and the overall impact into the real estate industry.

vii

Literature Review Introduction This chapter of the research provides a theoretical framework for the study. This includes a review of the previous academic research findings and literature related to research aim and objectives. These reviews will critically appraise a range of viewpoints and research approaches relating to the following topics headings: •

Overview of the office market

•

Factors that affected workplaces

•

Changes in workplaces and new trends

•

Corporate Real Estate Management

•

Impact on real estate

•

Future workplace

Overview of the office market History of Office spaces Back in the past, the first office space established in ancient Rome as a place where conducted work and related spaces existed in some form over the centuries. Before that time, lots of people worked from their own workshop, home or on the farm. By the end of the eighteenth century, due to the upcoming of the industrial revolution and with the British Empire, which helped to expand and engage an increasing level of trade with other parts of the empire, was developed the first office building. The first office building in the UK, known as ''The Old Admiralty Office'' was constructed in 1726 in London(Mansson, 2018) At the beginning of the 1990s, Frederic Taylor created a work method called Scientific Management purposed to provide high performance, efficiency and discipline. People were considered a potential source of error and work needed to become standardized in order to contain this

error (Stallworth & Kleiner, 1996). The key characteristics of this method were order, hierarchy, supervision and depersonalization and due to the standardization, offices transformed into large, open spaces with unified workspaces. In this work model, people that are higher in the hierarchy of the company did not need the supervision, as a result, they had their own enclosed offices. (Bell & Anderson, 1999). In 1930 was originated the Human Relations movement as a response to the Scientific Management. (Voordt & Meel, 2002). As a consequence, the work environment turns into a place for socialising. The key aspects were the employees' needs and their influence on productivity. (Stallworth & Kleiner, 1996). This movement was predicated on the idea that people do not work only for economic reasons as well as for social contacts and a pleasant working environment could support this goal. (Voordt & Meel, 2002). Following World War II and the followed rapid economic growth, the target gave attention to the working environments that enhance employees' productivity. More often people needed office place and new types of workspace created. In 1959, Peter Drucker introduces the term knowledge worker and the office. The office work becomes more knowledge-based

and

two

new

office

types

were

introduced.

(Davenport, Thomas, & Cantrell, 2002). The first one was the cell office, where employees got their own or shared office based on their place in the hierarchy of the company. The second was the office landscape created in 1960. (Duffy, 1997). The large open workplaces from the Scientific Management are turned into open offices where furniture and plants create semi-enclosed spaces and more privacy (Bell & Anderson, 1999). In 1980, following the development of personal computers and cell phones a new nature of working created. Work became more individualistic and created the need for contact with colleagues. It has

resulted in the creation of the CoCon-office (COmmunication and CONcentration) aiming to support both needs that came with this new way of working (Appel-Meulenbroek, Groenen, & Janssen, 2011). Fundamentally, CoCon-office is the combination of the cell and open plan office. Accordingly, this covered the needs for privacy and quiet and gave the possibility to change the employees' workspace in accordance with their current activity. This type of office is the precursor of the activity-based office, in which different workspaces are situated and nobody has an assigned space anymore. (Mansson, 2018) In 2000, employees have become more mobile because of the progress of technology. Portable computers, Wi-Fi and mobile phones do no need cabled to be tied down. Throughout the last decade, offices with openplan layout predominated and gave the opportunity to employees to avoid isolation of cubicles and activities on work became more free, interactive and collaborative. Todayâ&#x20AC;&#x2122;s demand Throughout the last decade, two new trends have started to become increasingly attractive: hot-desking and co-working. The rising number of freelancers and people who work part-time has contributed to the increasing demand for flexible office spaces and creative collaboration. (Mansson, 2018) Moreover, a new term has followed the open-plan workplaces and this is ''dynamic spaces'' At the present, designers follow the demand of this types of office spaces and create spaces that characterised by the ability to transform quickly and adaptable suit on constantly workers changing needs. Dynamic space consists of easily movable furniture like dividers or temporary walls that have simply moved fixtures inside. Therefore, spaces can quickly and easily transform from a semi-private area to a meeting room or to a conference centre.(Catalano, 2018)

Factors that affect office spaces Several different trends affect significantly the commercial office market. Factors found to be influencing UK office market have been explored in several studies. The following pages describe thoroughly all factors that have contributed to the office market in the UK in the last years. The changing nature of work The key factor that affected office spaces is that changing nature of work. In modern times, a successful working environment should cover the needs of today's and future workforce, which consists of Millennials. By 2025, Millennials will comprise 75% of the global workforce, as a result of their point of view for workspace is essential for the current design discussions. A number of researchers have reported that millennials characterise the office as a work tool and not as a symbol of hierarchy and consider the physical workplaces more than a desk and the furniture. (Consulting, 2018) Consequently,

companies

have

transformed

into

networks

freelancers, employees, contractors and clients located all over the world. The major part of the workforce still commute to the office but an increasing number of them are willing to work from different places such as home offices, clientâ&#x20AC;&#x2122;s offices, satellite offices and co-working spaces. Organizations offer a variety of alternatives places and ways of working that incorporate innovative configurations, new practices, and locations. (Knight Frank, 2018) Therefore, companies have adopted the different work styles and expectation of young people. Recent developments in workplaces have heightened the need for less traditional styles and more dynamic spaces, unconventional office solutions and flexibility and giving at the same time the option to work in alternative locations. Over the past decade, there has been a dramatic change in character and the location of the

workplace owing to flexibility and collaboration. The individual desk â&#x20AC;&#x201C; offices have transformed into spaces that cooperation and share information is essential. (Knight Frank, 2018) Sharing economy In the new global economy, sharing economy has become a central issue for affecting office market. Sharing space with other working people from another field, industry or company is a phenomenon that has evolved the sharing economy for workplaces and offices. (Baum, 2017) In recent years, there has been an increasing interest in sharing space with either colleagues or other unknown workers. This trend has affected the work environment within traditional workspaces. Nowadays, activity-based working is a common way to work and this concept has increased a lot mainly in the London area. This provides freedom and flexibility to the employees and they have the opportunity to choose a particular setting that fits better with their needs and work pattern. Consequently, this idea was incorporated into the various sector of the economy and real estate market.

The past decade workers had the

choice to rent or lease objects owned by other people. Moreover, there was

the

opportunity

encounter

and

lease

space,

accommodation, vehicles or even products. The definition of sharing economy into the office market is an influx of freelancers, co-working spaces or sharing office equipment. This solution gives the ability to organizations and employees to react and change quickly. (Knight Frank, 2018) Agility Agility is critical in an unpredictable environment and adaptive companies will perform best. Agility implemented firstly by IT companies, which have the characteristic to divide tasks into short phases of work, reassessment regularly and adopt new plans. This idea was created in IT companies because in this way create IT solutions.

(JLL, 2018) Agility is a flexible working tool that creates a flexible and productive environment. Agility leads to many new flexible ways of managing the workload that requires strong cooperation with the clients. However, agility had vast success, as a result, more and more companies and organization from various sectors followed this idea. Hence, this approach belongs to one of the most popular ways of project management and agility is one of the factors that have affected workplaces. (Knight Frank, 2018) VUCA VUCA means Volatility, Uncertainty, Complexity and Ambiguity. VUCA describes the wat that companies and organizations should operate and the way that people should perceive a condition, make decisions and solve problems. In other words, it is a reflection of the changing conditions, which companies should cope with today. A large amount of data and information from the entire world is generated and exchanged in unexpected pace. As a result, VUCA impact on all business areas and therefore commercial office market. (Knight Frank, 2018) Sustainability In recent years, environmental awareness is an important aspect of every society. All companies and organizations have sustainability in their tops priorities and more and more developments have a high level of sustainability. Landlords should enhance the energy efficiency of buildings and at the same time lessen the negative influence on the environment. (Knight Frank, 2018) The improving of sustainability can create a â&#x20AC;&#x153;premiumâ&#x20AC;? that is generated by lower operating costs, higher occupancy rates and accordingly higher rents. (Norges Bank Investment Management, 2015) Technology â&#x20AC;&#x201C; Internet Another factor that affects the office environment as a whole is the progress of technology and internet access. According to CBRE (2017a),

technology has a significant impact of how the occupiers use and handle their office space. Harris (2016) mentions that technology is used to help companies to enhance connectivity and at the same time provide options and flexibility to their employees. (Harris, 2016) It must be noted that digital innovation has affected all commercial office properties because the developments of workplaces are driven by technological progress. (CBRE, 2017b) Internet access provides freedom to employees and gives them the ability to work from different locations with laptops and wireless.(Kojo and Nenonen, 2017) This movability which caused by the new technology and the possibility to keep connected have transformed the way people work today accordingly change office properties. Technology and digital disruption provide an immense opportunity to transform workplaces and office environments for the benefit of employees and companies, in the final analysis, improving profitability. (Deloitte, 2019) The rising of telecommuting has led to less need for conventional office space. During the past twenty years, the use of technology for the purpose of communicating, storing and managing data from remote work has been rapidly increased. (Knight Frank, 2018) Furthermore, the progress of technology has enabled an unprecedented escalation in the low consuming buildings, establishing a new era of â&#x20AC;&#x153;smartâ&#x20AC;? buildings. (Norges Bank Investment Management, 2015) Effectiveness, Wellness and wellbeing A number of researchers have reported that built environment and workspace affect significantly employeeâ&#x20AC;&#x2122;s productivity and recently investigators have examined the effects of offices on employees in order to get a greater understanding of this topic. Recent evidence suggests that user experience is important in order to make each employ more comfortable, happy and productive. Despite a typical day in the office still means sitting for many hours without any little physical activity,

active and healthy lifestyle plays an important role in office design. Nowadays, property owners try to provide fitness spaces in every office building to help combat these health challenges. (Driscoll, 2018) Nowadays, wellbeing is an integral driver of workplace design. Recent developments in the UK have heightened the need for spaces within office properties, which include an assortment of other shared collaborative and third spaces. today's companies across all industries have recognized the value found a healthy and happy workforce. As a result, workplaces have become more a space for socializing and coincidentally meetings with co-workers rather than just a space that focuses merely on productivity (Waber et al., 2014)

Changes in workspaces and new trends Design of workspace The present officers have designed intending to take into account diverse

work

styles,

preferences

and

approaches

which

can

accommodate four generations of employees concurrently. The design concept of todayâ&#x20AC;&#x2122;s workspaces characterised by three key features: versatility,

autonomy,

and

collaboration.

well-designed

office

increases the productivity of the employees and fosters higher retention rates. At the present time, workspaces with a vivid-mix of collaborative spaces, individual areas and quiet rooms are becoming increasing frequency. This new mix of spaces on office properties give people the opportunity to change their environment during a working day, as a result, they do not feel locked into one area. (Knotel, 2019) Smart workplaces Offices are becoming increasingly ''smart'' and more and more spaces and resources are controlled and improved. A new remarkable trend in most office spaces today is sensor technology. Nowadays, offices are integrating high-tech sensors, which contribute to improving efficiency

and optimizing space. The progress of technology has created office sensors, which are made of microwave, ultrasonic and infrared technology that enhance collaboration and efficiency. As a result, new technologies offer an important advantage to occupiers they could make the best use of their space and provide significant information that could influence efficiency. (Charnotskaia and Forde, 2019) Last decade, sensors were used only to triggering lights, automating room temperatures or providing furniture sensors detecting whether the employees were using their seats. However, today the sensor technology has incorporated more functions, which improve the efficiency of office properties and have the ability to monitor all the details while figuring out from effective spaces to amenity utilization. Companies and organizations use this key data not only to know the exact location of their employees dynamically, but also to identify the most suitable blend of spaces, determine seat-sharing ratios, and inform adjacencies. (Charnotskaia and Forde, 2019) Services and amenities Nowadays, more and more office buildings mainly medium and big companies and organizations offer a wide variety of shared services and amenities. In this case, landlords act more like curators of experience within buildings selling experience instead of square feet. Employs seek a different place for connecting with others or work independently in a social environment. Today's offices offer ton employees these place within the workspace instead of trying to find these services outside of their offices. Communal spaces serve a temporary escape from the office and improve collaboration and productively. (Christopher, 2018), (Kloeple, 2018) Landlords provide this with a variety of amenities and services. (Convene, 2018) Some of the amenities that have added in office spaces today are below:

Flex furniture, flexible meeting spaces

Communal area, a coffee shop, Café - Bars

Mother’s rooms, childcare centres, kindergarten

Wellness Rooms, Fitness centres

Recharging spaces, Break room upgrade

Libraries, Playrooms

Kitchens, dining options

Event spaces

Retail

Improved outdoor spaces, garden

Easy access to parking and transportation

Eco-friendly options

Security measures

Flexible spaces and co-working One another major change in the workplace is the rapidly growing of coworking spaces. Predominantly, co-working has a remarkable impact on the London office market. Simms and Rogers (2006) mention that the functional flexibility of space is important to companies because of unused space consist of wastage of resources. (Worthington, 2001) Coworking is mainly concern people who are self – employed or people that are working for different companies at the same space sharing office equipment. Co-working concept is related to companies that their major priority is flexibility in terms of workspaces and leases. (Savills, 2019). The largest flexible workplace operators in the UK are WeWork and Regus but also the Neuehouse and General Assembly. These companies provide open plan solutions and collaborative co-working spaces, along with on-site amenities and frequent networking opportunities in order to promote innovation, collaboration and creativity. (Forbes, 2013) Many organizations, large or small, seeking co-working spaces because of these properties include space rentable on-demand along with access to

various services. Serviced offices offer a large variety of amenities and networking opportunities. (Savills, 2019)

Corporate Real Estate Management Back in 1980, the way people thought about the way of working and the function of employees have changed. Companies focused on the quality of work and at the same time, there is significant interest in low costs. At the end of the eighties, the aspect of time was added to the vision. An important result of this was a rethinking of the business process and organizational structure (Bell & Anderson, 1999). The role of the corporate real estate management was redefined and the vision on how the real estate had to be managed and how it could contribute to the strategy of the company changed (Krumm, 2001). Corporate Real Estate Management (CREM) tends to relate to a service provided to an organization whose core business is not real estate. The main purpose of CREM is to have an impact to the performance of the company by verifying that the real estate portfolio align well with the strategy of a company. Corporate Real Estate Management (CREM) nowadays is defined by Bon as: â&#x20AC;&#x153;the management of building and parcels at the disposal of private and public organization which are not primarily in the real estate business. An organization which occupies space in the real estate business and needs to manage it properlyâ&#x20AC;?. (Haynes and Nunnington, 2010) Furthermore, aligning the real estate strategy with the company's strategy is important and this alignment of strategies should result in benefit for the company. (Acoba & Foster, 2003), (Ramakers, 2008). In 1993, Joroff developed a model with five evolutionary stages in which a company can be found, based on their CREM activities. Each stage represents a level on which a company can operate, and adds a new layer to the previous one. Consequently, every level includes the activities of the previous. Nevertheless, only the fifth stage, the business

strategist, is really strategic. In this stage, strategies are tuned to those of the company, especially because consultation with other departments is customary. Corporate real estate only in this stage could add exchange value, but also use value (Appel-Meulenbroek, 2014). Last decades there were seven main strategies on which a corporation can focus (Appel-Meulenbroek & Haynes, 2014; Lindholm & LevĂ¤inen, 2006). However, in the last few years companies also started to focus on their environmental impact. As a result, added a new one strategy that is related to sustainability. (Gibler & Lindholm, 2011). These main strategies are listed below: 1. Reduce costs 2. Increase the value of assets 3. Increase flexibility 4. Increase innovation 5. Increase employee satisfaction 6. Increase productivity 7. Promote marketing and sales 8. Sustainability The first seven strategies can be divided into two categories which define the kind of added value. The first three strategies focus on efficiency and can deliver added exchange value, while the last four strategies look at the effectiveness and the employee and deliver added use-value (Appel-Meulenbroek & Haynes, 2014).

Impact on real estate UK's office market and mostly in London has changed a lot in the last decade. The combination of changes on employs working patterns and the development of efficient and productive work and IT infrastructure has empowered the workforce to become a highly mobile community

that impact on real estate industry completely. The following pages are presented in detail the effects on the real estate industry. Changes in leases All lease lengths vary with the strength of the market, the size of the development and the location. However, one of the most remarkable effects of workspace changes on real estate is the decrease in lease length. Recent trends on workplaces have led to a different kind of leaseholders, they called customers, not tenant or occupiers. Therefore, all contacts points between landlord and customers are carefully considered and improved where possible. (Theakston, 2018) Traditionally, office leases during the mid-20th century lasted 10-25 years, and even longer. Over time, the average lease has become shorter and in the last thirty years, the average lease length was 16 years. (Baum, 2017) However, todayâ&#x20AC;&#x2122;s office leases are five to eight years in length and tempt to decrease day by day. (Newson, 2017) In recent years, commercial office leases have reduced dramatically because of the growing demand for flexibility and there are leases for terms of less than five years or some months only. Serviced office providers are able to offer shorter-term lease than conventional office spaces. Additionally, they can offer bespoke, tailored packages and leases in accordance with the needs of each tenant. Moreover, conventional leases are taking several months to sign but a lease for serviced offices could take only a few hours. This is a definite advantage for fast-growing businesses. (Hobson, 2018) Co-working has created leases that are even more flexible, tenants can lease space of less than one year or more. Property owners can offer their spaces only for a few months or some hours instead of 5 or 10 years lease. (Miller, 2018)

As a result, legal fees for both parties, occupiers and landlords decreased in relation to higher legal fees for conventional leases. This has impelled some landlords to make it easier and quicker to sign an agreement. (Theakston, 2018) Nowadays, there is another one advantage in commercial office leases. Today’s lease offers the possibility to negotiate a longer-term lease with more frequently break rights. This opportunity delivers to the landlords a comfort long-term lease and gives the tenant the opportunity to end a lease earlier if their circumstances change. (Hobson, 2018) The flexible lease is a concept relatively connected to agile real estate. Co-working model lies in the opportunity of lease-term flexibility in combination with highly appealing workplace environments. These new models take advantage agile strategies that incorporate flexible, shortterm and long-term lease structures aiming most effectively anticipate and organizational needs. (CBRE, 2018) A positive impact of shorter leases with co-working spaces on the real estate industry is that in this way property owners increase their revenue. Leasing vacant space or communal areas is a perfect method to gain more income. The average coworking space can yield two to three times more revenue per square foot than traditional space. (Miller, 2018) The increasing growth in the “non-traditional” leasing sector has affected in a certain degree the real estate industry and it is expected more than 30% of all office properties will be let under “non-traditional” or “flexible” leases. (Cutts, 2017) Workspace area A significant impact on office properties is the decrease in office space area. Several studies have reviled that there is now a higher utilisation

of office space. In the early 1990s, the office stock per employee was 30 square metres and until now has decreased dramatically around 17 square metres. (Jll, 2018) The total area that a company or organization needs in order to accommodate its employees has reduced a lot. A big amount of employees has the ability to work from their homes or any other location (telecommuting). Consequently, the effective space per employ is decreased and as an ultimate result to reduce the overall demand for office properties. (Miller, 2014) Additionally, the progress of technology has allowed more efficient use of office space. For example, the amount of the required storage space needed within an office property has decreased significantly. Today, storage documents have moved from paper to electronic media. (Jll, 2018) On the other hand, three communication, teamwork and innovation have become the three aspects on which design based on. Spaces that cover these characteristics should be included in corporate offices or increase the space of these adequate facilities. (Harris, 2015) The result of the above is that workspace has transformed from a place that represents “desktop work” to cultivate the value of “human interaction”. Moreover, the drop off desk space owing to the fact that employees are working remotely has been balanced by higher demand for shared amenities that encourage communication between coworkers. (Miller, 2013) Agility Beth Moore (2018), CBRE Americas Agile Real Estate Practice Leader, support that agility is strengthened by the fact that “people are looking for a different experience when they come into the work environment and this is forcing companies to combine technology, services, and amenities.” Accordingly, the creation of a more flexible workplace strategy is a major priority for property owners. Today, organizations and companies look for flexible and co-working workspaces with the

ultimate goal to keep people engage them and offer to the tenants the desirable flexibility. (Amador, 2018) The impact in real estate of agility is that developers, investors and landlords endeavour to find out new ways to make office properties more agile and activate the community inside of them. Agility provides the possibility to come up with more creative configurations of space. The above mentioned statement targets the wellness and event space as ultimate result the attraction of people. (Amador, 2018) Amenities and Services The new approach to workplace design that focuses on productivity and communication among employees has increased the demand for a broad range of new amenities and services that have included in office properties. It is vital, office properties consist of common area, spaces for group work, decision-making and learning. In addition, it is important to have quiet areas for concentration. (Christopher, 2018) In the past decades, only 3% of commercial office properties was dedicated to extra amenities such as dining areas and gyms. Nowadays, most of 12% of the total office area includes more than the average amenities and services in order to attract tenants and meet the needs of current employees. This portion tends to be increased the next years aiming to provide better experiences to employees. Employees tend to be consumers of ongoing amenities. (Christopher, 2018) Nowadays, office amenities are a premium commodity. According to the Colliers International Group Inc. (2015), the importance of shared amenities is vital on attraction, retaining tenants and increases the overall income. A premium value can be created of a comprehensive amenity package. Karen Whitt (2015), president for Colliers, highlights that â&#x20AC;&#x153;Though a unique set of amenities is just one factor in an extremely complex market, investment in amenities can make the difference

between a vibrant, productive property and one facing vacancies.â&#x20AC;? (Colliers International, 2015) (Colliers International, 2015) Employees spend many hours in their office building, and the more amenities that are in the building and surrounding area, the more likely their employees are happy and are going to stay. (Kloepple, 2018) Traditionally, office buildings have been designed and maintained for the 9 to 5 lifestyle. Today's demand change and update their infrastructure and their lifestyle offering a workplace environment that better supports engagement and connectedness. Landlords provide this with a variety of amenities and services. (Convene, 2018) Some of amenities that have added in office spaces today are below: -

Flex furniture, flexible meeting spaces

Communal area, a coffee shop, CafĂŠ - Bars

Motherâ&#x20AC;&#x2122;s rooms, child care centres, kindergarten

Wellness Rooms Fitness centres

Recharging spaces, Break room upgrade

Libraries, Playrooms

Kitchens, dining options

Event spaces

Retail

Improved outdoor Spaces

Easy access to parking and transportation

Eco-friendly options

Security measures

Landlords become members Another one impact of workplace changes in that now landlords act as curators of experience within office buildings. It has resulted in that landlords have become brands and tenants members. Real estate has started to become de-commoditized, selling experience rather than square feet. Landlords have incorporated flexible workspaces in their models and offer office properties with shared amenities, services and a

large variety of workplaces that companies or individual can rent an office floor, a desk or a meeting room by hour, day, month or year. (Christopher, 2018) Increasing income Leasing vacant space in a co-working office is a very good way to increase income. According to Deskmag (2018), the average co-working space can yield two to three times more revenue per square foot than traditional space. Investors have started to look at co-working spaces as breeding grounds for future tenants. A new start-up company might have high risk initially and need time to grow. In case this company will have been established and after will be ready to sign a long-term lease. Apart from that, landlords provide additional services which increase their income. Co-working centres offer IT infrastructure, in-office amenities and other services which increase the income of property owners. (Miller, 2018) Workspace as service Workplace changes have another one strong effect on the real estate industry. Commercial office space can now be delivered as a service and can be consumed as a â&#x20AC;&#x153;pay-as-you-goâ&#x20AC;? model. At present, a new idea has adopted from real estate companies which work overturning the traditional commercial office marker and the way that workspace let. Companies of all types and sizes can take advantage of this new model of service space and can avoid long term leases. At the same time, these companies can scale up or down in case their needs change or headcount and can have the possibility to set as a priority their core business instead of ongoing space management. (Knotel, 2019) Mixed-use buildings As a consequence of all drivers mentioned in the previous chapter, the supply of the property industry has become more flexible. More and new amenities have incorporated in office properties and more flexible types

of the occupation have added. As a result, more mix-used properties have created in commercial real estate. The demand for mixing offices with retail properties within single buildings is increasing significantly. During the last decade, property owners were questioning more the role of serviced offices. Today, serviced offices have become mainstream and this trend tends to increase dramatically in the following years. Therefore, office buildings are becoming more “permeable” as distinct from the corporate monoliths of the past.

(Harris, 2015)

Change of use of existing office properties As mentioned above, changes in the workplace have reduced the space of the office building today. This has a significant effect on the real estate industry, many big office buildings across London has remained empty because of developers and companies are searching for smaller office spaces. For that reason, many of the existing office buildings have changed

use

and

have

transformed

into

residential

properties.

Consequently, up to 40,000 new homes will be created in London by converting many of the empty traditional office buildings into new flats. However, local authorities are concerned in case that in the future a surge in office-to-home conversions could compromise the amount of commercial space available as the economy recovers, thus hindering growth. (Londonist, 2013)

Future workplace According to recent researches, half of the employees is estimated to work in technology-enabled or “smart” offices the upcoming years. Moreover, 80% of millennials mention that workplace technology would have an impact on their decision of taking a job. (Driscoll, 2018) The future world of work will consist of the next generation of millennials. They have called from researches as “digiratis”, which are the future workers and have the total control of choice for the place, the way and the time. All these people will never be familiarise their selves without the dominance of the internet and therefore they will have grown up in

environment

that

predominated

digital

technological

developments. They will have high expectations about choice and experience in the working environment. (Johnson Controls Global Workplace Solutions,2015) According to CBRE (2018) report ''Smart workplace'', the next generation of Millennials will choose the ‘Trophy Office’, a smart workplace of 2040. The future workplace will be entirely different will redefined by adaptable, radical working patterns, which will meet private needs. A “Trophy Workplaces” will be created for people who are looking for environments that build experiences and promote relationships among co-workers. Future workers will decide the place and the way they prefer working and they will have a wide variety of alternative work paths. (CBRE, 2018) The future workplace will be more than an office. The following years, office properties do not consist only of open plan spaces with desks and meeting rooms but they will offer more than a working space. This means more services and amenities, which offer choices, experiences, fluidity, care and in-built technologies under the prism of collaboration, networks, flexibility, sustainability and wellness. (Regus, 2018) Next generation of millennials will need an attractive office will boost creativity. They appreciate money and the freedom it gives, and they value when work and leisure can be combined. Future offices will provide human services that enhance the employees' experience as they interact with their surroundings. Workplaces will offer wellness through spaces and activities that will be prioritized over work with more time devoted to healthy activities and personal time. (Johnson Controls Global Workplace Solutions,2015) In the following years, flexible spaces will prevail predominantly and big corporate HQ will be an outdated phenomenon in upcoming years it will

face the challenges of new business trends. More and more frequently office properties will need agile solutions that match the flexibility. (Regus, 2018) The future will hold of dynamic offices that can transform easily and quickly in many different types of spaces and accommodate a variety of work styles and are going to be increased significantly. Landlords and developers will need to adapt to the changing demands, aspirations and expectations of end-users. Property owners should keep pace with this technology-driven generation and ensure their properties. This purpose will be achieved by transforming existing workplaces and creating new offices, which provide services and amenities that match in real-time tenantsâ&#x20AC;&#x2122; expectation and demand. (Driscoll, 2018)

vii

Research Design and Methodology Introduction This chapter explains the conceptual framework and research design, which underpins the research of this project. In the following pages will consider the research paradigm that will underpin this research project and give an explanation of how this approach interacts with the research methods and strategies employed. Furthermore, it will clearly set out the data sampling strategies used and explain how these have shaped the

empirical

approach

the

projectâ&#x20AC;&#x2122;s

research

design

and

methodology.

Conceptual Framework The conceptual framework is trying to illustrate an image of the approach of the current research and lists the assumptions made. The different aspects in regards with the theories of science are briefly examined to comprehend the philosophy underpinning the research. (Collis and Hussey, 2003)

Figure 1: The research process â&#x20AC;&#x2DC;â&#x20AC;&#x2122;onion'' (Saunders et al., 2012) 25

According to Saunders (2012), the research process is like an ''onion'' with different layers, as it is shown in the image above. Every layer describes every step that a researcher must pass in the research process in order to structure the methodology. The initial step is the definition of research philosophy establishing the starting point for the second step which is the determination of an proper research approach. The third step is the selection of the relevant research strategy that will be adopted. The fourth step is the identification of the time horizon and the final and fifth step is the collection of the relevant data and the identification of their methodology. (Saunders et al., 2012) Research philosophy This section analyses the research philosophy embraced in this research. Research philosophy defines as a system of beliefs and assumptions in relation to the nature of the knowledge and its development. At every phase of a dissertation, the researcher should make a few types of assumptions (Burrell and Morgan 2016). These comprise of ontological assumptions, epistemological assumptions and axiological assumptions. Unavoidably, these assumptions define the selection of the relevant research methods and the process of interpreting the findings. (Crotty 1998) More specifically, there are four pillars for research philosophies: Positivism, interpretivism, pragmatism, and realism. Positivist research philosophy Positivist research philosophy is the theory that certain positive knowledge founded on natural phenomena and their connections. It claims that the social world can be understood in an objective way. The research strategy is approached on the basis of data collection and hypothesis development. These hypotheses will be tested and confirmed which can be used for further research. Collected data derived from the senses through observation and these are empirical evidence and therefore positivism is based on empiricism. In this research philosophy,

the researcher is an objective analyst and separates himself from individual values and works independently. (Saunders et al., 2012) Interpretivism research philosophy Interpretivism research philosophy is the opposite of the positivism, This theory asserts that is not simple to understand the social world based on the principles. However, this research philosophy claims that the social world can be interpreted in a subjective manner. In this research philosophy, the researcher performs a specific role in observing the social world. (Saunders et al., 2012) Pragmatism research philosophy Pragmatism research philosophy claims that the decision of the appropriate research philosophy based on the research problem. This theory claims that concepts are relevant only in the case that they support action. Pragmatics â&#x20AC;&#x153;recognise that there are many different ways of interpreting the world and undertaking research, that no single point of view can ever give the entire picture and that there may be multiple realitiesâ&#x20AC;? In this research philosophy, the researcher is free to choose the methods, techniques, and procedures that meet research aims. (Saunders et al., 2012) Realism research philosophy Realism research philosophy claims that assumption is required subjective nature of a human for the observation. This philosophy is divided into two categories: direct and critical. Direct realism argues that the world could depict through personal human senses. On the contrary, critical realism argues that the world cannot depict through sensations and images because they can be deceptive. (Saunders et al., 2012) The following table represents the principal differences between the four different research philosophies in terms of the popular data collection method.

Table 1: Research philosophies

(Saunders et al., 2012) Research philosophy of this Research The current research seeks to collect subjective views and actions of professionals and the main aim is to interact with people from different perspectives and interpret the current situation. As a result, the most appropriate research philosophy method is interpretivism. All views and patters will be developed from all professionals and are essential to creating dialogue and investigation between the diverse samples of humans aiming to get a throughout understanding of their thinking. Notwithstanding the risk of not producing obvious trends, there is the need to allow for a degree of subjectivity in their answers, which make the interpretive philosophy more beneficial than a positivist or critical stance.

Research paradigm Research paradigm is defined as “the set of common beliefs and agreements shared between scientists about how problems should be understood and addressed” (Kuhn, 1962) According to Gube (1990), research paradigms can be characterised through their: ontology, epistemology and methodology. (Gube, 1990) Ontology According to Davies and Hughes (2015), ontology is the “pre – methodological questions that ask how we perceive the social world” In other words, ontology is how the researcher’s view about the world affect the drawn conclusions. (Davies and Hughes, 2015)

Epistemology Epistemology defines as the theory of knowledge dealing with an investigation into the nature and reasons of knowledge itself. The epistemological assumption includes the reasons for forming, acquiring and communicating of knowledge. (Scotland, 2012) Methodology According to the Perri and Bellamy (2011), methodology is to realise how to progress from empirical research findings to creating conclusions about the truth or the adequacy of theories. (Perri and Bellamy, 2011) Research approach The research approach is the ideas, plans and the procedures for the research that designate the steps for the process of the research for the assumption to research method of data collection and analysis and interpretation of them. There are two main different types of research approach that can be applied in research: Inductive and deductive. (Bryan and Bell, 2015) Deductive Approach The deductive approach is characterised as the method that the previously existing theories are used for presenting the hypothesis related to a specific situation for deriving empirical evidence.

The

deductive approach moves from the general to specific and data are gathered after the theory is declared. (Bryan and Bell, 2015) Inductive Approach The inductive approach is defined as the method that the major step is the collection of relevant and appropriate data. Hypothesis and variables are not predefined and the analysis of the data collected defines what should be analysed. The inductive approach moves from specific to

general as a result, comprehensive results are reached on the basis of evidence from individual observations. (Bryan and Bell, 2015) The following table represents the principal differences between the three different research approaches in terms of logic, generalizability, use of data and theory.

Table 2: Research approaches

(Saunders et al., 2012) Research Approach to this Research The most appropriate approach method for current research is the inductive approach. This research is not examining a predetermined hypothesis but seeking to establish if a theory can be created as a base on in the empirical. The starting point of this study is the collection of data that are relevant to the chosen topic. Moreover, this method has been selected because allow the data to flexibly inquire about the outcomes.

Research Strategy The research strategy must be taken into account of establishing which methods of research are the most relevant to investigate the research question and objectives of a research project. (Naoum, 2013) Research methods There are two main areas of research, the one is qualitative and the other is quantitative. However, these two broad research strategies should be not considered as two independently standing methods to research but as two different points of the same option. (Creswell, 2009) The following table represents the principal differences between the two main different research methods. (Collis and Hussey, 2003) Table 3: Comparison of research methods

(Harlow, 2015) Quantitative research method Quantitative research method defined as the method, which uses the tradition of science (Davies, 2007). This method is for examining theories by examining the relationship among variables (Creswell, 2009) Quantitative research method aim to objectively gather, study and analyse data to test hypotheses by measuring numbers and statistically

analysing them. (Creswell, 2009) A quantitative approach is utilised by positivists. Qualitative research method Qualitative research method is the method which ‘’employing a more reflecting or exploratory approach’’ (Davies, 2007). On the contrary, qualitative research method is subjective and focuses on the description, meaning and experiences of the subject of the research. (Flick, 2013) Triangulation research method Mix method known as triangulation is deal as it enables analysis through both quantitative and qualitative methods, which can prevent their weaknesses. (Dawson, 2009) Research Method of this Research The most appropriate research method for this study is the triangulation method. This method offers the opportunity to be used multiplies different research in order to get out different forms of information from research

undertaken.

Furthermore,

this

method

gain

has

the

advantages of using both qualitative and quantitative research methods mitigating at the same time the disadvantage of these two methods and will be utilized in the research. In addition, this method increases the viability of qualitative research. Research Tools Data Collection Data collection method depends on the requirements of the research and the action of the process of identifying the appropriate method is vital for achieving the objective of the study. This research adopted both primary and secondary data collection methods. Due to the fact that the triangulation model used, the study produces new data from interviews and fails back on existing data from case studies to support the validity

of the conclusions. Therefore, this research uses a combination of qualitative and quantitative data from primary and secondary sources. Primary Data Naoum (2013) defines primary data as â&#x20AC;&#x153;fieldwork research, where the research is collected directly for the studyâ&#x20AC;?.

(Naoum,2013)

Primary

data relies on the process of sampling where the subjects are asked directly

about

their

opinions

and

views

through

interviews

questionnaires. (Walliman, 2011) Interviews The first method of collecting primary data for this study is the interviews. For the aim of this research, it will include interviews with property professionals which they have expertise in office properties. There are a number of different approaches to interviews. Interview questions can be structured, semi-structured or entirely open. A structured interview is similar to a quantitative survey and a limitation of this method is that there is not allowed freedom to develop the research through the interview process. However, a full-unstructured interview is not appropriate as the research study does not have a clearly defined focus as a result, the comparison between participants is not simple and there is difficulty to conclude. (Willis, 2007) The method of the interview process of the subject study is a semistructured interview. This includes both structured and unstructured questions in order to provide the benefits from both methods. Moreover, this research will be created by interviews in order to provide more widely answers in the research question. To get strong qualitative information on new workspaces and demand, the research used in-depth in-person interviews. A collection of open-ended questions help to capture official proofs and contrast different stakeholdersâ&#x20AC;&#x2122; views. (Bryan and Bell, 2015)

Case studies The second method of gathering primary data for this study is the case study method. Case study is set as "a strategy for doing research which includes empirical research of a particular contemporary phenomenon within its real context using various sources of evidence’’ Case study method has been criticised for its lack of stringency, based views regarding findings and conclusions and inability to generalize findings. (Yin, 2014) A case study method is widely used research design

and gives the

opportunity to use multiple sources of evidence used to exploratory research questions and is useful in finding answers to questions such as ‘’what, why and how’’. (Yin, 2014) In the course of the triangulations approach, the case studies complement the interviews and converge on the research questions. As the exclusive use of qualitative research fosters making generalisations based on one or more interviews, including another research technique is beneficial (Silverman, 2013) As a result, the findings of the interviews and case studies examined and compared in order to increase the validity and readability of the research (Yin, 2014), (Gillham, 2004) Secondary Data Secondary data provides the recognised background of the research topic and is often authored by experts (Walliman, 2011) The benefit of secondary data is the speed at which information can gather, additional secondary data can be compared. (Naoum, 2013) Secondary data consist of published data collected in the past which entails written materials. Secondary data are taken from a range of different sources, including

books,

academic

journals,

articles

and

reports

from

companies, in order to provide a broad range of critical perspectives. The review of the existing literature would provide the theoretical background for this research project.

Literature review Literature reviews were used to develop a theoretical framework and generate a research question that is later tested based on empirical research. A literature review is used to broaden and connect existing studies and thereby developing a theoretical framework. Secondary data are taken from a range of different sources, including books, academic journals, articles and reports from companies, in order to provide a broad range of critical perspectives. (Naoum, 2013)

Research Design Selection of data Interview In order to appropriate relevant data, strategic sampling has been implemented in the process of selecting participants. The sample of interview participants comprises of a mix of professionals who have a different position in different companies in the commercial office property industry. All professionals were selected according to their expertise and knowledge of the research topic and their work experience. Participants include property managers, agents, chartered surveyor and associate across London, who are able to provide significant information. Generally, it is commonly accepted that the more the participants, the more the data could be generated. According to Davies (2007), a sample should be anything between 1 to 20 preferably. However, Oppenheim (1992) argues that quality is the essential determinant of numbers than quantity and as a result gives the opportunity to focus on the responses with a more detailed approach. In the current research, a sample of 4 property professional will be used. The following table represents the list of the companies of the selected professionals who took part in this research. (Oppenheim, 1992)

Table 4: Description of participants

Company 1

Avison Young Cushman & Wakefield Cushman & Wakefield

Role Senior Research – Office analyst Senior Surveyor Office Chartered Surveyor

KKS Savills

Workplace Strategists & Consultant

Knotel

Manager, Workplace Design & Strategy

MSCI Inc

Associate commercial properties

Case study In this research project analyses two case studies. The first one is the Bloomberg office in London and the second is WeWork, which is related to the co-working office spaces. Bloomberg’s headquarters case study has been named London’s best new office building for 2018 by the British Council for Offices (BCO). (Jessel,2018) Moreover, It is an exemplar of sustainable development, rated the world’s most sustainable office with a BREEAM Outstanding rating 99.1%, the highest design score ever achieved of any major development. (Eltringham, 2018) This office raises the bar for future office spaces around the world. For all the above reasons, this selected case will give a valid insight into the office property sector and would increase the validity of the case and the study. The case of ''WeWork'' was selected due to the leading position in the co-working sector market. WeWork is the largest operator in all over the world as well in London and is currently taking more space than any other occupier is in the UK commercial office market. In central London, this company corresponding to over 3,000,000 square feet of space (Cushman & Wakefield, 2018). As a result, this selected case will give a 36

valid insight into the co-working sector and would increase the validity of the case and the study. (Strutt and Parker, 2017) Design of research tools Interview The interview questions were designed following the literature review and aiming to provide the relevant information and meaningful results needed to meet the research objectives and answer the research questions. The questions have designed in order to cover the following themes: •

Today’s office market demand

•

Changes on workspace

•

Drivers of those changes

•

Impact on the real estate

•

The future workspace

The interview comprised of 8 questions both open-ended and closed. The firsts questions are closed in order to induct plain introduction to the subject. The following question is open-ended and has a less structured approach in order to give the opportunity for further questions and thoughts to emerge from the immediate text. An openended question allows making an informal conversation. On the contrary, closed questions simply the data. In addition, the open question is vaguer and interview can consider general thoughts on the topic resulting in a more defined conclusion. Question 4 operates using a rating scale requiring answers ranging from a 1-5 scale with 1 being the most significant and 5 the less significant. A copy of the interview questions has been included in Appendix A.

Case study Case studies were developed based on the research objective and analysed following a logical structure, which gives answers to the research questions. This order includes the following steps: •

Motivation strategy

•

Design concept

•

Flexibility

•

Sustainability

•

Amenities

•

Future

Data Analysis After data collection, data analysis should be conducted in order to draw a conclusion. The analysis of all data is a process that presupposes in the interpretation of results and the explanations of the findings over conclusions.(Creswell, 2009) The qualitative data from the interviews will be interpreted with the thematic analysis method because this is the most suitable for analysing qualitative data in the form of interview transcripts. Open-ended questions will carefully examine divided into themes. The qualitative data from the closed questions will be statistically analysed and shown as graphs and charts, with an additional description of the data. Semistructured interviews have a risk of the interviewer subconsciously biasing the results of the analysis is not done with a structure. After the evaluation of these themes, it is important to secure that all estimated trends are true. This method will help to bring clarity to the results of research undertaken and minimise the bias effect. Moreover, all interview responses will be compared and aggregated to drive conclusions. (Walliman, 2011) Case studies analysed in-depth using multiple sources of information in order to ensure the validity of the results. The analysis will address the objectives and significant aspects of the research aim. The main idea

the case study analysis is to categorise, collate the data, into a manageable form, and create a narrative. Further to these analyses, results for both research methods case studies and interviews will be compared with the ultimate purpose to identify patterns or contradiction in thinking.

Ethics According to Bryman and Bell (2015), the highest ethical standards and integrity should comply with the collection and reporting of data. This study complies the‘’ University Code of Practice Governing the Ethical Conduct of Investigations, Demonstrations, Research and Experiments’’. In the process of the current research, it will be ensured that ethical standards were advocated and maintained. (Bryan and Bell, 2015) All interviewees were chosen according to their knowledge and expertise of the study and do not have a close relationship with the researcher, ensuring the neutrality of the participants. The principle of informed consent has been achieved because all participants have informed for the nature of the research and their responsible consent to take part in this research. All interviewees were informed that the responses would be recorded fairly whereby the details of individuals were removed, adhering the Data Protection Act 1998. All information and knowledge collected truthfully and documented accurately aiming to ensure that the outcomes of the research were not compromises or inaccurate. According to Walliman (2011) should assure that the work produced is original and that the researcher has intellectual ownership of what they write. Where ideas from previous researchers are included appropriate citations must be used to acknowledge the author. (Walliman, 2011) Moreover, the interpretation of results must be done with the honesty and integrity to allow the research to discover truths that may be contrary to the researcher's beliefs. A high standard of honesty and integrity will be maintained to prevent plagiarism or misinformation.

vii

Results and Interpretation Introduction This chapter represents the empirical findings and analyses of the research data, which consists of two parts. The first part of this chapter represents the results of the two case studies. The second analyses the interviews responses and presenting the data.

Case Studies In this research project analyses two case studies. The first one is the Bloomberg office in London and the second is WeWork, which is related to the co-working office spaces. Findings and results are presented on the following pages.

vii

Case study 1: Bloomberg’s new European headquarters

Figure 2: Bloomberg's office façade

(Bloomberg, 2019)

Location: 3 Queen Victoria St, London EC4N 4TQ, UK Appointment: 2010 Completion: 2017 Designed: Foster and Partners Constructed: Sir Robert McAlpine Cost: £1bn Area: 102,190m² Capacity: 6,700 Introduction The new European headquarters of Bloomberg LP opened at the end of 2017 and designed to facilitate a ground-breaking of collaboration, productivity and fuel revolution. It brings together 4,000 London-based employees in the same building. This office building sets new standards for openness and sustainability.

Description Bloombergâ&#x20AC;&#x2122;s European headquarters is located in one of the prime locations in the world. It is situated opposite of the Bank of England and next to Mansion House. The whole city block measures 3.2-acre and the premise consist of 1.1 square feet of office building. The property comprises of two buildings, which are connected by bridges that span over a pedestrian covered arcade. The arcade accommodates many restaurants and reinstates, an ancient Roman road. (Foster and Partners, 2019) Motivation Strategy The motivation of this office was the creation of an innovative and sophisticated building and a place that build the communication bridges. Employees can be productive and happy to work in this environment into this workplace. According to Michael Bloomberg, â&#x20AC;&#x153;This building is designed to encourage cooperation and collaboration, and that's what makes for a successful business."â&#x20AC;?Bloomberg, 2019) Design concept The fundamental idea for design concept was to create a core in the heart of the building, which links all the levels and areas, reflecting the significance of collaboration inside the company. (Bloomberg, 2018) The majority of the offices has a large central core formed with lifts and staircases, but on Bloomberg's concept people consist the core and the services are situated at the edges of the building. For this reason, the centrepiece of the interior is a giant, spiralling triple-helix ramp, 700 feet long. (Myerson, 2018) The function of this ramp is not only the link between floors but also a place for socializing. The ramp provides the central connection for all office floors in a meandering loop and especially pulls people to a ''pantry'' on the sixth floor. (Clarke , 2017)

The whole layout, space and the furniture designed in order to improve the work experience in terms of productivity. The new Bloombergâ&#x20AC;&#x2122;s office in London demonstrates the new generation of open-plan working. All office floors are open and there are no private offices or walls between people. The design goal was to design three specific room types for levels 1-8 of the North Building: open meeting rooms, scheduling room and enclosed meeting rooms. The scheduling rooms created by glass panels and being the single furniture to foster efficient use of time. (Architonic, 2017) The desks are configured in circular positive in six this is really to support this notion of teamwork and collaboration. This desk layout which has actually tried in New York Bloombergâ&#x20AC;&#x2122;s offices and provide privacy and at the same time, share what you are doing with others consulting with somebody where you can swing the chair around roll it over pull out the drawers and sit on the right under the desks of two people can share keyboard. (Architonic, 2017) Flexibility The whole design is fully flexible and all furniture solutions provide flexibility and collaboration at an upper level. All desks have a standing mode for comfort and file cabinet padded for use as a seat making easy the collaboration between colleges and visitors. There are also many central tables to boost team work. Moreover, there are also enough mobile pods with glass walls which is the perfect solution for spontaneous team meetings. (Bloomberg, 2018) Another one important innovation that enhances the flexibility at the same time is that employees can use a smartphone app and a smart screen to choose a free office, to navigate the space, to set meeting places and to provide many other functions which help to work flexibly, productively and efficiently. (Clarke, 2017)

Sustainability Bloomberg’s European headquarters in London reaches the highest ranking an office building that ever awarded in the UK’s BREEAM sustainability Bloomberg,

system. founder

(Schoof,2018) Bloomberg

According

L.P.

said:

“We

Michael believe

R. that

environmentally-friendly practices are as good for business as they are for the planet. From day one, we set out to push the boundaries of sustainable office design – and to create a place that excites and inspires our employees. The two missions went hand-in-hand, and I hope we’ve set a new standard for what an office environment can be.” (Bloomberg, 2017a) Many environmental - friendly practices applied to this building in order to deliver the highest sustainable solutions. The water consumption is less than a standard building of the same size, almost 73% lower than in other offices. (Bloomberg, 2017b) Moreover, the energy consumption is 35% lower than a typical office building and lower than legally allowed for office buildings. Furthermore, this office building is 40% more energy efficient because of 500,000 LED lights with individually placed lenses are integrated in the ICP's. (CIBSE Journal, 2017) A significant energy-efficient building solution is that the concrete for structural material contains up to 60 % recycled materials. Another one important component of the sustainable strategy is water recycling. In addition, a rooftop photovoltaic system helps Bloomberg’s power bills in order to keep down. (Crane, 2017) The whole design concept of this building aiming to represent an important role in energy efficiency, even the facade consists of large-scale bronze fins, which have integrated, soundproof flaps while holding an essential component of the building’s natural ventilation system. (Foster and Partners, 2019) Finally, smart CO2 sensing controls allow air to be distributed according to the approximate number of people. This solution could reduce dramatically CO2 emissions. (BREEAM, 2018), (Crane, 2017)

Amenities Bloomberg's new office building is one of the new office properties that has not a big amount of services and amenities. According to Mr Bloomberg, there are no extra facilities in this building because of one of the main goals of the strategy was to encourage employees to leave the building, go out and do not be an addict to their work life. (Jagger, 2017) In the sixth floor of the building, there is a big communal â&#x20AC;&#x153;pantryâ&#x20AC;? area which supplies coffee and snacks but not lunch. This strategy encourages employees to go outside of their work environment and become more productive returning back on it. (Prynn, 2017) However, health and well-being were central to the design of the building. (Clarence-Smith , 2017) As a result, this includes an art gallery, twocycle centres and a wellness centre, which are available for all employees offering health services on site. (BREEAM, 2018)

Images Figure 3: Bloomberg’s office floor plan level 6

(Astbury, 2017) Figure 4: Bloomberg’s office section

(Astbury, 2017) 46

Figure 5: Sustainable solutions

(Bloomberg, 2019) Figure 6: Ramp

(Bloomberg, 2019) 47

Figure 7: Desks design

(Bloomberg, 2019) Figure 8: Communal areas

(Bloomberg, 2019)

Case study 2: We Work

Introduction The second leader for co-working spaces in the world is London, following the New York market in terms of the number of spaces and operators. (Savills, 2018), (Cushman & Wakefield, 2018). Over the last five years, London has become one of the greatest markets for flexible workspace in the world. The sector is predicted to extend over 10 million square feet of space in London that is equal to around 4 per cent of the total office stock in London. Between 2010 and 2018, operators of the flexible office occupied the four of ten bigger takers of workplace alongside tech giants such as Google, Apple, Facebook and Amazon (Cushman & Wakefield, 2018). Desctiption WeWork is a global company that provides shared workplaces for entrepreneurs, start-up, freelancers, small businesses, subculture communities, and large enterprises all around the world. WeWork established in 2010 in New York by Adam Neumann and Miguel McKelvey. Less than ten years has expanded quickly from its establishment and have become the largest coworking brand in the world. The initial purpose of the founders was to provide a collaborative place for start-ups and freelancers. However, WeWork's growing sector is courage members, businesses with more than 1,000 employees that seek dynamic design and greater flexibility. (The New York Times, 2018) In the start of 2019, WeWorkâ&#x20AC;&#x2122;s value was US$47 billion and managed 10,000,000 square feet (930,000 m2) of office space. At the time of this

research, WeWork has more than 40,000 employees and WeWork’;s offices located in 600 different sites worldwide creating a network of shared office spaces across the globe in 39 countries and 124 cities. WeWork is the largest office operator in the United Kingdom with 59 office properties across the whole country with almost 50 buildings in London, 5 in Manchester, 3 in Birmingham and only 1 in Cambridge and Edinburg. (WeWork, 2019) Motivation Strategy The main thinking of WeWork’s was the creation of a community through dynamic offices that help businesses redefine the employee experience. into a fashionable alternative with in-house networking apps, beer on tap and events for tenants. (Financial Times, 2017) According to Phil Kirschner, the senior workplace strategy director at WeWork, “Employee experience is the holy grail...The design definitely matters, but a holistic community and activation strategy is also required to make people feel good about being at work.” (The New York Times, 2018) At the current decade, more and more people prefer works at a coffee shop or at home. According to Meet Devin Vermeulen, WeWork’s Creative Director “Community is our catalyst, We knew people would get a lot out of coming and being part of this community; we knew the community was a big part of what we had to create.” (Keohane, 2019) The strategy of WeWork is based on creating spaces with the same level of comfort that you get out of your home. The aim was WeWork will be a space that members do not wait to get out of their offices. On the contrary, is based on workers feeling like home (Keohane, 2019) WeWork's strategy focused on community, therefore, the design concept is affected by the way that people interact within a working environment and

try

give

answers

with

which

ways

can

encourage

communications. The final layouts of offices aim to connect people and help in creating a closed society rather than a few people that just work in the same place without interactions. (Keohane, 2019)

According to recent researches, people have various different needs during a day and they feel more productive by having the ability to use different spaces. From the start, WeWork's aim was to create spaces that can grow alongside a businessâ&#x20AC;&#x2122;s needs. (The New York Times, 2018) Design concept WeWork developed a design to stimulate collaboration. WeWork's strategy focused on community, therefore, the design concept has affected the way that people communicate and interact. (Keohane, 2019) This goal was achieved creating energy zones and created workspaces

with

distinct

areas

for

focused

thought,

group

brainstorming, recreation and relaxation. (The New York Times, 2018) The shared space is certainly the loudest there are people, music, coffee and an energy that is contagious. However, there are office space, desks and conference rooms which are muted and ideally design for concentrate on work. Moreover, there are phone booths and nooks that are quiet and provide enough space for privacy. During your day, there is always a place that covers all different and constantly changing needs. It is no characterized by static and the movement between different zones is easy. (Keohane, 2019)

Solutions WeWork designs build and operate a space specific to every companyâ&#x20AC;&#x2122;s needs. The strategy of WeWork includes four different solutions that meet the requirements of all typesâ&#x20AC;&#x2122; size companies and freelancers. The company offers shared workspaces for teams of 1-100+ through the four following different solutions (WeWork, 2018) 1. Headquarters by WeWork This solution is made for companies that need a location, which is dedicated only to their team. This category accommodates standalone and private offices with preconfigured layouts. It is proposed for primary headquarters and it is suitable for all team sizes 20-250+ members. This

type of office property characterised by complete autonomy does not have shared space, include just the essential and only basic amenities. (WeWork, 2019) 2. Office Suites This solution is an upgrade to the first one. This category accommodates large satellite offices with access to premium shared spaces and amenities. It is proposed for regional headquarters and it is suitable for all team sizes 25+ members, which need its own environment. These properties include private meeting rooms, lounges, and executive offices dedicated only to a company. Premium shared spaces and amenities include private reception, conference rooms, executive offices, phone booths, and pantries. (WeWork, 2019) 3. Private Office This solution is made for teams of one to 100 members and characterised by autonomy within the community. This category accommodates enclosed, lockable offices, which are move-in ready, lockable spaces that feel like home. These properties are equipped with chairs, desks, storage closets with access to meeting rooms, living rooms and other amenities. (WeWork, 2019) 4. Shared Workspace This solution is suitable for startups, small companies, freelancers and remote workers. These properties include a dedicated or hot desk with premium amenities, conference rooms to on-site support. Dedicated Desk choice offers an own desk in a shared office including a permanent desk at a chosen spot, a chair, trash can, and filing cabinet and 5 credits a month towards booking conference rooms, mail & package handling. Hot Desk choice offers access to an open common area including a new guaranteed desk space in the common area a new spot every time, 2 credits a month towards booking conference rooms. (WeWork, 2019)

Flexibility The key reason why occupiers choose to take space from WeWork is the flexibility offered. Small organizations or freelances who are not yet fully established serviced offices provide the opportunity to occupy spaces in high locations in good quality with the solution on less restrictive lease term. Moreover, these solutions also offer tenants the choice to extend or shorten their operations easily. However, this solution also accommodates larger companies or organizations owing to surplus or empty space underlining a mismatch between the volatile business cycle and fixed leasing model. Serviced office reduce significantly the unused spaces and it is beneficial for both parts occupiers and tenants. (Strutt and Parker, 2017) Furthermore, serviced offices can provide a solution to occupy space on a less restrictive lease term. In WeWork service agreements start at six months for WeWork office suites. (Hershfield, 2019)Tenants could take small amounts of space over a shorter-term basis. Although the majority of occupiers in serviced offices are small to medium-sized companies, where larger companies require additional space for projects or confidential work, serviced offices can provide a solution whereby they can take small amounts of space over a short period of time. (Strutt and Parker, 2017) Cost Although serviced offices offer a high advantage of flexibility, the cost is often higher on a square feet basis, especially in the long term. Most start-ups or smaller companies may be prepared to pay a higher cost in order to have flexibility. However, more established companies who do not need the flexibility will pay lower costs and larger companies, it is likely to be more cost-effective to acquire a traditional lease over the medium to long term.

Another one positive impact of coworking spaces is that the tenant does not require to pay additional charges such as fit-out costs on top of the rental payment. For a short rental period, this advantage provides a more cost-effective solution and reduces hassle. Secondly, serviced offices also offer the potential to cater to a fixed number of people without the need for additional extras such as kitchens and reception areas. (Strutt and Parker, 2017) From occupier's perspective, they have the opportunity to gain more income to offer the same amount of spaces and services gaining revenue from multiple tenants at the same time. Moreover, they can reduce the empty office spaces and have the highest usage for their properties. Amenities Members of WeWork have access to serviced offices with a wealth of allinclusive workplace amenities and include valuable benefits on business services

and

lifestyle

perks

which

could

increase

employees'

productivity. WeWork provides a large amount of extra amenities in order to attract more and more tenants. (WeWork, 2019) • •

Super-Fast Internet Printing Nooks

•

Unique Common Areas

•

Stocked Kitchens

•

Onsite Staff

•

Phone Booths

•

Cleaning Services

Future The main WeWork’s goal for the future focuses on redefining the workplace experience of the future and optimizing every aspect of the physical workplace so workers are their most productive. (Mikel, 2018)

Images Figure 9: Private office – Standard

(WeWork, 2019) Figure 10: Private office – Office suites

(WeWork, 2019) Figure 11: Private office – Headquarters by WeWork

(WeWork, 2019)

ϱϱ

Figure 12: Hot Desk

(WeWork, 2019) Figure 13: Dedicated desk

(WeWork, 2019) Figure 14: Labs desk

(WeWork, 2019)

ĎąĎ˛

Results of the interviews One of the main research tools was the interview. The interview was conducted in person and full transcripts of the interviews can be found in Appendix 2. The results from the interview will be presented thematically related to the research objections •

Today’s office market demand

•

Changes on workspace

•

Drivers of those changes

•

Impact on the real estate

•

The future workspace

Today’s office market demand First of all, all participants were asked which one of the four common office layouts have the highest demand today. Almost two-thirds of the participants (60%) believe that the dynamic spaces have the highest demand today and clients seek office buildings for this layout. More than one-third of them (40%) claim that shared spaces have the highest demand. None of them argues that traditional office spaces even openplan have the greatest demand. Figure 15 compares the two layouts with the highest demand for office properties today.

40%

60%

Dynamic spaces

Shared spaces

Figure 15: Office layout demand

Although the majority of participants believe that, the dynamic spaces have the greatest demand, one of the interviewees points out that it depends on the culture of each company. On the one hand, start-ups and modern companies, which occupy the largest proportion-share of the market, are searching for shared offices. On the other hand, there are traditional and older companies that are still are looking for openplan spaces. Moreover, one of the interviewees suggest a new one type of workspace that has not yet the greatest demand but its demand is increasing considerably. Suggest a new type of workspace known as the virtual office. Although, this aforementioned type has not yet gained popularity among the workspaces, its demand is increasing considerably. The virtual office offers a physical address and the opportunity employeesâ&#x20AC;&#x2122; work from anywhere offering some services at the same time. In addition, participants were asked to identify which amenities are more on request by todayâ&#x20AC;&#x2122;s tenants. All participants agreed that the three amenities that clients have as a priority are flexible meetings spaces, communal areas and kitchens. Figure 16 compares the amenities that clients require more on office properties today. 7 6 5 4 3 2 1 0

Figure 16: Desirable amenities

However,

one

the

interviewees

supports

that

these

three

requirements are not only supportive available options but clients consider these three amenities are fundamental or every office space. Moreover, he comments that these amenities depend on the location. Furthermore, another one participant mention that big companies with a large amount of budget are willing to offer many more amenities than these three more desirable and include extra services to their employees. Changes on workplace Among the main objectives of the current research, is to discover the changes in the workspace. Participants were asked to identify the three most significant changes of them and to discuss their perspective. The following figure represents which of the changes are the most important. Flexible layouts Meeting rooms Open plan Serviced offices Social spaces Sustainability accreditation Unassigned seating Wellness space 0

Figure 17: Most significant changes on workplace

All participants consider that flexibility is the most significant change. More and more traditional office buildings are transforming into flexible spaces including flexible furniture solutions. Two-thirds of respondents believe that the increase of social and wellness spaces are the other two most remarkable changes in office properties last decade. However, a few interviewees include sustainability accreditation, increasing of the

meeting room and the growing of serviced offices into the three most significant changes. One of the participants highlights that nowadays, the top priority of the majority of the companies is to create spaces, which are focused on wellness. Companies have understood that only happy and healthy employees can be productive, therefore, they are seeking the creation of more wellness spaces. Another one respondent mentions that the importance of the change it depends on the culture and the size of each company. Smaller companies tend to have as a priority the creation of enough space for their employees and their secondary purpose is to offer flexible meetings room. In the contrary, larger companies have as priority the offering of spacious kitchens even more than the kitchen in every building, but kitchen areas on every floor. Kitchen spaces it is not only a space to have lunch but also these spaces consist of areas for socializing and random meetings with colleagues. Drives of those changes on workplace As revealed by the material discussed within the literature review, there are many reasons that have contributed to the changes in the commercial office market. Interviewees were asked to rank these drivers form the most important to the less important. The following figure shows the ranking. Flexibility Internet Well beeing Sustainability Co-working 0

Figure 18: Ranking of importance of drivers

Participants rank flexibility as the most important driver of workplace changes and co-working the less important. There were a variety of answers given to these questions. Flexibility was the second most important driver for all of the participants, nonetheless took the first place on the rank. Interviewees rank internet as the second most important driver of workplace changes. The internet has been a force impacting office property for years now. Interestingly, there were key differences between the opinion of the participants. Wellbeing and sustainability were the most important for someone and the less important for someone else. The internet has been a force influencing office property for years now. Flexibility considered as the most influential factor for office changes. One of the interviews underlines that due to the global financial uncertainty and globalization flexible spaces and leases have increased significantly. Nowadays, a company may at any time grow or face a downturn and flexibility offer the opportunity to minimize or maximize space and services and have flexible agreements at any point in time. In terms of flexibility, one of the respondents claims that the demand for flexible workplaces is driven by accountancy rule changes. At the start of 2019, leases need to start being recognised on balance sheets. Leases with a term of 12 months or less are not required to be recognised on company balance sheets. One of the respondents highlights that the sustainability is the most significant driver for workplace changes and he argued that it is driven by the legislation that does not allow letting a commercial property with an EPC rating F or below. This national legislation carries out the risk o financial penalties, as a result, one of the responders consider sustainability the biggest influence across the national office market. The majority of participants included wellbeing in the three most influential factors of workplace changes. They support that wellbeing has

large consideration for landlords in the last decade. In terms of the wellbeing angle, operators encourage community between their tenants either by offering monthly seminars and conferences or simply frequent social events which could be as simple as â&#x20AC;&#x153;drinks on the terraceâ&#x20AC;?. This is all conducive to employee wellbeing. One of the respondents claims that the whole co-working concept is actually overblown in its importance. For instance, only fractions of WeWorkâ&#x20AC;&#x2122;s operations cater to this submarket. Finally, one of the participants added one more important driver this is the culture. He believes that any company have its culture and its identity that may affect a lot the design and the whole layout types of spaces of a building. Impact on the real estate industry The research aim of this study is to investigate the impact of workplace change on the real estate field. The key question was to gather opinions and different perspectives on the primary research objective. All participants highlighted the reducing of office leases as the main impact on the commercial office market. One of the questions was focusing on the duration of office lease today. All participants agreed that workplace leases have changed dramatically. In the past, offices leases were 10-25 years. Today, the average lease is 5-8 years. For the very best assets, leases still have duration 10 years but for the second-hand stock, the 5-year leases are becoming more commonplace. Furthermore, leases for office properties have typically been agreed on 10-year terms subject to break options in the 5th year. This dynamic is somewhat shifting as we are beginning to see many 5year leases with break options in the 3rd year. Nowadays, workplace leases have become more flexible and have more flexible licence agreement. Serviced office offer leases at least 1 year and has yearly duration. Most of these leases length 1 to 5 years and w.

There is also a new category of workplace leases. Co-working spaces offer monthly leases with duration only a month at least and most of the shortest leases has duration 1-6 months. One of the interviewees added that the flexibility not only for the duration but also the flexibility of agreement. Serviced offices can offer all-inclusive leases, which allow flexibility via shorter and often rolling contracts that can be agreed and sourced quickly. One of the respondents believes that the biggest impact on those changes in workplaces is the speed. Every step of the process has become faster than ever before. The time of finding a space, negotiating, designing and signing a deal has decreased dramatically and has affected a lot the real estate industry. Another one important impact is the transformation of many of the existing office properties because of the requirements of the Energy Act. This

legislation

requires

that

all

office

buildings

should

have

environmental accreditation. Moreover, many exiting office properties remain unlet and empty. The demand for traditional office properties has reduced significantly, as a result, many big offices building remain unlet and do not the requirements of today's clients. This has created the need for the refurbishments of many older office buildings aiming to meet the needs of today's employees. One positive impact of the workplace changes on the real estate is increasing income because of the flexible lease. From landlords perspective, the monthly or yearly rental basis have given the opportunity to have a higher income in a long term basis. One of the interviewees' highlights that â&#x20AC;&#x2DC;â&#x20AC;&#x2122; tenants who rent office space in yearly basis if they keep rent office space for 5 years we have the same income if they rented with a 5 years lease or in a yearly basis. However, in case they keep rent after 5 years we can gain 20% more approximately for each year in the end or we can gain 100% (double income) for the ten

years. This flexible rented – lease model has offered a lot in the real estate industry and could be better satisfying both parties at the same time in the future.’’ Further to the question about the impact on the real estate industry, there was also another one question that was trying to focus on what developers and landlords can do in order to ensure that their properties are on demand. All participants agreed that developers and landlords should take the appropriate actions in order to defend their properties for future tenants. First and foremost, they should cater to occupier requirements for every market that they operate in separately. One of the interviewees emphasises that clients in Central London have different requirements and needs instead of the regional UK. Furthermore, landlords should create or redesign working environments which include a large variety of single facilities, shared facilities, local amenities, service delivery and support services. One of the respondents points out that landlords should justify services and estate charges through including more desirable amenities and external spaces.

In addition, they should create workspaces that cover all potential clients and their constantly changing needs. Most interviewees claim that all office buildings must have many floors with different zones consisting of different office layout. For instance, an office building must consist of some floors of traditional layout, some other floors of flexible workspace and all the others floors could consist of extra space, amenities or services that can meet the needs of every potential client and accommodate volatility in headcount. Few participants comment that developers should digitize simple service delivery and support services to focus on human-centric services that enhance employee’s performance. Another action that 64

can help to ensure office properties is to create or upgrade energy efficient in their existing office properties. This is vital because not only it is driven by the national regulation but also this is important to provide a healthier environment for employees and reduces cost on a longer basis. Moreover, developers should ensure that they create and provide appropriate space. They should also liaise with tenants and make pre-lets. Many benefits flow to both parties from a pre-letting, developer and the potential tenant. Securing a pre-let can help with the risk of the vacancy rate, of shortage of funds, of low rental values or high yields. One of the participants highlights the importance of the location. A landlord could ensure that they include in their portfolios office properties in many desirable locations across London. An office property can still remain in demand if it is located in a desirable area even the requirements and needs are changing constantly. He is also added that Kings Cross and Farringdon is the most upcoming areas for office demand in London. The Future workplace Anther one important part of the aim of this research was to find out how will be the workplace in the future. The last question was seeking to collect different thoughts and perspectives for the future workplace. Firstly, all interviews agreed that the office market in the future will change totally and they characterized the future workplace as a ‘’digitalized’’ space. The future workplace will be not a physical place but a notional space. Offices will be truly digital and employees will communicate and collaborate in unprecedented ways.

In the next twenty years, more and more people will work from their homes or from different locations. The total space of office properties will be reduced dramatically because of flexible working. Many multistorey office buildings in London will reserve at least one floor for flexible working â&#x20AC;&#x201C; allowing their tenants to take such additional space as and when major projects arise & staffing levels ebb and flow. Furthermore, interviewees imagine office buildings which include more amenities which cover the needs of every different type of employee. All respondents argue that office buildings in the future will incorporate technology completely. There will be a digitalization of services such as a booking meeting room. Future office buildings will reduced entrance area. Conventional receptions will be replaced by very small entrances which they will include computers and robot instead of the physical presence. In addition, traditional office passes will be replaced by a system with facial recognition identification. Furthermore, office buildings will include many more hi-tech systems and sensors that will offer innovative and flexible services. One of the participants pointed out another one important innovation that will be used in the future. This is the localised acclimatisation systems that allow individuals to adjust the climate within their individual workspaces. The future real estate for office properties will change significantly. All participants believe that workspace owners will not sell spaces but they will sell services. Future employees will book desks and other services like travellers book Airbnb houses. There will be holistic flexibility in everything. Lease terms will be even shorter than today. In the future, more and more people value flexibility in everything, as a result, will be created a flexible option to everything. For instance, there will be a flexibility in terms of the fees, and will create a different fee for extra service property owners offer such as deposit

fee, design fees, consulting fee and other fees for every new service they offer. Consequently, property owners will provide more customized solutions in order to meet clientsâ&#x20AC;&#x2122; expectation. Flexible leases and agreements could offer more options.

vii

Conclusion The current chapter of this dissertation summarizes the findings from the primary and secondary data analysis to conclude the research objectives, aim and key questions of the study. This study intended to determine the impact of workplace changes on the real estate industry. The following section will analyse how the objectives were accomplished and summarizes the result. Objective 1: To provide an overview of the UK office market. The first objective was to provide an overview of the office UK market from ancient Rome until today. This objective was achieved mainly through the review of the literature with an additional analysis of the primary data form derived from interviews. As discussed in the previous chapters, the first type of office space created in Ancient Rome and was the private place or home for the workers. This was followed by the first form of office buildings in 1900 which its layout was an early open plan with the aim of provided efficiency and high performance of workers. In 1930, the work environment transformed into a place for socializing and communication. In 1960, has started to create cell office which was based on hierarchy into the working environment including self or shared office desks. In 1980, a new type of office called ‘’CoCon Office’’ (Communication and Concentration) was created combining the two previous office type: open plan and cell-office. This type focused on privacy and the need for changing space accordingly to work activity. At the start of this century, open-plan offices met the needs of the new generation of mobile workers. During the last decade has come into view the flexible and co-working workplace and their demand is constantly increasing dramatically. This stems from the fact that more and more employees work from their homes or other location rather than traditional offices. Last years, a new type predominates in the UK commercial office market and its called ‘’ dynamic spaces’’. Dynamic and

flexible workplace has a growing demand due to the fact that it is characterised by the ability to transform and become adaptable quickly and easily. However, the results have shown that the last years' innovation is the virtual office, which gives to today's millennials generation the possibility to work from different places and location offering a big variety of services and amenities everywhere they are. Over the centuries, workplace has constitutes its first form due to people started work again in their homes as at the start of 1900s. Objective 2: To discover the changes in workspaces and analyse the trends and demand of the office property market. The second objective was met through the process of the literature review but predominantly met by the analysis of primary data. Primary data confirmed that dynamic space has the highest demand in the commercial office market in the UK. The research also shows that virtual offices have an unexpected growing demand. However, the most interesting finding was that flexible and co-working market is actually overblown in its important because is occupy a small proportion of the overall office market in the UK. The results of this study shown that the three more desirable amenities in office spaces are the flexible meeting spaces, kitchen and communal areas but it is differently the location and companyâ&#x20AC;&#x2122;s culture. However, in the present workplaces have added a lot of various amenities that cover needs for every potential worker. Additionally, this comprehensive analysis concludes that offices consist of a vivid-mix of collaborative spaces, individual, quit rooms with the main purpose to provide wellness and flexibility. There have been many changes in office properties during the last decade

and

present

workplaces

have

designed

driven

the

combination of various workstyles, preference and approaches meeting the needs of four different generations of employees. The most important change is the incorporation of technology that has created smart workplaces using sensors and high tech which improving efficiency and optimizing spaces. Objective 3: To establish the reasons that contributed to the changes in office spaces. As revealed by the material discussed within the literature review, a number of drivers were analysed and were assessed through the literature review that contributed to the workplace changes. It has been identified through secondary data that the constantly changing nature of work is the key factor. Moreover, sharing economy and agility are two additional factors that have affected workplaces and play a key role in the creation and rise of flexible and serviced offices. In relation to this analysis of interviews, real estate professionals claim that flexibility is the most significant driver and the internet is the second most important. Furthermore, according to the interviews, wellbeing and sustainability have contributed to office properties in different aspects. In terms of wellbeing, companies have been aware of the impact of the working environment on employees' productivity and take care of providing wellbeing spaces and service. Although primary research indicated that sustainability is not one of the most significant drivers, environmental awareness is a crucial factor for office changes because of the national legislations. At the same time, sustainable solutions create a premium to a property reducing operational costs and overall increasing rental prices. Finally, this researcher discovered that culture is also a considerable driver that may affect a lot a workplace.

Objective 4: To assess the impact of these changes on real estate and the consequences for landlords The literature review produced a general theoretical framework for this objective, but this research question was predominantly explored through the interview responses and discussions with the experts. The varying view of the perceived level of impact of workplace changes on real estate was attributed to the different natures of professionals’ background. Despite the varying opinions, it was agreed that office leases have reduced sharply from 20-25 years average duration to 5-8 years. In addition, both primary and secondary data have concluded that office leases have become more flexible in duration and in licence agreements. Landlords can rent an office floor, a desk or a meeting room by hour, month or year. Commercial office space can now be delivered as a service with a “pay as you go’’ model. The qualitative research has found that the overall size of office properties has decreased but the total area of shared amenities has increased. Nowadays, workplaces provide a huge variety of amenities. Therefore, landlords sell an experience rather than square feet. Due to the fact that space of office has reduced significantly many existing office properties have changed use and transformed into other types of properties. As previously discussed, the evidence from interviews shown a positive impact on the real estate industry. Real estate models for flexible leases and the possibility to lease vacant space or a communal area twice, increase income. Furthermore, primary data point out that a remarkable impact of those changes is that every step of the process of letting a workplace has become faster than ever before. Moreover, primary data from cases revealed that serviced offices provide the opportunity to occupy spaces in high locations in good quality with the solution on a less restrictive lease term. Serviced offices

reduce significantly the unused spaces and it is beneficial for both parts, occupiers and tenants. The next finding was linked to the actions that landlords and developers can do in order to ensure their properties are in demand. In regards to the analysis of the interviews, real estate professionals agreed that landlords should redesign and create office properties which include at the same building different zones representing a different type of office spaces in combination with a wide variety of amenities and supportive services. Therefore, they could meet the needs of the next generations of employees. In addition, they should cater to occupier requirements for every market separately. Primary data resulted that property owners should redefine the real estate models and adapt service models with the ultimate purpose to fit proactively with the changing requirements of employees and they should prepare new forms of occupying aiming into the keep and attract tenants. Further to this objective, this research indicated that developers should create appropriate spaces and liaise with tenants making pre-lets. Objective 5: To identify what the future holds for the office market. The key research question of this dissertation is whether the office market has changed and what the future holds for it. Both primary and secondary data used to achieve this objective. The research found out that the future workplace would be the â&#x20AC;&#x153;digitalizedâ&#x20AC;&#x2122;â&#x20AC;&#x2122; space. This ''Smart office'' will acquire a large proportion of the share of the commercial office market where employees will communicate and collaborate in unprecedented ways. Furthermore, the results also highlighted that the future office will incorporate technology using sensor and other hi-tech systems that will

offer innovative and flexible services. The future will hold of dynamic offices that can transform easily and quickly in many different types of spaces and accommodate a variety of work styles and are going to be increased significantly. Future offices will provide human services that enhance the employees' experience as they interact with their surroundings. In conclusion, the principal finding of this research indicates that the role of the commercial office real estate industry is to decode the demands of workers and businesses and transform the workplace into a place

that

adapts

the

changing

demands,

aspirations

and

expectations of the demand of both end-users and customers. The contribution of technology is mandatory in order to support these changes. The future office property portfolio will look the same as a network of digitalized workplaces. Owners and developers have to react to increasing demands for flexibility, adaptability, and agility because during the design decision the experience is key factor. Investors should consider the advantages and disadvantages of working with occupiers with main objective to clarify flexible lease arrangements and advocate co-working and shared amenities and services of their buildings. Successful office spaces mirror their workers, adaptive, intuitive, and always changing

Limitations During the performing of this study, various limitations affected the outcome. The primary difficulty encounter throughout this study was related to collecting primary data. The main limitation of this research is the number of interviews that were available. This limitation is based on the available amount of potential respondents. With the available qualitative data gathered through the interviews provided an adequate level of insight on the topic. However, it would have been optimum to have available more primary data resulting gather a broader range of expertsâ&#x20AC;&#x2122; perspectives. Another one of the limitations is the number of case studies. A bigger amount of case studies would help further the result and would give a broader sample of existing office properties and their characteristics. Through more case studies would be compared more data and could have

been

produced

detailed

representative

analysis.

Furthermore, another one important limitation was hence the amount of time available. It was hard to arrange meetings with most potential participants from more and diverse types of organizations in order to provide a more in-depth analysis, which would cover more aspects of this research.

vii

Further work As per the limitation described above, further work is recommended with the purpose to enhance the findings of this study and overcome the limitations. In future investigations, it might be possible to use more participants and cover a wide range of position and companies in order to strengthen the current findings and gain more detailed knowledge about the impact of workplace changes on the real estate industry. A future area of study would be to understand the differences between various locations. The study could be widened by looking at other cities in the UK except for London, as well as wider research could be conducted in order to investigate more details for the difference between different commercial office markets in London. It would be a good comparative to assess the factors that affect workplaces between different locations. For instance, it will compare the difference between the central London market and other regional markets as well as other UK cities. Further research should be done to investigate in depth the flexible offices. A further study with more focus on flexible workplaces and coworking is suggested. The increasing growth of these types of workspace requires research that is more detailed. A further work could determine more detailed knowledge for their characteristics, factors that creates these types of office properties and their overall impact on the real estate industry In order to built on the findings of this research, a further study would analyse the business models that operators use for let flexible offices, the risk of them and the return. There is abundant room for further progress in assessing the agreements between landlords and tenants and the effect on flexible components in the contacts.

vii

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Appendices

Appendix 1 â&#x20AC;&#x201C; Interview Questions 1. Which of the following office layouts has the highest demand today? A. Traditional offices B. Open plan C. Dynamic spaces D. Shared spaces 2. How long is the shorter and longer lease today? 3. Please, identify the three most significant changes that have been made in the last couple of years in workspaces. A. Open plan / reduced office space B. Flexible layouts and furniture solutions C. Increased meeting rooms and collaboration spaces D. Increased social and relaxation spaces E. Unassigned seating (employees with no fixed desk) F. Increased use of natural light G. Wellness rooms H. Sustainability accreditation I. Other (please specify) 4. Which of the following drivers do you believe have changed workplace most in the last decade? Please rank in order of importance from 1 to 5 where 1 is most important and 5 least important. A. Internet B. Flexibility C. Wellbeing D. Sustainability E. Co-working

5. Which three of the following amenities/services do tenants require more? A. Flexible meeting spaces B. Communal areas (cafĂŠ, bars) C. Recharging spaces D. Wellness rooms E. Libraries F. Playrooms G. Kitchens H. Event spaces I. Retails J. Improved outdoor Spaces K. Other 6. What is the impact of those changes to real estate? 7. What do you think landlords / developers can do to ensure their properties are in demand? 8. How do you think the office market of the future will be? 9. Do you have anything else to add?