THE OFFICE UPRISING

from MIPIM 2022 Preview Magazine

LOGISTICS

From workplace tosafe space

Hines’ latest timber office in Barcelona aims to respond to occupier needs

The pandemic has drastically changed work patterns around the world and has, in turn, sparked a revolution around how owners and occupiers think about office use, Ben Cooper reports

Compare the designs of the office developments coming out of the ground in 2022 with those at the turn of the 21st century and, with only a few exceptions either side, the difference is remarkable. It doesn’t matter which developed market you look at, from Singapore to Stockholm, the days of putting up a box with only the minimum of features beyond the functional are long gone. No wonder, considering the times. New work paradigms, whole new business models based around flexibility, even fun in the workplace, new attitudes towards the role of the office landlord — all have shaped the way that investors, and occupiers, look at offices today. And all of that is before you get into the formative turmoil of the past two years, and a seismic upheaval that has changed everything in business, most of all the modes by which people work. Despina Katsikakis is the global lead of Cushman & Wakefield’s Total Workplace services, as well as being an internationally renowned lecturer on the future of work and wellness in the workplace, and an advisory member of the WELL initiative to advance health and wellbeing in buildings. She says that the past two years amount to nothing less than a “trauma event” that will have untold consequences for our understanding of wellness at work. “People’s access to social connections, knowledge, mentoring and wellbeing have all suffered,” she says. “We are seeing a huge amount of focus now on treating this as a trauma event. We’ve been looking at this whole idea of workplace re-integration where you can create spaces where people feel safe. She adds: “From a building perspective we’ve totally acknowledged that ubiquitous tech can be used to manage a more dynamic interface between user and space to transform those spaces and energy consumption. We’ve experienced a work-life integration that has transformed our expectations for the future.” With transformed expectations comes new demands and pressures on office developers — and owners — to adapt. But Raphel Brault, head of France at international real estate asset management firm AEW, says that for professionals specialising in office space, the pandemic has been more of an accelerant of these new patterns than a sudden transformer. “The general market consensus is that the pandemic has been a catalyst to existing market trends. Working from home was already

Despina Katsikakis, global lead within Cushman & Wakefield’s Total Workplace service

Ronen Journo, head of European operations, Hines getting more popular across Europe. The pandemic has just accelerated this,” he says. Indeed, the trend towards a more ‘humancentric’ approach to offices, says Ronen Journo, head of European operations at Hines and former vice-president at WeWork, is an evolution long in the making — one that not everyone accepted at first. “The real estate industry was slow to evolve,” he says. “They looked at Google and Facebook and they were laughing. They said they’re creating a Disneyland. “But those companies were focusing on culture and human experience. That’s what they didn’t understand. They were focused on business outcomes, they knew that if we can give [staff] the best human experience possible they will be productive and they will be happy.”

What does that mean in practical terms? It means greater flexibility, as staff turn away from the Monday to Friday grind; better amenities within office spaces to attract top talent; a greater awareness of the link between salubrious, well-designed spaces and the happiness and wellness of the people working in them; and an ever-higher sensitivity to the environmental and social consequences of occupying large office spaces. The pandemic may only have been a catalyst for all this, but it has had a definite consequence of its own, one of making the need for owners to adapt one of surviving, rather than simply being en vogue. For this to happen, says Niall Gaffney, chief executive of Dublin-based real estate investor IPUT, office owners need to start rethinking the way they view themselves. “Now more than ever property owners have to regard themselves as service providers,” he says. “The market to attract office occupiers is increasingly competitive as they become more discerning about the space and locations they are choosing, and ultimately what value they can offer to their business strategies. “Occupiers hold the cards right now, so office owners need to make sure that their space is a head above the rest, meets the highest possible sustainability standards and provides a responsible investment proposition for the long term.” However well they do adapt their offers though, one fact is inescapable — with working from home now fully established as an option, on a total basis, office occupiers simply won’t need as

Inside Hines’ fully wooden T3 Diagonal Mar building

much space in future as they did prior to the pandemic. Demand is falling, and will continue to do so for some time. Brault estimates that one of the world’s most important cities for office investment, Paris, is going to lose a significant chunk of its current occupier demand as time goes on. He says: “There will be less office requirement overall, probably 10-15% over the next 5-10 years. It won’t be dramatic, it won’t all come at once, but it’s a significant amount of space.” It won’t come all at once, nor will it be uniform — the strongest developments in the hottest locations will be rewarded, a trend that Brault says is already very apparent. “Overall the Paris Region market is at a 5.7% vacancy rate. Inside Paris it’s less than 3.5% vacancy. In the outer suburbs vacancy is much higher. This is where we see

the polarisation,” he says. Consider that this is just in one city — albeit a major one — and for investors in the office sector thinking on a global scale, there are some tough decisions to be made. Demand is shrinking; priorities, and appetites are changing. For the offices that meet the increasingly high bars of design, location and amenity demanded by the next generation, post-pandemic prospects look exceptionally good. But for those that don’t, investors will reach a point where holding on to them, even trying to revitalise them, is no longer viable. If times and past turmoils have proven anything at all it is the importance of being flexible, and adapting. With the world not yet out of the COVID pandemic, and change still happening at pace, those who can move with the times, not against them, will reap 002_ART ER_PV_PIM the rewards the future offers.

Niall Gaffney, chief executive, IPUT

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