Bosses have tried calling it “morally wrong”,1 have left “condescending” notes on employees’ desks,2 and even forked out US$10 a day for every worker that comes back.3 But since the pandemic, many companies have struggled to convince staff to rebalance their working from home schedule in favour of the office.
It’s something of a conundrum for companies, but it’s a question for investors too. How to find those commercial office buildings that have real value by ensuring they’re the ones that employees want to work in?
In truth, research has shown time and again that people do still see the benefits of coming into the office - at least some of the time.4 They see the benefits that come from collaborating, socialising, boosting well-being, and being able to separate their work and personal lives. But what they want from their working environment has changed. Investors have to be much more specific about where their money is going - even down to the precise location of the buildings they’re considering - to ensure any assets they acquire satisfy the demands of employees and their companies.
Well, well, well
High on that list of requirements are amenities that cater to employees’ welfare. These can include bright and comfortable places to get work done, canteens that provide healthy food at lower prices, social spaces to catch up with colleagues, green roof terraces for strolls in the sunshine, and health facilities such as rooms to take Pilates classes.
The growing popularity of the WELL Building Standard – an accreditation that examines how a workspace serves employees’ health and wellness – is testament to how these considerations are moving up employers’ agendas. The certificate considers a building’s air, water, light, sound, material, and thermal quality alongside how it encourages people to move, to eat healthily and sustainably, to build community and culture, and to maintain their cognitive and emotional well-being.
These elements may seem ‘fluffy’ at first glance, but they add value. Research suggests that workspaces that meet the highest of healthy building standards can demand rents between 4.4 and 7.7 per cent higher per square foot than non-certified offices.5 An asset’s 10-year net present value could grow by US$115 per square foot in the healthiest, highest performing buildings.6 Workspaces with enhanced ventilation and high-quality air can also expect to see an 8 per cent increase in employee performance.7
Features like this can also demonstrate an employer’s consideration for their workers and can be important boosters not only to office attendance but also the attractiveness of a company as a place to work.
The place to be
However, the most important aspect to the attractiveness of a workplace is its accessibility. A recent survey of UK workers found that the cost and time spent commuting was the biggest deterrent for people going into the office.8
This is echoed in a report from CBRE, which revealed that 89 per cent of businesses regard public transport access as a key location driver for new facilities, up from 80 per cent in 2023 and from 44 per cent in 2022.9 The report also showed that the most desirable features of a building are those that make a commute as easy and sustainable as possible - with bicycle and scooter storage and electric vehicle charging wanted by 80 per cent and 69 per cent of employers respectively.
These preferences are changing the way that buildings across different areas of a city are valued. Once, commercial real estate focused on comparing the office market city by city, noting which metropolis, or even which region, offered the most long-term potential in terms of economic growth, or where new industries may emerge. But now the micro-location of a building - its specific positioning within a small area of a city - has become the focus, and those areas within a city that offer the best travel connections have quickly become the most attractive.
This is creating an interesting trend in many European and US cities as companies move away from designated business areas on the outskirts and back to historic city centres. To the east of central London for example, Canary Wharf, once derelict dockland that was developed in the 1980s as a financial hub, is now seeing some of its banking residents move out and is instead evolving to become a mixed-use zone focused on life sciences. Banking giant HSBC is one of the largest firms that has announced it will be shifting its headquarters from Canary Wharf to the City.
Similarly in Paris, La Défense, another area originally designed to alleviate pressure on the city centre, is falling out of favour as companies show a renewed preference for the central business district.
Much of this change can be ascribed to the range of public transport options that are typically available in the centre of a city, but historic city centres have other attractive benefits too. Employees want to work in offices that are close to amenities that make their lives easier, and the CBRE survey reveals that cafes, restaurants, and food shops are now very important (for 88 per cent of respondents), while fitness facilities and shops are also popular.
But the cultural capital of city centres - the varied architecture of an environment that has evolved over centuries, the broad offering of small businesses and niche restaurants, and the access to cultural facilities such as museums and theatres - is also increasingly important to workers.
The changing approach to work seen in the last five years had led some to question whether the office was dead.10 The office is alive, but the old expectations of what companies want, and how investors can provide them with the most attractive assets for the strongest returns, certainly seem to have passed on.
Sources:
[1] Elon Musk calls working from home ‘morally wrong’, Independent
[2] ‘Condescending’: Jacob Rees-Mogg leaves notes for WFH civil servants, The Guardian
[3] Salesforce lures staff with $10 donation to charity for each day they’re in the office, The Register
[4] Hybrid is the future of work, Stanford Institute for Economic Policy Research; In an era of choice, workers still prefer the office, Gensler Research Institute
[5] The financial impact of healthy buildings, The Real Estate Innovation Lab
[6] The financial case for high-performance buildings, Stok
[7] Economic, environmental, and health implications of enhanced ventilation in office buildings, International Journal of Environmental Research and Public Health
[8] Office worker survey, Remit Consulting
[9] European office occupier sentiment survey 2024, CBRE
[10] Return to office is ‘dead,’ Stanford economist says, CNBC
