More employers are reshuffling their real estate portfolios to accommodate a new kind of workplace.
The new hybrid workplace means more than simply offering employees a Slack channel and the green light to work from home half the time. It has prompted companies across the nation to reexamine their real estate footprint—what the office looks like, its location, its size, its amenities, its technology—and whether the office is even necessary in some markets.
Allstate, the nation’s second-largest insurer, is reshuffling its real estate portfolio of 500 offices to determine which of them truly really matter. Pre-COVID, about 20% of Allstate employees worked from home, but in September, at least 99% of them will continue to work remotely or split their time between home and office. Sorting out how to manage the excess office space across the nation will take time, and may include canceling leases in some cities and adding smaller satellite offices in others.
“We’re rethinking what the workplace looks like, and how we can ensure we drive innovation, collaboration and culture,” says Christy Harris, Allstate’s chief talent officer. “But I don’t think we’ll ever go back to an office where you come in five days a week.”
The hybrid workplace is the new normal, according to 87% of 185 U.S. companies surveyed this spring by commercial real estate firm CBRE. Those companies are now working to determine how that looks in terms of office space needed to accommodate group work, meetings and other in-person activities.
Consolidation still remains a focus for most large companies, but those portfolio adjustments are now thought to be less drastic than originally anticipated. The latest CBRE survey found only 9% of large companies anticipate their office portfolios will get “significantly smaller” over the next three years, compared to 39% last September. Meanwhile, large companies planning for modest office-space reductions grew to 72 percent this spring, up from 45 percent in September.
“Many of these larger companies recognize that space is underused, and they have an opportunity to redesign space to boost use and efficiency and, in some cases, reduce their footprint over time,” says Julie Whelan, CBRE Global Head of Occupier Research. The smaller companies are the ones that have the strongest sentiment towards growing their footprint, mostly because they expect to do more hiring, which isn’t surprising given recent economic growth, she says.
That’s the case for Collectors.com, grading and authentication services for coins and sports trading cards. The 1,000-employee company has its 200,000-square-foot headquarters located in Orange County, California with smaller 7,000 to 10,000-square-foot offices in New Jersey and Manhattan. But the company will be expanding its office footprint across the United States and internationally over the next five years. “I think most would agree that there is a huge value of having teams together in person—from a morale/culture standpoint and from a work productivity/collaboration standpoint,” says Rosie Hobbs, the company’s senior director of strategic growth.
Large companies have a longer journey as many of their employees remain in a full-time remote status. The process of getting employees back to the office remains ongoing, but early signs of life are emerging. According to Kastle Systems data, average office occupancy in the top 10 U.S. markets currently stands at 29% of pre-pandemic levels (June 2021 vs. March 2020) but is slowly increasing. More employers are now encouraging vaccinations, boosting communication about the virus and focusing on air quality and safety inside the office.
Assuming the pandemic remains relatively under control, office occupancy will increase dramatically, but not fully, in the fall before leveling off, according to estimates by CBRE. At least 12% of large companies will grow their portfolio of office space in the coming months, and 40% of small businesses will do the same.
“Office space continues to be important because it offers a place where people can come together when they need to, like a clubhouse. A place that offers employees familiarity of an environment, the space to be productive and collaborative and the technology to be successful,” says Whelan of CBRE. “Being present virtually 100% of the time can wear on people.”
Allstate began rethinking the workplace soon after the pandemic struck last spring. The company surveyed all of its 38,000 employees about their work preferences, and the resounding answer from 95% of them: “We want flexibility.”
The company then began scoring jobs based on whether they can and should work from home. The company found that 1% would need to come into an office four to five days a week, 40% would be home-based, 20% would be hybrid. The other 40% were given a choice of being fully remote or hybrid and nine in 10 workers chose home-based. All in, about 75% will be home-based, 24% hybrid, 1% in-office.
The survey results weren’t entirely a surprise: when COVID forced everyone to work from their homes, Allstate saw no drop in productivity. It made it easier for people to get to work, instead of fighting traffic or bad weather. “But it was definitely higher than we expected,” says Harris. The WFH preference spread across all demographics, young and old.
Now, the company is preparing offices for a hybrid workforce, such as installing reservation software for hot-desking and conference rooms. It’s also employing new video conferencing technology that provides a “Brady Bunch view” of each participant, even if they’re in the same room, to put at-home workers and in-office workers on the same playing field when it comes to comfort. “It will create an equal experience for everyone inside and outside the office,” says Harris.
Allstate will invest in more agile office features, such as prefabricated walls and offices that can easily be rearranged, rather than investing in new drywall construction. Cross-functional groups will sit together in pods to encourage more innovation and communication. The Company will also continue to outfit remote workers with modems, mice, routers and computers for a more comfortable home office—as well as offer monthly stipends for cell phone and Internet use.
How real estate is reshuffled in the months and years to come will largely depend on how employees use the office and how often, and maintaining culture will require intentional focus, says Harris.
A number of companies, including R/GA, Ford, General Motors, Google, Salesforce, Reddit, and Spotify, have embarked on a similar planning process. To encourage Gen-Z and Millennial workers to come back to the office, Google, for instance, has been repurposing and redesigning its offices to make them more attractive than working in a tiny apartment or their parent’s basement.
Google is designing “team pods,” with chairs, desks, whiteboards and storage units on casters that can easily be wheeled into various arrangements. New meeting rooms will be called “Campfire,” where people will sit in a circle with video screens to accommodate remote workers, and outdoor hangouts and tents will be erected for meetings. If an inside meeting needs privacy, a robot with sensors can inflate a translucent, cellophane balloon wall. And to encourage focus, the company is installing “petals,” or leaf-shaped partitions on the edges of desks and office chairs with directional speakers in the headrests that can play white noise to muffle office sounds. Smaller conference rooms will be turned into private workspaces.
At Allstate, the decision to embrace hybrid and remote is already paying off. The number of job applications it has received for data scientist positions, for instance, is up more than 100% this summer, and the company is getting recruits from a broader geography and more diverse group of applicants: a 27% jump in female candidates and a 27% increase in minority candidates.
“Recruiters are telling me that everyone is asking about flexibility,” Harris says. “And our existing employees say they’re feeling like they’re heard and engaged.”