All over the world, employers of office workers are trying to come to grips with the long-term trend of working from home (WFH) and working from anywhere (WFA). Some employers are resisting this change, while others are embracing it.
In the end, however, the market will have the final say, says John Loos, Property Sector Strategist at FNB Commercial Property Finance.
“Market forces are powerful, and many companies and governments have failed when trying to resist those forces. The labour market is one such example, and office employment conditions and arrangements are part of that.”
Working from home
In 2013, Nicholas Bloom and James Liang published the results of their work with CTrip, a large Chinese travel agency. The paper was titled ‘Does Working from Home Work? Evidence from a Chinese Experiment’ (NBER Working Paper No 18871).
They conducted a randomised experiment comparing the output and productivity of two selected groups - one group worked from the office and the other group sent home to work. Analysis of the results were encouraging for those who believe that greater levels of WFH can work. It challenged the notion that all employees need to be in the office to be at their productive best.
The WFH debate escalated when Covid-19-related hard lockdowns started globally in early-2020, with many office workers being sent home to continue working.
Ever since there appears to have been a proliferation of research done on the issue. As yet, Loos says, no one is quite clear on what the future holds for office workers and the office market or how rapidly the long-term rising WFH trend will proceed from here.
Surveys
“The many WFH surveys have proved interesting and insightful - although often varying in outcome and often carried out in developed economies. I suspect the results reflect what many South African employees and management members are also thinking about WFH - the good and the bad.
“Having read many articles on WFH survey results and expert opinions, I get the impression that regular employees in sectors such as the financial sector tend to be biased towards wanting to work from home. Whereas, members of management as a group are biased towards getting subordinates back to the office.”
He says this segmentation may be a bit too simplistic. Many managers feel uneasy about WFH because, many may have - perhaps incorrectly - equated work and productivity with being able to see workers at their desks.
“There is such a mindset among some, although they would battle to explain some impressive company results over the past two years where often almost entire workforces worked remotely.”
When analysing the WFH issue, there have also been different segmentations provided. One theory is that those who want to get the job done without distraction tend more towards WFH. On the other hand, networkers are desperate to have everyone back in the building. This is because networking and lobbying interactions are better done informally in corridors or face to face in cafeterias.
Some chief executives talk about the importance of maintaining company culture as a reason for bringing employees back to the office. However, not all companies have cultures that excite employees and motivate them to voluntarily hurry back to the office workspace.
“Besides general company culture arguments put forward by the pro-office workgroup, I have also frequently come across the argument that activities such as idle banter and coffee machine conversations lead to all sorts of innovation, good ideas and problem-solving for the betterment of the organisation,” says Loos.
“There is probably some merit in these arguments advanced by the back to the office group. Despite huge improvements in conferencing software, I don’t believe we have yet fully replicated the in-person interaction experience online.”
Office space
A recent article from the Harvard Business Review titled ‘Why companies aren’t cutting back on office space’ would surely grab the attention of office landlords and certain pro-back-to-the-office managers.
Loos says there is some truth in this report, which emphasises that social distancing measures often drive lower office worker density levels. However, its headline is perhaps misleading. Although greater social distancing in the office can mean lower density than before for many - limiting the extent to which a company can reduce its office space requirements - a claim that businesses have not been cutting back on office space may seem debatable in the US, where office vacancy rates have risen quite significantly in many cities.
In South Africa, too, MSCI data shows that national office vacancy rates increased from 7.9% in the second half of 2015 to 17.9% by the first half of 2021.
Loos says that in FNB’s Property Broker Surveys, a significant percentage of brokers - who are very much in touch with tenants and landlords in the office market - have consistently pointed to companies revising their office requirements.
“They often cut back on space, with greater levels of remote work being said to be a key driver of this trend,” he says.
Technology
Loos says he tries to look past the noise of what individuals in a market say at any given time and prefers to consider what the greater market forces, driven by larger groups, will ultimately do.
“It’s important to remember that WFH - or work from anywhere other than one’s office - began a few decades ago driven by forces totally unrelated to lockdowns. The US Census Bureau showed estimates of the percentage of employees working from home rising gradually from 3.3% in 2000 to 5.4% by 2018.
“This is not surprising, as technological progress has made office employees increasingly mobile. The internet and logging into servers, email, Wi-Fi, and now highly affordable and practical conferencing software enable us to Zoomify many interactions.”
He says it makes sense to work on the realistic assumption that the enabling technology will continue to improve in future.
“The Covid-19 lockdowns merely boosted the long term WFH trend. They obliged late-adopters to use the most modern online communication technology. Whole divisions of banks have functioned almost entirely remotely for two years with relatively few glitches.
“Although not perfect, the forced lockdown experiment has been a massive success. But there are no doubt benefits to some in-person contact.
“I believe this forced attitude change is highly significant in increasing work location flexibility. This greater acceptance of online interaction is here to stay at a far higher level than before the lockdown, implying far less of a need to be in the office for in-person interaction.”
Commuting
Loos says that lockdowns have made many employees realise how inefficient and costly daily office commuting was. In addition, people often don’t appreciate how bad something is until they’ve stopped doing it.
“We get used to things over many years, and I believe society’s becoming accustomed to the costly, stressful and time-wasting activity of urban commuting - not to mention polluting - has been similar to the frog in the boiling water analogy that is often used. There is little positive about urban commuting in increasingly congested cities,” says Loos.
The lockdowns allowed people more hours in the day to use productively, with less stress from commuting. Many people also experienced major financial improvement through reduced transport costs.
“I believe the realisation as to how bad daily office commuting is has been a key influence in the desire of many not to return to the office. The office environment may not necessarily be bad, but people want to avoid the dismal experience of getting to and from the office.”
Next
So, what will happen in 2022? Barring some far more lethal strain of Covid-19 emerging, it seems that South Africa - and the world - is set to get back to far more normal economic life, relatively unrestricted by lockdown regulations.
However, Loos doesn’t expect the level of office attendance to get back to where it was before the 2020 lockdowns.
- The widespread acceptance of remote interaction means that more people can use it.
- How well the forced WFH experiment worked may have been a pleasant surprise to many late adopters
- The time saving when working remotely rather than commuting can be massive - up to a few hours a day.
- There are significant savings in transport costs.
- There are probable office space cost savings for companies.
Flexibility
Loos believes the market will start to talk, and the longer-term rising WFH and WFA trends will resume.
“The reality seems to be that many employees desire flexibility, and a significant portion appears to want to work remotely where it makes sense for the job to be done remotely,” he says.
In a recent Vidyard/Atomik survey of a sample of financial sector employees in North America, only 1% of respondents said they would prefer to work in the office all the time. Just 5% would prefer to work in the office some of the time, and 96% said they would give up a portion of their salary to be able to work from home permanently.
“These results appear to be extreme, and other survey results differ, but for a sizeable portion of employees, flexibility in work location and being allowed to work remotely at least for a significant part of the time appears to be proving popular.
“If surveys to this effect are a reasonable reflection of the opinions of the workforce, certain more progressive employers will see potential opportunities to gain the upper hand over the more resistant ones.
“The apparent opportunity lies in being able to attract skilled employees to your organisation through offering greater flexibility in working arrangements, while also perhaps being able to contain the company salary bill through being able to offer lower salary packages - than in an inflexible approach scenario - accompanied by greater work flexibility.
“In addition, the company could conceivably contain office space costs, retaining less office space than would have been the case in a less flexible work arrangement scenario.
“The less flexible employers would then likely be pressured by the market into greater flexibility with regard to working arrangements.”
Market effects
Loos believes that for many, it won’t be full-time WFH, but part-time WFH to a greater degree than before lockdown. Even with office-bound employees spending far less of their workweek in the office, reserving a desk permanently for each employee makes little sense.
The hoteling of desk space will make more sense for many companies, where employees only reserve desks for the days they will be in the office. He expects this practice to offset the move to a lower staff density due to social distancing measures.
“Accompanying all of this, I would expect that the office market will continue its long-term trend towards occupying a smaller share of total property stock. In the five years before 1990, the amount of office space built amounted to 34.6% of total stock built in the three major commercial property sectors - office, retail and industrial. In the five years before 2021, this share of the total had already shrunk to 22.1%.”
From the above, it’s clear that there will be significant shifts in the coming months and years between working from home (WFH) and working from anywhere (WFA).