The Mishcon Academy Digital Sessions
Susan Freeman
Welcome everyone. I’m Susan Freeman and I’m going to be your host today. This is the second in our sector-focused series of Mishcon Academy Real Estate Digital Sessions. So, today we’re discussing the future of offices. We’re going to talk about the longer-term implications because there will be an end to Covid and we’ll be looking at changing uses and demands, we’ll be touching on sustainability, healthy buildings and of course, technological advances. But I’m delighted to be joined by Charlie Green, the joint Founder and co-CEO of The Office Group, also known as TOG; Emily Prideaux, Director of Leasing at office developer Derwent London; Ronen Journo, Senior Vice-president of enterprise and workplace at WeWork and last but not least, Richard Howard. Richard is Head of London office leasing at Cushman and Wakefield. So, let’s get… we’ll get into an easy question to start with. Do you think we’re going to go back to working in the way we did pre-Covid? So, Charlie do you want to kick us off on that one?
Charlie Green
For sure there will be a new normal and we will not go back to the way it was before. Our working week is forever changed and how we make up our working week and where we work now is going to be made up of a variety of different spaces and locations we as individuals all want to work in a different way and now we’ve realised that we can.
Susan Freeman
Emily, what do you say on that?
Emily Prideaux
I think no, we won’t go back to how we were working before nor do I think we necessarily should. I think you know, Covid aside, will we be working the same in 2025 as we were in 2019? No. I think this will see a you know, change was afoot before and this will inevitably provide an acceleration of many changes that were underway but with further topics in that discussion.
Ronen Journo
People have been striving for flexibility for choice on how they manage their time and where they perform work and the longer this lasts, the longer I think mindsets are changing at all levels in organisations and everyone is trying to figure out, how do we seize this opportunity to come out and have a much more human working life?
Richard Howard
I think the real revolution took place a few years ago when the Office Group and WeWork came to the fore and really flexible working started then. What’s happened now will clearly accelerate it and we won’t go back to what we’ve known before.
Susan Freeman
Perhaps we can just look a little bit at what the office is going to look like moving forward.
Richard Howard
Coming into the office will need to be an experience and I think even until sort of March this year maybe you came to work to work and the amenities came second. You’ll have to have very good reasons to come to work and then you will work while you are there.
Susan Freeman
And Charlie what about you? I mean has this changed the way you look at how you’re going to provide workspace?
Charlie Green
We are going to have to work hard to bring people back to the office. They will come back but we’re going to have to work hard to make it a really compelling place, to make it attractive and that starts by the way with healthy buildings and safe environments and all of those things but that’s a given, we don’t really need to talk about that, if you’re not doing it you don’t deserve to have a voice. So, everybody has to do that. What more then are you doing that is really thinking about the experience of the individuals?
Ronen Journo
There’s huge amounts of data that’s being collected by employers around the world and the… it’s overwhelming consensus that when they ask employees what would you like your office to be about and the first thing people say is, ‘First of all I want flexibility. I want to choose when I travel to that destination’. Which leads us to believe that people are placing greater value on their time and on their commute time. So, if I’m going to travel to central London or central New York, that destination has to be rich in amenities, it has to be of high quality and enable me to collaborate with other people.
Susan Freeman
Emily, what… who, who is going to decide going forward where we work? Is it going to be the employer? Is it going to be the employee?
Emily Prideaux
I think you are going to see a different type of contract if you like being formed between employer and employee. I think you know, choice and agility are going to be key in the sense we’re in a world and we’re going to be in a world where people are choosing to come to the office and they need a good reason to do so and there is going to be much more emphasis on purpose, what the office is providing, what the value is of being there and as all the panellists have referred to, the experience. What are people getting from coming into the office? I think there needs to be much more emphasis on what the employer is providing for their employee and how they’re getting them there but also that very much comes into our role as providers of working with those businesses to help that dialogue.
Charlie Green
There is certainly a responsibility, a greater responsibility on employers now to be thinking about their employees in a different way. Traditionally in the real estate world I think that people would say, ‘How do I convince a CFO or a CEO to make a decision to come and be in this building?’ Now you’re sort of saying, ‘How do I convince an individual to be in this building?’ and that then starts to… and just flows up the chain…
Richard Howard
Trickle upwards.
Charlie Green
… is made for the CEO by virtue of the fact that they’ve got to get the right space for their teams.
Emily Prideaux
I think it’s a much wider responsibility and I think as you referred to Charlie, you know, talking to the CFO and the people running these businesses is how we used to do real estate deals. You’re now talking to talent managers, HR departments, end users and a whole much bigger spectrum of people who all have an interest in what that workplace is doing for all the various agendas across the business.
Ronen Journo
Companies are starting to look at as many data points as possible to try and formulate what’s the right new norm for their culture and for their industry. We’ve seen some fairly you know, extraordinary headlines by very traditional companies who basically declared, ‘We will enable our people to have the choice to work where they feel happy and productive including co-working spaces and we will train our managers how to manage by outcome, by impact and not by presenteeism.’ It’s no longer about bricks and mortar it’s about the people and the business and the culture of the business.
Richard Howard
Has that emphasis on data become just much more important than it’s ever been before?
Ronen Journo
So, I have spoken now to over 160 corporations and what is interesting is that very few of them are executing. Very few of them are saying, ‘I’m reducing my footprint by x percentage and I’m going to buy everything from The Office Group or WeWork or IWG’. What they’re saying is, ‘We’re trying to figure what’s right for our business. We’re trying to figure out what’s right for our culture’. My understanding is that come January, February we will begin to see the very large occupiers beginning to act on what they think is right.
Charlie Green
At the moment bluntly, anybody who can sit on their hands is doing so but they are now beginning to reflect on what they want to do and do it properly going forward. I think the other thing that we will see going forward in an urban setting – we’re already beginning to see it – is a much more variety of use of space. You’ve got schools going into Olympia, you’ve got University’s going into Here East and as we go forward and I don’t see that reversing, I see that, if anything, becoming more and more exacerbated.
Susan Freeman
Ronan, from the conversations that you’ve had with all these corporates, are they saying similar? Is there a consistency in what they’re saying to you or are different types of businesses actually thinking in different ways?
Ronen Journo
If you went back to June there were very distinct schools of thought out there. There were organisations that were basically seizing this opportunity to optimise the heck out of their business and then there was another school of thought which said, ‘No, no. We need data’. What I’ve seen and learnt since September is that there are consistent sets of ingredients that are surfacing. It has become very much about you know, human-centric conversation. It is about flexibility but everyone is also recognising that there is healthy tension at the moment between policy, between you know, trust, how much are we are going to let people do whatever they want and work anywhere? But with that there is also recognition that we can’t go back to the old. Not everybody was working in an Office Group environment or WeWork or IWG and benefiting from this kind of beautiful design. Many worked in locations that screamed hierarchy. Then the question is do we bring those back to the future?
Susan Freeman
We’ve heard a lot about you know, hub and spoke, that people will think about having sort of more local offices you know, with the main HQ office. Is that workable? I mean, Emily are you seeing anything on that?
Emily Prideaux
In terms of the hub and spoke in particular as a London market I think we’ve all seen that sort of tested to some degree previously and it may be again. I think at the moment my instinct would say that generally speaking all of the talent discussing that we’ve been having pre-Covid in the last five years with occupiers and others has sort of come back to a sort of central office which allows that sort of creativity, innovation. So, I do think what you’ve seen in terms of more active villages if you like because people have been working at home I think there is probably some legs in that, but I don’t think we’ll see a fundamental sort of shift from town out as we did seven or eight years ago with many big corporates who moved out of town and who we’ve recently seen come back in again. So, I think it will be a bit of a mix.
Robert Howard
You know you might get a proposition like Charlie and Ronen offered, but only on that basis that you’re dropping in there but not as a company I don’t think necessarily. You may find slightly further out if you get something ironically where the hub is just the core market and having access to it and you’re out on a spoke but it’s a fantastic environment but your whole company is there. That kind of environment could work very well. I don’t… balancing two companies between two areas like that I don’t think does because it’s got to be somewhere that suits everyone.
Emily Prideaux
But the challenge is that the business has always got to find a common denominator, right? So, finding where that spoke is going to be is very difficult. Naturally, the common denominator becomes somewhere with great transport links and is usually in town.
Ronen Journo
A year before Covid a lot of the conversations I was party to, these corporations were looking at their suburban compasses and saying, ‘We need to optimise or close them down in order to establish locations in the city centres’. What they’ve been saying now during the Covid crisis is, ‘We are going to retain both in our strategy. We are going to optimise the old compasses but we’re going to continue to establish a presence in the city centre. And the reason we’re going to do both is because we have four generations of people in our workforce’. The hub and spoke is not a new model. It is a concept in corporate real estate that has existed for you know, ever since I started which is almost 30 years ago.
Charlie Green
It’s just acknowledging that choice is something now that is paramount to everybody and that’s, ‘Where can I choose to work on any given day depending on how I feel?’ There’s almost this empowerment piece for individuals and for people to say, ‘I can choose how and where I want to work’.
Susan Freeman
It’s interesting this point about none of this is new and Ronen you were talking about 25-30 years ago, I mean Mark Dixon was talking about this 25 years ago and telling us we actually didn’t need to commute we could all go and plug in in a business centre. So, there have been a number of questions about technologies. What technology are we going to be seeing to keep us all connected?
Charlie Green
The technologies are going to drive efficiencies in how we use space and where the ability to move around and work in different areas but understand very quickly on an app, that there is a space that you can work and whether or not you can pay for it on your app. For me, I think use of space and the actual buildings is where we’re going to see some really interesting technology and then I think the sort of last on that is utilities and can we drive the sustainability agenda a bit more by using technology again.
Susan Freeman
Presumably… obviously sustainability was very much on the agenda and healthy buildings but is this something that potential occupiers now have at the top of their list?
Robert Howard
I think in all honesty, sustainability was, if you’d asked me in February or March I would have said that was going to be the theme of the next sort of three, four years. It’s taken a little bit of a backseat as we’ve gone through what we’ve gone through but it will be straight back as soon as there is some sort of return to normality.
Emily Prideaux
I think the exciting progression that we can sort of look forward to hopefully in respect of this sustainability conversation is provider and occupier working together, you know, more easily through technology but also with the agenda just having risen massively up the agenda I think it’s much better understood and I think there’s much more willingness from everyone. The real value and impact comes when we can do things together.
Susan Freeman
So, there was a question about how valuation of offices is going to be affected by everything that we have been talking about.
Charlie Green
In terms of flexibility going forward then as long as you accept that you’ve got repeat custom because you’ve got a great product, then that has an intrinsic value of its own right and if you don’t move with the times and become more flexible, on the flip side of it you’re not going to have a very valuable office building because no-one’s going to really want to come to it.
Susan Freeman
I just wondered if you had any thoughts on why UK office workers have been slower than their colleagues in France and Germany and Spain, in getting back to the office?
Ronen Journo
My personal view is, don’t believe the headlines. I think there is an element of political propaganda to say, ‘Hey, we got through it and we are thriving again’. You know, one data point that is kind of a reality check is actually what these large occupiers are sharing. They are not encouraging more than 10%, 20% of the workforce to go back to offices by the end of this calendar year. So, I think we need to take it with a pinch of salt when we see the headlines and actually take the public transportation and walk into buildings and face reality. This is going to take time.
Robert Howard
I could tell you that 49% of the companies that are renting space to us are returning to the office and that is true, really true because they’re only having one or two or three people coming back. So, the reality is we’ve got 11%, 12% of people who are actually coming through the door. What you present and what the reality is might be slightly different.
Susan Freeman
That is probably a really good place to finish so huge thank you to the panellists. It’s been a really interesting discussion so thank you. Thank you everybody.
The Mishcon Academy Digital Sessions
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