An ebook by VTS
We’ve all heard rumors about Google’s office – scooters, legos, copious amounts of free food. Facebook embraces its startup culture with an internal bike shop. Twitter offers free laundry services. Thrillist offers paid time off on your birthday every year. An evolving workforce has set off a wave of new office habits, needs, and wants.
By 2020, millennials will make up 40-50% of the working population. Intuit predicts that by 2020, 40% of the U.S. workforce will be freelancers. While not every millennial wants to work at a startup, and not every freelancer wants to work from home, their demands are transforming the commercial real estate industry.
How can modern landlords prepare for 2020 and provide the office tenants want, today? Follow the best practices outlined in this eBook around tenant improvements, embracing coworking, and adopting the WELL building standard, and you’ll be well on your way.
Before we get started, let’s take a look at how these two workforce shifts are changing the way we work, and in turn, changing the workplace.
Globalization and technology
There’s an app for that. Millennials (and Generation Z-ers) have never known professional life without the internet. Can your building keep up with the demand of information, when peers and competitors are just a text, email, or tweet away? The concept of the workplace is fast coming to mean working from anywhere and requires connecting with global offices, better data security, and mobility within the office itself.
“Millennials want a cool, different environment-type of space and culture,” said Jason Lewis, president and managing broker of Denver brokerage firm EcoSpace Inc. “They’re overstimulated 24/7. The phone is on 24/7. They’re so connected and over-stimulated that they expect and are used to that in the workforce. The old-school office space just doesn’t work for them.”
More collaborative and flexible
Internal physical flexibility and collaboration is also important. Technology brought on the sharing economy, which in turn brought a wave of access to information, not ownership of it. Employees are collaborating and sharing knowledge, from brainstorming to execution. They’re working in pods, having impromptu meetings on the stairs, hanging out at team lunch, and brainstorming in huddle rooms. Cubicles have effectively disappeared from the millennial-focused workplace. All employees are able to contribute and feel essential, and the modern workplace reflects that.
Offices becoming more like home
Millennials never quit. The 9-5 became the 8-6 became the 24/7 as the work day adapted to globalization and technology. Early birds are in from 7am-6pm, night owls are in from 11am-10pm, we don’t bat an eye at 3am emails. Your cell phone is an extension of your arm and now talks to your car, syncs with your computer, and facilitates your dating life. Work-life balance is no longer about keeping it even, but ensuring a seamless integration between the two. In response to this 24/7 life, workspaces are beginning to look like living environments with gyms, game rooms, cabinets full of cereal and a beer fridge. Outside the office, there’s a demand for urban, mixed-use environments that offer ease of socializing, dining, living and working.
BYOD – Bring your own device
Many employers are allowing workers to BYOD, or “bring your own device.” This allows employees to telecommute while reducing overhead costs for the employer. Instead of buying computers and renting space for every employee, workers are given a technology stipend so they can buy their own laptops and work from anywhere – whether it’s the office or home. With more and more work done online, it’s hardly surprising. Who wouldn’t want to skip the morning commute and work from the comfort of home? But not everybody is happy about the shift – especially office landlords, who are trying to adapt to the trend by rethinking office layouts and searching for the best ways to stay competitive while giving modern tenants what they’re looking for.
There is a push for better office spaces, better perks and better technology. More of the younger, tech-savvy generation is joining the workforce. Your tenants are feeling the pressure to meet these demands and you can help them do it.
Chapter 1: More than just ping pong tables
We know that millennials are already making a big impact on office life and work style. But since many offices have come to be a reflection of the company culture, the physical office, interior design, and furniture are also changing.
Open offices and ping pong tables may not be for every company culture, or every employee, warns Lewis.
“When people think an office trend is hot, they go all in versus truly asking why do you need that space?” Lewis said. “I call it the ping-pong table effect. People throw a ping-pong table into their space and expect it to be cool and help hire millennials. It doesn’t. People go, ‘I want open space. I want cool. I want brick and timber and we’re going to go all in, ‘ and they just do it without actually doing it because of their culture.”
These trends are influencing some of the most common tenant improvements (Tis). Forward-thinking landlords can increase their ability to attract top-tier tenants by being well-versed in these trends and partnering with tenants to implement them.
Tenants want a space that reflects their brand, operations style and business objectives. First impressions are everything for tenants, their clients and their future employees. While location is mostly everything, there is strong value in a statement lobby, elegant (and efficient) elevators, and great amenities and shops. Within individual office suites, branding in entry ways and reception desks are critical. Use recurring themes and design elements to consistently remind people where they are – work with designers to select key accent colors, furniture pieces, lighting elements and even technologies that emphasize the building’s brand.
Large open spaces and small phone booths
Rents are climbing, and square footage per person is dropping. Gone are private offices and extra-large cubicles with high walls. In their stead are open-air environments with bench desking and casual seating clusters. Unfortunately these settings often make for a noisy work environment.
“People want to collaborate but they still need the ability to get away,” said Lewis.
Phone booths, huddle rooms, war rooms, team rooms, nap rooms all offer an escape from the melee of conversations and phone calls. They should be soundproof, internet connected, and tucked away from high-traffic zones. The ultimate difference in each type lies in the level of technology (mounted screen, white board) and seating style (table, couch, bathtub?). Styles cover a huge range, from the traditional to deconstructed British phone booths and more.
Furniture configuration for inspiration and innovation Have you ever tried to work together in a group and found people carrying chairs, moving tables, and struggling with computer cables? Steelcase, Herman Miller, Knoll and other workplace furniture designers design furniture and settings specifically for collaboration, brainstorming, and innovation. Knolls’ Antenna Workspaces, Herman Miller’s Layout Studio, Steelcase’s media:scape and West Elm’s WORKSPACE are evidence of an industry-wide adaptation of the collaborative trend. Even high-back couches have recently emerged as a way to maintain the open space vibe, but give people a space away from others. These types of solutions help maintain the dense, open office plan while providing several nooks and crannies for different work styles.
Do you have any furniture dealers in your Rolodex? You should. Strong relationships between owners, brokers, design firms and vendors mean cost savings for your tenants. Help your tenants facilitate the best types of workspaces for their employees with these resources.
Looking ahead to parking
Further down the road, the importance of on-site parking might be less significant. Driverless cars could have a huge impact on office parking lots. Although these cars are still being tested, it’s believed that they will be available for average consumers to purchase in the next decade. In the meantime, support tenants by shuttling them from mass transit and providing bike storage for those riding to work.
Chapter 2: Coworking is here to stay
Commercial real estate’s office sector is changing, and cubicle workstations are becoming a thing of the past. While some landlords are maximizing Tis for tenant satisfaction, others are turning to coworking to add new offerings and flexibility to their tenant mix.
Creative office space and coworking has regained wide attention for its innovations, largely due to the technology industry having amenities that keep employees in the office, whether it is hip and free cafeterias, pool tables in common areas, or maybe childcare for parents whose kids aren’t school-aged yet.
“It’s been an easy transition because, just as companies are trying to get more efficient and save money, millennials are more open to the idea of less hierarchy in real estate,” Christian Beaudoin, director of corporate research for JLL in Chicago, told VTS. “So those two trends have combined at the same time – companies trying to save money and millennia ls entering the workforce, who value compensation and freedom and flexibility more than they do a big office.”
What does coworking actually mean?
Coworking is a term for shared offices where people typically pay a monthly fee to work beside like-minded independents. A filmmaker might be sitting next to an entrepreneur or lawyer, and it becomes not only a place to work but interact and network with other creative people. Some coworking spaces are informal, renting out desk space on a first-come, first-served basis. People bring their laptop and sit down at an available workspace. Others allocate desks or offices to “members” (the most wellknown coworking space of this model is WeWork). While coworking isn’t quite right for all companies, this office alternative is proving to be a sustainable option for many growing companies for three key reasons:
#1. IT AIDS COLLABORATION AND FOSTERS NEW IDEAS
Coworking spaces offer a particularly robust form of collaboration – something that few traditional offices can match. This form of coworking-fueled collaboration is particularly unique because it combines a mixture of demographics and office layout.
All coworking spaces are designed to have breakout rooms and shared spaces to encourage relationships and communication between companies of different types, all while fostering a sense of community (something WeWork is known particularly well for). The physical layout encourages a lot of collaboration between the employees and tenant companies.
But, arguably more importantly, is that the collaboration typically occurs between varied companies and teams that are facing similar challenges. For example, many companies that inhabit coworking spaces tend to be facing growth or transitional changes.
“It’s exposure to other people’s ideas, talents, and resources,” said Coy Davidson, senior vice president at Colliers International in Houston. “Technology is great and it allows you to work from everywhere at all times, but there’s something that’s just not transmitted as effectively over the phone or even over Face Time as a face-to-face environment.”
Coworking spaces offer a place for dozens of like-minded individuals and companies to share their experiences and offer unique insights. Having similar companies around can offer a great sounding board and ideation chamber. It is a forum for collaboration and new ideas – one that could not be truly replicated in a single-tenant office space.
Davidson also said the referral opportunity is huge in coworking settings. “Working alongside someone, they get to know you,” he said. “People refer you when they trust you.”
#2. IT ATTRACTS EMPLOYEES
Coworking spaces aren’t going anywhere because millennials really like them – both the design and the lifestyle. And, by 2025, this demographic is going to make up 75% of the workforce.
In addition to wanting a different type of environment, many millennials are now opting for a more independent work style as freelancers or contracted help. Contractors are playing a larger role in everyday office life and becoming more important to employers. Coworking spaces are a great office setting for them.
When done right, coworking “provides companies with a much higher-quality and more engaging office experience relative to what they’d have in a traditional setting,” said Jamie Hodari, co-CEO and co-founder of New York Citybased Industrious. Industrious offers one-to 15-person offices or can cater to bigger companies by offering entire wings.
“Our thought is until a company has about 150 to 200 in their office, they can’t afford to have relaxation rooms, coffee lounges and sushi-making classes,” he said. Offering these extras can help attract and retain talent that might otherwise go to big companies. Industrious and other coworking spaces can afford to offer those benefits and help attract talent.
#3. THE BENEFITS ARE NOT JUST FOR STARTUPS
While coworking is most known for attracting startups, big companies are getting in on the action too, including Microsoft, Salesforce, Bank of America, and HSBC. The benefit is the same for the corporate behemoths and the lean startups: it’s a way for traditional companies to manage real estate costs, grow efficiently, and attract young talent. Companies are able to use coworking space as a site of expansion (or contraction), without worrying about complicated commercial leases.
“From the corporate side, people’s offices are occupied less and less every day,” said Davidson. “They’re working in different places and opting to work at home more often … Companies may say, ‘We’re paying $35 or $40 per-squarefoot for this space and it’s not necessarily effective. If employees are effective in another place, why not allocate that money there?”
Lease structures are also evolving. Instead of inking traditional leases, landlords have a stake in the coworking pie via partnerships. “As the industry learns from the last few years, the business models in the industry are changing,” says Communitas co-founder Noah Wallach.
“People realize you need more revenue streams than just desk memberships.”
Some coworking spaces are catering to larger companies by offering pay-as-you-go options with open floors that can be partitioned to accommodate the company.
Although the popularity of coworking spaces will likely ebb and flow with market forces and trends in workstyle preferences, it is likely that – for the above reasons – they will remain a staple for office solutions.
Chapter 3: A healthy office equals healthy, happy employees
Buildings with green labels are nothing new. Over the past decade, developers and corporations have jumped on the eco-friendly bandwagon.
There are now nearly 54,000 LEED certified or registered projects in the U.S. spanning some 7.8 billion square feet. The trend will likely continue as commercial landlords plan to invest an estimated $960 billion globally between 2013 and 2023 on greening their existing built infrastructure, according to the U.S. Green Building Council. The environmental benefits of green building are clear in terms of creating energy efficiency, improving air and water quality, and conserving natural resources.
But, a building that “cares” about your health and well-being and engages you to make healthy choices in your own space – now that’s something new.
The WELL Building Standard is a new building certification gaining traction nationally that not only focuses on the “built” indoor environment, but also emphasizes the health and wellness of people in the building. If you haven’t heard about WELL, you will. It debuted in 2013 and is touted as the first building standard worldwide focusing specifically on the health and wellness of building occupants.
Proponents of the certification say it makes sense to keep your employees happy, healthy, and more productive as it translates directly to the bottom line. Businesses should see an increase in productivity if employees are engaged and happy in their workspace, and building owners should benefit by charging top rates for these top-tier, healthier workplaces, reports the Urban Developer.
“People spend more than 90% of their time indoors … which means that buildings, and everything in them, can have a profound effect on human health and well-being,” Paul Scialla, founder of the International WELL Building Institute, told VTS. “As people continue to make health and wellness a priority in nearly every area of their lives, we have seen a rapidly growing demand for indoor spaces that actively contribute to the well-being of occupants.”
How does WELL work?
WELL puts health at the center when designing indoor environments, focusing on seven categories: air, water, nourishment, light, fitness, comfort, and mind. Certification is performance-based and requires a passing score in all seven categories. These categories are further divided into more than 100 “features,” including everything from circadian lighting systems, which help occupants maintain healthy sleep/wake cycles, to office layouts encouraging physical activity, Scialla said. He added WELL-certified spaces can help improve the nutrition, fitness, mood, sleep patterns, productivity, and performance of its occupants.
Today, almost 600 projects across 31 countries have been WELL-registered or certified. Of those, 466 are commercial projects.
“The really cool thing about WELL is that it encapsulates a lot of different elements that are not approached by LEED or accessibility standards or other building codes, so it’s really talking about creating a better environment for individuals in the workplace,” said Victoria Lanteigne, senior accessibility consultant for Norwalk, Conn.-based Steven Winter Associates and one of fewer than 150 people worldwide to become a WELL-accredited professional.
“A lot of it’s operational and management policies, not just structural,” she continued. “For example, having an employee policy where you have an organizational cap at midnight, and no one can send emails after midnight. It’s this idea that we have to stop working; we have to have a better work/life balance.”
Lanteigne said WELL also encourages fitness, focuses on ergonomics and addresses mental health. “There’s a whole section talking about beauty in design and what we call biophelia – an access to nature indoors,” Lanteigne said. “A lot of these things are supposed to offset anxiety and we believe reduce the number of people living with depression and anxiety. It goes above and beyond LEED or energyefficiency – it’s about improving the quality of life.”
CBRE headquarters makes its mark
In 2013, CBRE Group’s new global corporate headquarters in downtown Los Angeles became the world’s first commercial space to achieve WELL certification. Features include air filtration systems, sound-damping walls, ergonomic furniture for sit-to-stand options, 1,000-plus plants, energy-absorbing flooring to encourage proper posture, water hydration stations, fresh food options, antimicrobial treatments for germ-free surfaces, and wellness activities like yoga classes.
“It’s just a better work environment – more light, encouraging motion, germ-free, an emphasis on nutrition and hydration – so it really is just a thoughtful process of a variety of steps – some big, some small – that taken together we believe will make people happier, healthier hopefully, and more productive moving forward,” said David Pogue, CBRE’s global director of corporate responsibility.
WELL is a game-changer
The days of LEED setting you apart are gone because most high-quality, Class A buildings in large cities are LEED-certified.
“But if we can demonstrate that a building – by choices that it makes in air quality, lighting, exercise and a variety of other things – makes the occupants more likely to stay there, to perform better there, then that will be the differentiator,” said Pogue.
Finding a payback on healthy office space related to staffing is another compelling argument for commercial owners to invest in these improvements, as well as justifying paying higher rents for leased space in LEED- and WELL-certified buildings. Brokers should be sure to emphasize these benefits during space tours, and emphasize it as a competitive advantage. As the competition for talent continues to heat up, wellness-focused office space will weigh more heavily in employee recruitment and retention.
“People spend more than 90% of their time indoors … which means that buildings, and everything in them, can have a profound effect on human health and well-being,” Paul Scialla, Founder of International WELL Building Institute.
Conclusion: Landlords and brokers who want to be on the cutting edge of millennial and workforce trends have to find ways to adapt
This could mean moving further away from the old, cubiclestyle offices and towards modern communal offices. Or following in Google’s footsteps and offering luxuries, fine cuisine and fun spaces to make employees actually want to be in the office rather than at home.
This new mindset applies to all developers, regardless of whether you’re leased up or in the market to attract new tenants. Become familiar with the increasingly common flexible work spaces in your environment (WeWork and the like), says Kate Lister, founder of the Telework Research Network. Get to know the architects and designers who work on repurposing space and collaborate with them on future projects. Partner with software suppliers in order to help clients know exactly how much space, and what type of space, they need to reach their utilization and cost-peremployee goals. Get ahead of the game now, and reap the benefits come 2020 and beyond.