Why Now is the Time for a Closer Look at Your Real Estate Strategy

Office tenants try to measure remote work productivity as they weigh shrinking footprints

This article appeared originally on BIZNOW about our friends at Cresa.

Software company LogMeIn had most of its 3,500 workers commute into the office daily before the coronavirus pandemic. Going forward, almost none of them will.

After seeing their employees could be productive at home, LogMeIn’s executives in October introduced a long-term, remote-centric work strategy that will have roughly 3% of its employees coming into the office every day.

This strategy is leading LogMeIn to cut half of its 230K SF footprint in its Boston headquarters and about one-third of its worldwide office space.

“The decision we made to go remote-centric was one that was not made to solve for a short-term problem like the pandemic, but rather one that we believe reflects the way our employees want to work permanently,” LogMeIn Vice President of Global Real Estate Andy Hook told Bisnow in an email.

Many companies haven’t finalized their long-term remote work strategies yet, but office market experts say discussions have ramped up after several months of pandemic-induced paralysis, and they expect a host of tenants to reveal their future plans this year.

These decisions about how much of a company’s workforce to keep remote are coinciding with a re-evaluation of their long-term office needs. And if companies increasingly choose to give back large portions of their footprints like LogMeIn did, the already-weak office market could be in for a major reckoning.

“Companies are saying ‘I don’t need all this space, I’m going to have more of my workforce work from home tomorrow than they did yesterday,'” said Cresa Managing Principal Jason Jones, who leads the firm’s Remote Advisory Services team.

Several factors come into play for employers deciding whether to keep their workforce remote over the long term, such as their company culture, employee satisfaction, need for collaboration and their real estate costs. But one of the most important questions, which was the reason many employers were hesitant about remote work before the pandemic, is whether their workforce can be as productive when they’re not in the office.

Productivity can be a difficult metric to measure, especially for a dispersed workforce, but employers have used a series of methods over the last year as they evaluate the long-term sustainability of remote work. They have conducted employee surveys, tracked employee progress on measurable production goals, monitored revenue generation and client satisfaction, and in some cases instituted surveillance measures to ensure their employees are working.

The consensus of several companies, office brokers and workplace strategy consultants is that the majority of employees have been just as productive at home as in the office, if not more so. Remote work allows them to skip commuting, choose the hours when they are most productive and avoid workplace distractions.

A September survey from Global Workplace Analytics found that 75% of workers said they were just as productive or more productive working remotely, and they are interrupted an average of 43 minutes less every day than they were in the office.

“The biggest hold back for remote work has been that managers just don’t trust their employees to work untethered,” Global Workplace Analytics President Kate Lister said. “Once managers did it for themselves, they were more comfortable with it for their employees.”

Decision Paralysis Is Finally Subsiding

The unprecedented nature of the pandemic and the uncertainty over how long it would last led many companies to delay long-term real estate decisions last year and make their remote work strategies only temporary.

But as they surpassed nine months of remote work and began to look ahead to the new year, many companies kicked their long-term planning efforts into high gear.

“There has certainly been a pickup in activity of people wanting to start thinking about and assessing their real estate, whereas in the first half of the pandemic everyone wanted to put it on pause and figure out the short-term stuff,” Cresa Managing Principal Christie Minch said. “We’re now shifting into the phase where we’re working with a number of clients on their workplace of the future.”

Minch said that many of these discussions with clients revolve around the long-term effectiveness of remote work, and she has noticed a significant shift in executive attitudes.

“There have been a lot of groups who were primarily against teleworking and working from home prior to this but are much more open to it now,” Minch said. “And a lot of that is driven by employee productivity. The managers specifically are seeing that their employees are able to be just as productive, if not more in some cases.”

CBRE Head of Occupier Research Julie Whelan said companies were in a reflexive mode for at least six months after the pandemic began, but they now feel more comfortable discussing long-term strategy, even if those discussions haven’t yet materialized into a trend of long-term office leases closing.

“We are now in a very real period where we can start to imagine the return back to the office,” Whelan said. “That is really starting to ramp up: The discussion of what is going to be our influence over how people come back to the office … how that translates to real estate is the thing that’s still under discussion right now, because we don’t see transactions happening.”

The Agency, a residential real estate brokerage with 37 offices worldwide, has already started reducing its footprints because of the remote work trend, CEO Mauricio Umansky told Bisnow.

The firm is still adding new offices to expand its network, but he said the planned offices are around 35% smaller than they would have been before the pandemic. In September, it reduced the size of its existing Beverly Hills office from 12K SF to 10K SF upon the lease expiration, and Umansky said it has multiple upcoming expirations that will lead to similar reductions.

“We’re definitely going to see a much larger amount of the workforce work from home,” Umansky said. “We’ll still have the web of offices so we can network around the different markets, but we’ll have a smaller footprint at all of them.”

Roar Media, a South Florida-based marketing firm with 32 employees and a 5,700 SF office lease, hasn’t had employees in the office since March 12, CEO Jacques Hart said.

The company began using the online employee engagement platform Officevibe to help manage its remote workforce during the pandemic, but it still hasn’t finalized its long-term office strategy, Hart said. He had planned to make that decision by this month, but given the continued high levels of COVID-19 cases, he said he is waiting until at least April to finalize the company’s future workplace plans.

While he is still evaluating its future policies, he said he expects to implement a hybrid approach with remote work and office work that will have employees coming in two or three days a week. He is considering having revolving work stations rather than dedicated desks, and he said there is a “serious likelihood” this could lead Roar Media to reduce its office footprint.

“We’re trying to evaluate when is the appropriate time to put into effect ‘brave new world’ workforce policies,” Hart said. “I’m already hinting to the team, I did so yesterday, that the way we used to work is not the way we’re going to work in the future.”

‘Why Do We Need An Office?’

Executives have to weigh a variety of factors when determining what portion of their workforce will remain remote for the long-term, and whether they should reduce or even eliminate their office footprint.

Employee preferences are a main factor in any company’s decision-making, office experts said, and executives forcing workers to come to the office against their wishes could hurt their retention and recruitment efforts. But managers also need to ensure their employees are as productive at their jobs when working from home before they can commit to cutting their office footprints.

In workforce surveys her team has done, Minch said the main reasons employees say they want to be in the office involve company culture.

“Now that we know we can work from home and be productive, why do we need the office?” she said. “The top three results I’m consistently seeing no matter the industry group is: collaboration with my peers, socialization with my peers, and the spontaneity. You can ideate and collaborate and your day is not so scheduled.”

PwC Advisory Real Estate Director Katherine Huh said companies planning their remote work strategies need to make sure they understand the nature of their employee’s workflows and whether each specific role is better suited for the home or the office.

She said some roles have a greater need for an office presence if they require frequent collaboration, or if they need a type of technology that employees don’t have at home.

“What we are seeing a lot of is analyzing the workforce and understanding what percentage of the workforce can work remotely long-term versus what percentage needs to be in the office,” Huh said.

Sales teams in particular tend to work more successfully in the office, Adroit Health Group CEO Joseph Safina has found.

Safina, in an email to Bisnow, said he plans on scaling back his company’s office footprint significantly because of the success of remote work. The McKinney, Texas-based insurance marketing firm has 20K SF of office space, and he said it plans to cut its footprint to about 2,500 SF.

“While we’d like to fully transition to full remote working at Adroit Health Group by the end of 2021, we’ve found our sales teams in competitive workspaces outperform those who work from home,” Safina said. “The vast majority of administrative and support staff can operate effectively from home, but I imagine office environments will remain essential for sales teams in many industries.”

For companies considering changes to their real estate footprints, cost is always a key factor.

“Even if you’re doing extremely well, you don’t want to spend money on something you’re not using,” Whelan said. “As space is not being used and they’re trying to figure out what the future holds, they’re trying to rightsize their portfolios anywhere they can.”

When determining LogMeIn’s remote work strategy, Hook said the company evaluated three main factors: the legal framework for employees working in different jurisdictions, the practical aspects of whether employees working remote aligns with their business strategy, and the sustainability of the plan over the long term.

To ensure the remote work strategy is sustainable, he said employees must be able to meet performance expectations and business goals. And in order to meet those goals, employees must be able to be as productive at home as they were in the office.

“Productivity is an important part of a successful business, but we would like to expel the notion that people need to sit at a desk in an office to be productive,” Hook said.

Measuring Productivity From Home

In the past, managers would monitor employee productivity by walking through the office to make sure they were working. But workplace experts say this wasn’t as effective a method as many thought, and now companies are exploring new ways to measure the productivity of remote workers.

Cresa’s Jones said the ability to measure productivity goes hand-in-hand with effective leadership skills. He said that successful leaders create measurable goals and performance metrics for their employees to hit.

“It boils down to leadership and creating clear goals and objectives for the organization, and then measuring whether or not your employees are meeting those goals and objectives,” Jones said. “As opposed to another version of leadership which is ‘if I can see you and you’re working the hours you’re supposed to, then you must be productive.’ That mentality is not going to work effectively in an environment where people are working from home.”

Huh, who leads PwC’s occupier services business, said roles that translate well into clear performance metrics like sales jobs can be easy to track productivity, but not all employees have those types of jobs. Some employees spend most of their days on phone calls and videoconferences and have fewer concrete deliverables to measure.

For those types of jobs, Huh said managers can look at employees’ calendars to ensure they are spending their time in meetings, but a full calendar doesn’t necessarily mean an employee is just as productive at home.

“Is tracking my hours that I allocate to different things a good indicator of productivity? That has been a little bit tougher of a formula to crack,” Huh said. “The only way people have been looking at that so far has been asking employees if they feel like they are as productive.”

Lister, whose research firm has spent the last year asking employees if they feel as productive at home, said the answer has been a consistent “yes.”

A May survey from Global Workplace Analytics and Iometrics that received responses from 2,865 employees and managers over a six-week period at the start of the pandemic found that 77% of respondents were fully productive working from home.

In September, GWA released another survey in partnership with Owl Labs that found 75% of the 2,025 respondents were just as productive or more productive working from home. The survey also found that 80% of people expect to work from home at least three days per week after the pandemic.

“Employees have said they feel more trusted as a result of working from home,” Lister said. “Because of the increased autonomy, they’re less stressed and more comfortable.”

The Officevibe product that Roar Media implemented allows it to anonymously survey employees to gauge their feelings about remote work. While Hart said this type of engagement is important, he said he doesn’t have numerical metrics for tracking employee productivity, and he thinks pushing to maximize productivity can be unhealthy.

“Because of the intense amount of change that happened in Q1 and Q2 of 2020, our team members were sprinting,” Hart said. “We’ve had to now remind them that this is the new normal. This is not a sprint. This is a marathon. We can’t afford to burn ourselves out.”

Umansky said The Agency tracks productivity by assigning specific tasks to employees through its internal management platform and seeing how long it takes them to complete the tasks.

“It seems our efficiencies have actually increased,” he said. “The tasks are getting done.”

Lister said she has seen some examples of more invasive productivity tracking methods.

“We’re also seeing an increase in interest in surveillance technologies,” she said. “Whether it’s keyboard tracking or mouse movement or persistent videos or screenshots, there are a number of companies that have had these technologies for years, but the interest in them has suddenly gone up substantially. I call it virtual babysitting.”

A Microsoft product launch in October highlighted the potential pitfalls of tracking employee productivity.

The tech giant rolled out a feature for its Microsoft 365 platform called Productivity Score that allowed employers to see individual data on how often employees used email and chat functions. It received strong backlash from privacy advocates, with one digital rights activist calling it a “full-fledged workplace surveillance tool.”

In response to the backlash, Microsoft announced on Dec. 1 it was changing the product to remove the names of individual users, allowing employers to instead track trends across their organization.

“This change will ensure that Productivity Score can’t be used to monitor individual employees,” Microsoft 365 Corporate Vice President Jared Spataro said in a statement.

Huh said she expects many companies that adopt long-term remote work strategies will institute new ways to track productivity, but she thinks it is still too soon for that.

“Because we’re still very much in the pandemic, I think that most companies feel like it’s a bad image to start checking the productivity of people right now,” Huh said. “I would expect to see a lot more of that after the pandemic is behind us and people are choosing to work from home.”

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