What The Conversation About The Four-Day Work Week Means For Commercial Real Estate
Kenny Kane is the Chief Operating Officer at Firmspace.
The idea of a shorter workweek has been around for decades. In fact, it was FDR who supported a 30-hour workweek in 1933 as a way to stimulate employment after the Great Depression.
While opinions on shorter workweeks have been largely split since the days of FDR, it’s the similarities between hybrid workplaces and four-day workweeks that commercial real estate (CRE) leaders should focus on today.
With Covid-19 forcing companies to reconfigure their workplaces, flexibility has remained a feature of the typical hybrid or remote work experience. Whether this means taking impromptu dog walks from home or booking time in a clean meeting room in the office, it is clear that workers value flexible work arrangements.
As companies toy around with the idea of a four-day workweek, CRE leaders must find innovative ways to attract new tenants by giving them what they want: flexibility and stability.
Today’s Hybrid Workplaces Set The Scene For A Four-Day Workweek
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To be clear, the four-day workweek likely won’t likely be broadly implemented for a while in the States. For every study that points to its virtues, there’s another that explains its pitfalls. Each company functions differently and each industry has different demands. The four-day workweek is not a one-size-fits-all solution for boosting productivity or employee engagement.
However, if or when the time comes to implement a shortened workweek, property management companies that have prioritized hybrid accommodations will have an advantage in acquiring and retaining tenants. This is because the tenets of a four-day workweek largely overlap with those of hybrid work. Both value:
• Greater flexibility.
• Employee freedom.
• Maximizing productivity while in the office.
Like the four-day workweek, though, the demand for hybrid work fluctuates. While flexibility remains a fairly consistent desire for employees, what this flexibility ultimately looks like will vary by company and even by city. To sustain property values, CRE leaders must make sure their properties meet tenants’ desire for flexibility, in whatever form it ultimately takes.
Companies Will Look To Cut The Costs Of Office Spaces
A 35% drop in global leasing activity in 2020 has driven lower rent costs for 2021. CBRE Group additionally reports that “rents will continue to fall before a return of positive net absorption at the end of 2022.”
What does this mean for commercial real estate? Building value for renters will be especially important as the market bounces back, especially for companies faced with the decision of whether to re-sign their lease or move on.
In order to save money, companies are relocating headquarters to more tax-friendly areas. If a company feels as though its investment into a space is not paying off, it will leave. Because of this, CRE leaders must look for ways to tailor properties to their tenants’ needs. Fortunately, there appears to be more than one way they can achieve this.
Nearly 70% of large companies (10,000-plus employees) surveyed by the CBRE cited flexible spaces as the most necessary investment into their offices. The designation of “flexible” here can mean a variety of things, from in-room technology that enables teleconferencing to a platform that allows tenants to book shared meeting rooms.
Investing in these tools, often called proptech, will enable your tenants to retain the flexibility their teams are looking for. This is the best way to show tenants you understand their concerns about managing their overhead costs today.
Companies And Professionals Still Want Dedicated Office Spaces
It’s important not to confuse workers’ enthusiasm for greater workplace flexibility with disdain for a physical office. The virtues of having a stable work environment cannot be understated.
In order to meet the demand for offices, some companies have even opted to create or join shared office spaces. This isn’t entirely dissimilar to the way workers have used communal working spaces in recent years. The idea here is to cut the costs of maintaining and managing an office space without going fully remote.
Certain large companies, however, continue to acquire properties. This reveals two trends:
1. Purchasing real estate in densely populated areas remains a viable business strategy.
2. CRE firms may have an opportunity to charge tenants a premium for being in a desired area as workers return on-site.
Put simply, CRE firms can still charge the rent they’re seeking if their spaces give tenants what they want: safe and flexible workspaces that enable privacy and collaboration.
The Four-Day Workweek Forces Companies To Weigh The Benefits Of Being On-Site
As we wrap up another month of Covid-19 outbreaks, the impacts of a distanced workplace are racking up, including the costs of working in a hybrid or fully remote setting.
There is a human cost to not being in-person. Workers and executives want office spaces. Fifty-eight percent of workers reported that they missed their offices substantially and 85% of executives believe in-person meetings build stronger work relationships.
However, there is a financial cost associated with hybrid or remote work, as well. Simply maintaining an empty office space has been overwhelming for small businesses, and each company needs to evaluate the cost of being off-site and what it does to performance and morale.
Similarly, CRE firms must evaluate the ways they can provide value to their tenants, through flexibility and stability, to prepare for a future in which how we work will continue to evolve.
The four-day workweek is far from the norm, but with the emergence of hybrid work, CRE leaders who prioritize the shifting needs of tenants will remain ahead of the curve.
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