Workplace of the Future Index 2.0

So ... where are you working these days?

With a pandemic in the rear-view mirror and an economic downturn on the road ahead, the office is still the other half of hybrid.

The second annual EY Future Workplace Index, a national survey by Ernst & Young LLP, offers fresh insights into how leaders envision the road to a stable, balanced hybrid-work state. One of the top findings is that the likely economic recession is having a concrete impact on real estate decisions across the board, and surprisingly, almost 60% of survey respondents plan to invest in physical space, while 33% will downsize existing locations.

Other critical considerations include the competition for talent, how to build flexibility incentives, the central role of technology for hybrid workers and effective management of the hybrid workplace.

Despite historically high costs and rising interest rates, 58% of the survey respondents said they plan on investing more in their real estate portfolio due to the impact of the downturn. Approximately a third plan on downsizing their real estate footprint, demonstrating the volatility an economic downturn can have on the real estate market. And compared to the inaugural 2021 EY Future Workplace Index, 11% fewer respondents said their employees will work exclusively from home.

Prior to the pandemic, 87% of employers reported that most or all employees worked from the office. Now, the EY Future Workplace Index shows that just 29% of companies have employees working only from the office. More than 70% of employees are working from home at least two to three days a week, and a surprising 40% of companies have either started using a four-day work week or are considering implementing one.

Five primary scenarios have emerged as the new normal, indicating a mass adoption of hybrid work.

Whatever scenario is most effective for them, companies that don’t clearly define structure and policy around multiple work locations will be at a disadvantage, as 62% of companies report putting more focus on virtual collaboration and remote-based relationship development during the past two years.

During the past year, 30% to 50% of companies have added new components to office layouts, including café and lounge spaces, a variety of informal and formal collaboration areas, and outdoor amenity spaces, among others. Flexibility continues to be a major focus, with 42% of companies planning or considering more co-working spaces, while another 27% already have. Leading organizations are leveraging a mix of leading-edge technology, including virtual collaboration tools and digital workplace apps, as well as learning and development opportunities and in-person events to entice employees back to the office.

Across industry sectors, health care, professional services and retail are the most likely to demand onsite or in-office time from employees. Telecommunications and more hardware-driven tech jobs are tracking toward fully remote.

According to recent reporting by Global Commercial Real Estate Services, more than two years later, the overall volume of available sublet space continues to increase. Major markets such as Chicago, New York, and San Francisco have recently reported an increase in sublet space on the market.

It’s worth noting that a debate over the role of the office may be growing between employer and employee. A recent survey from a major technology company shows that bosses and workers fundamentally disagree about productivity when working from home. According to the 2022 EY survey, most bosses worry about whether working from home is as productive as being in the office, while workers felt they worked as efficiently from home, if not more.

A high-quality building with smart and sustainable features will carry less transition risk and increase value going forward, making it easier to attract environmentally conscious tenants and investors. With changing work patterns and tight labor markets, occupier flight to quality is expected to continue.

With Generation Z expected to make up a large portion of the workforce over the next decade, managers will need to understand how this generation likes to work and what motivates them.

The working structure in many companies has dramatically changed, from a model where most employees spent a significant amount of their time in the office to a more dynamic model, in which employees have more freedom and control over when and where they work. Companies need to consider which amenities, services and technology to invest in, as well as the right amount of office space to effectively enable the hybrid working culture.