Is it time for a great office rethink?

“What’s clear to us is that hybrid is here to stay,” said Aditya Sanghvi, senior partner at the research centre. Speaking on a recent episode of The McKinsey Podcast, he shared the three reasons filling him with confidence in the correctness of his position.

“First, the attendance rate we’ve seen has really stabilised, and it has stabilised for over a year now. Second, actual attendance aligns quite closely with what workers want and expect from their employers. Third, there’s a substantial number of knowledge workers who would rather resign or accept a pay cut than come in more often.”

“Many of those folks are the executives in charge of making those decisions,” he added.

Going against the grain of popularly held and commonly spouted beliefs that the hybrid work bubble’s bursting is imminent, research from McKinsey Global Institute revealed office attendance has stabilised 30 per cent below pre-pandemic levels, although it should be noted different cities, and industries, are experiencing different activity.

The centre’s Empty Spaces and Hybrid Places: The Pandemic’s Lasting Impact on Real Estate report found that 12 months ago the average global office attendance was 3.5 days per week, with that number rising to 3.9 days in Beijing and dropping to 3.1 days in London.

It also revealed larger firms in the knowledge industry, defined by the McKinsey Global Institute as professional services, information and finance industries, time in office was lower than other sectors.

In Australia, time in office has grown more frequent as the pandemic has grown further in the collective national rear-view mirror. The University of Sydney Institute of Transport and Logistics Studies’ most recent Transport Opinion survey, covering a two-week period in September, found Australian employees spend 21 per cent of their week, or between one to two days, at home, down from 27 per cent in March’s edition of the survey.

The research found this uptick in office attendance coincided with 42 per cent of office workers indicating employees must work from the office during a particular number of days per week.

However, while there are several benefits to working from home, Jonathan Woetzel, senior partner at McKinsey Global Institute, explained the wide-reaching impacts of fewer office days.

“If we look at neighbourhoods which were very office-dominated, the first main impact is simply fewer people in those offices,” he said on The McKinsey Podcast. “That, in turn, means fewer people on those streets, fewer people in the shops, or just anywhere in the neighbourhood”.

In conjunction with the increasing usage of e-commerce, this is “creating a big challenge for those downtown retail spaces and public spaces in those office-intensive areas”.

For commercial office providers facing reduced usage rates, rising rates of hybrid working have forced a pivot towards fresher, modern spaces, the pair explained.

“In a moderate scenario, we found that office demand in 2030 could be 13 per cent lower in the median city that we studied,” Mr Sanghvi said.

“What’s fascinating is that values could be 26 per cent lower in our moderate scenario and up to 42 per cent lower in our severe scenario,” he added, revealing that a study of nine global cities found up to $800 billion of potential office real estate value disappearing.

In a climate of plummeting demand, he explained the shift moves from quantity to quality.

“For many people, the offices that they experienced pre-pandemic weren’t more compelling or interesting than working from home.”

“People ask themselves, ‘Is the office experience I’m going to have today worth the commute that I need to take?’ For large portions of our knowledge-worker population, that answer has been no,” Mr Sanghvi added.

He noted the definition of quality has shifted from the employer’s perspective and is now favouring the employee. It’s a dynamic shift he dubbed as “significant” because the focus for office providers becomes, “Can I get people to want to spend time in my office?”

Mr Woetzel stressed: “This shift from supply-centric to demand-centric is going to reshape the environment.” Comparing it to meetings, which pre-pandemic were limited to in-person or via phone but now have video options, he believes the wider hybrid working trend’s environment of “choice for everybody [is] going to be reflected in everything”.

This ranges from location through to the design of the building itself, and he insisted suppliers, employees and developers alike should “use that flexibility”.

But all this doesn’t spell the death of the office.

This isn’t the first instance of the workplace being rethought and reshaped. Technology has done that in the past, and artificial intelligence threatens to do so in the future. Hybrid working doesn’t spell the death of the office, rather it invites amendment to the system.

Mr Sanghvi declared: “If the office wants to thrive, there’s a world where it absolutely can. It just has to be completely reimagined.”

“Many offices are cube farms that are just not enjoyable,” he said. Instead of office design being an afterthought, the pair believes offices need to be based around the concept of being a place where employees want to be, rather than a soul-sucking, uninspiring shell.

“Imagine that I went to go buy a car and basically what they sold me was the shell of the car, but the car didn’t drive,” he said. “That’s basically what office space is today.”

“One of the really interesting changes that needs to happen is that real estate companies need to become experts and provide solutions for tenants. They need to give them a ‘car’ that works really well, where they know from experience with other tenants that they’ll want that product.”

Mr Sanghvi believes “that’s a radical shift in the industry that could allow a lot of the current office space to still be used as office space”.

When asked about what office providers can do to successfully rejig office spaces to match modern demands, he painted a picture of a multifaceted space that inspires work but also provides amenities, such as hospitality services.

On top of this, he stressed the need to “take the office and make it not just art, but bring science to it”.

“There have been so many designs over time in ways that people run their office space, and no one really has any idea if that’s leading to better outcomes for employees or for employers,” he added.

Viewing offices through a scientific lens considerate of employee productivity and engagement is “far better”, in Mr Sanghvi’s estimation, as it allows offices to get “better productivity and employee experience from the space overtime”.

Mr Woetzel added: “There’s a need to turn on the lights and understand what influences people.”

“Not on the factory floor, but in a communal work environment. When do they need privacy? When do they need sharing? What kind of information do they not want to exchange? I think providers and operators that use that data can be much more efficient.”