Future Workplace Trends: Are You Putting Your Office to Work?
From our Thought Leader Contributor, EY.
By: Mark Grinis - EY Americas Real Estate, Hospitality & Construction Leader, Francisco Acoba - Corporate Real Estate Consulting and Technology Practice Co-Lead
Rocked by three years of shifting workplace trends, corporate real estate is still finding stable ground.
In the continuing reboot of the American workplace, millions of employees in the US and worldwide have been pulled in different directions by swerving trends. Hybrid, fully remote, flexible schedules, four-day workweeks, required days in the office each week and full time in the office are among the models vying for standardization, acceptance and talent in the corporate workforce.
Fluctuating expectations have created a low but constant drumbeat of anxiety for mid-career professionals with children, aging parents and long commutes. Meanwhile, Gen Z, the next wave of the corporate workforce, naturally assumes a whole new level of agency and flexibility when it comes to work-life balance and preferred practices, even in their first or second jobs.
The third annual EY Future Workplace Index, a national research survey of C-suite corporate leaders conducted by Ernst & Young LLP (EY US), offers an eye-opening window into the ongoing evolution of the workplace and real estate during the past year. Perhaps most remarkable, is that the number of EY US survey respondents reporting nearly full-time remote work has plummeted from 34% in 2022 to 1% in 2023.
The move away from full-time remote work is welcome news for the corporate real estate sector, which is aiming for growth in both the demand for office space and its utilization. It’s worth noting that based on survey respondent feedback, over the past 24 months, smaller companies increased their office space, while larger organizations maintained or reduced their footprint but enhanced the quality of their space, technology and amenities. Optimization of space and time leads company leadership priorities.
“This warming trend toward the physical office is positive for businesses across sectors and employees spanning a range of roles,” says Francisco J. Acoba, MCR, SLCR, EY Americas Co-Lead, Corporate Real Estate Consulting and Technology. “Dark offices can create unintended doubts and uncertainty for both the workforce and the marketplace, even while all that cost is still being absorbed by corporate budgets. We’ve learned a lot in the past three years about productive ways of working, and it’s becoming clear that most workplace models benefit from keeping the office lights on.”
Here's what you need to know about the EY Future Workplace Index results for 2023:
- Hybrid work is firmly established, and an expectation of two to three days a week in the office signifies a palpable shift away from fully remote work.
- Employees were perceived to be more productive during the past 24 months in their current workplace models.
- Despite market headwinds affecting office demand and cost, smaller and midsize companies are continuing to expand their physical office space, while larger companies have maintained or reduced their office footprint.
- Leaders are actively seeking sharper tools to optimize office space occupancy, and almost all of the companies surveyed anticipate incorporating artificial intelligence (AI) into their work model, including for space utilization planning.
- Casual Fridays are being redefined.
Notable Results from EY’s 2023 Future Workplace Index results:
Chapter 1: In the reconstructed future workplace, office space claims its half of hybrid
Hybrid work is firmly established, and an expectation of at least two to three days a week in the office signifies a palpable shift away from fully remote work.
Knowledge workers who come into the office once a week or less appear to be the new 1%.
Almost 99% of all EY US survey respondents indicated that employees are being required or encouraged to work in the office at least two days per week, with the highest percentage (32%) indicating three days a week. Only 1% said employees are being asked to come to the office once a week or less.
This tracks with recent trends. The adoption of a fully remote work model peaked in 2021, and the reason is hardly a mystery. As the global pandemic spiked, 44% of companies reported a remote work model of zero to one day a week in the office. In 2022, when masks began to come off, that number dropped to 34%.
More than half of the companies surveyed have assigned their employees in-office days, and 80% said they are encouraging or requiring three or more days a week. The majority (80%) report full confidence in their hybrid work strategy; only 18% said they are still ironing out a hybrid model.
The staggering drop in fully remote work may signal a resurgence for commercial real estate as office towers and parks come back to life. The potential economic impact is good news for the retail businesses that surround urban offices, as well as the million-plus US workers in the office maintenance industry.
Chapter 2: Productivity remains strong, while space costs and work culture call for balance
Employees were perceived to be more productive during the past 24 months.
An overwhelming 80% of companies report that their employees’ productivity was “somewhat or much higher” during the past 24 months. About 28% of leaders feel their employees are equally productive when they work from home rather than in the office. At the same time, the top stated reason (29%) for encouraging a return to the office is to increase productivity, while the following three top reasons are maximizing the return on the office investment, improving the work culture and increasing collaboration (all at 18%).
“What we are seeing is a balancing out among corporate leaders regarding how they view and measure employee productivity,” says Mark Grinis, EY Americas Real Estate, Hospitality & Construction Leader. “Most can’t point to specific evidence of decreased productivity in a remote work environment. At the same time, they are unwavering at the importance and role of the office and, accordingly, continue to invest were they think it drives productivity and the culture of the organization.”
Chapter 3: Smaller companies are big on office growth
Despite market headwinds affecting office demand and cost, smaller and midsize companies are continuing to expand their physical office space, while larger companies have maintained or reduced their office footprint.
When it comes to real estate investment, size matters. Over the past 24 months, companies with 250 to 5,000 employees showed the highest percentage (51%) of adding new office space – which averages the data from small companies (251 to 1,000 employees) at 55% increasing the amount of office space and mid-size companies (1,001 to 5,000 employees) at 47% increasing the amount of office space – while among companies of 10,000 to 25,000 employees, 38% reported scaling back on the amount of office space.
“The scale and structure of big companies lend themselves to hybrid policies, whereas smaller organizations have been more challenged to embrace hybrid work for a number of reasons, including productivity, team building and the greater interdependency that comes with being a smaller business or startup" says Grinis. “In the current climate, they have a greater need for bringing employees together in the office than large companies do.”
When describing the utilization strategy for their office space, the top answer (62%), across all respondents, was “assigned open workspaces and enclosed offices,” with hoteling (reservation-based unassigned seating) and hot-desking (reservation-less unassigned seating — first come, first served) trailing at 19% each.
The quest for quality continues, with 51% of all respondents saying they’re investing in newer, higher-quality office spaces with better technology and amenities, leaving many older office spaces behind.
Chapter 4: AI? Sure, it’s around here somewhere
Leaders are actively seeking sharper tools to optimize office space occupancy. Almost all of the companies surveyed anticipate bringing AI and machine learning technologies into their work model, including for space utilization planning.
The hybrid work model has intensified the spotlight on workplace optimization and innovation as company leaders continuously re-evaluate the balance of space costs and the enablement of remote work.
There’s also a new presence in the workforce, and it doesn’t use a desk or a water cooler. As AI explodes into the business marketplace, its capabilities have the potential to remove a lot of guesswork from productivity measures and analysis. But its definitive uses and outcomes are still in play.
Among respondents, 44% said they are using AI to “collect data to maximize and optimize their office space” and 38% stated wanting to “apply AI to track the office’s sustainability and energy efficiency.” Only 2% of respondents said they are either not using AI or they’re not sure.
The tech industry also reported using AI for tracking sustainability, financial analysis, and monitoring the company’s equity and brand health as their top responses related to AI and machine learning.
When survey respondents were asked about their greatest challenge in optimizing their offices, the leading response (32%) was creating the right kind of work environment for each employee by balancing individual and collaborative spaces. By contrast, 21% of respondents feel they don’t have any difficulties optimizing their office spaces.
Most respondents are utilizing Wi-Fi, badge swipes and AI technology to track space utilization. The majority of respondents (62%) indicate they use a blend of assigned open workspaces and enclosed offices within their physical workplace. This could indicate that many leaders have an opportunity to more effectively equip their employees with space targeted to specific needs and uses, such as different types of offices, collaboration spaces and user-friendly reservation systems.
Respondents at the largest companies (25,000+ employees) say they don’t have any difficulties optimizing their current office space, while the smallest (251 to 1,000 employees) had the highest number of respondents report that the right balance of space utilization is their greatest challenge.
Chapter 5: TGIF
Casual Fridays are being redefined.
Even as the office makes a comeback, don’t expect it to be hopping on Fridays.
Asked which days their employees are most likely to come into the office, Monday through Thursday showed an average response of 70% for each day, while Friday earned a 34% response rate.
Employers, however, are not quite ready to let go of Fridays entirely and move to a four-day workweek. In 2022, the index found that 21% acted upon and 19% were in the process of deploying a four-day workweek, but in 2023, the percentage of respondents who are currently deploying a four-day workweek fell to 18%. But all hope is not lost for those who dream of a three-day weekend, as 24% of respondents are still considering adopting a four-day workweek.
Overall, there is an opportunity for employers and employees alike to more fully engage in the hybrid work approach, embracing the advantages of a weekly routine that blends different types of days. Those spent in the office may mean a chance to dress professionally, plan for a commute and lunch with a coworker, and enjoy direct and collaborative interaction with leaders and colleagues; remote workdays can offer focused time to accomplish lengthy tasks in relative quiet.
“This shift toward a more flexible workweek implies that we may be reaching a hybrid equilibrium, where the sharp lines between remote and office work are blurring,” says Grinis. “This is a positive development for both employers and employees, as they fully understand the place and value of both ways of working.”
Conclusion: The future of work hangs in the balance
The future workplace continues to reconstruct itself, but its foundation is stabilizing as the hybrid model takes more concrete shape.
After three years of investing in hybrid work models — and gaining confidence in the results — corporate attention is turning back to purposeful use of its office spaces.
Overall, 51% of EY Future Workplace Index respondents noted they are currently investing in newer, high-tech office space with enhanced amenities; 63% said they are investing in more digital and virtual collaboration resources; and 65% of respondents are, or are considering, creating a work environment that allows for predictable flexibility in work schedules to further support work-life balance.
The trend toward a well-balanced hybrid work model has been led primarily by the employee workforce, but companies are now overcoming inherent organizational challenges with updated policies, more effective use of technology and space resources, and clarified expectations around productivity.
“We’ve determined that physical office space is essential to effective collaboration, creativity and growth, which alleviates some of the previous risk and trepidation associated with investment,” says Acoba. “Now, it’s about striking the right balance between investing in physical office space and workplace technology innovation, with the end goal of optimizing the performance of the workforce in a hybrid model.”
The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.