The prestige of a prime city postcode or downtown business address has long been held up as a measure of the success and stability of a company or organisation. The received wisdom was that people with important jobs went out to work and where they went mattered. The ideal office building was big, central and expensive. Then along came coronavirus. The global pandemic has had a major negative effect on economies everywhere, but it is little exaggeration to say the heart of the city has been ripped almost clean out. For the moment at least, the glamour has gone and big is no longer beautiful.
In fact, research findings for The Word support the view that the business world is literally getting smaller, with the bulk of supply chain partners (62 %) now based in neighbouring countries. And the proportion of companies planning reductions in their office space number roughly one in four (24 %), rising to almost one in three among larger organisations (32 %). Even more respondents (35 %) expect to adjust their recruitment strategy to cut costs either through automating jobs, hiring from overseas or outsourcing. In terms of the talent that they do retain and hire, nearly seven out of ten companies (69 %) expect to offer employees greater flexibility about how often they need to be in the office, ranging from the option either to come in when they want (26 %), work alternate days (24 %) or go part-time (19 %).
The ripple effect of this shift away from the city-centre focus of old is already in evidence, with a somewhat unexpected boom in out-of-town property prices lifting markets worldwide, from Australia to the UK. Mortgage lenders are, though, warning of a slump in the pipeline, as economic pressures and job losses mount.
There is still good news to be found short term around environmental impact reduction as an unintended consequence of cuts in travel and congestion, with green initiatives increasingly popular as the public rediscover the joys of nature, plus the wellbeing and amenity benefits on offer to them free of charge in the great outdoors.
The bad news, unfortunately, continues for the hardest-hit business sectors, such as bricks-and-mortar retail and hospitality of almost every kind, as city-center footfall stumbles and falls with each new restriction announced. Such centrifugal forces have effectively sparked an ongoing exodus from the heart of town, whirling both work and workers out into the suburbs, regions, and rural hinterland. Throughout this drama, COVID-19 is commonly cast as the disruptor in chief. However, its role is perhaps better described as that of a plot accelerant, fanning the flames of fires already lit under the straw houses of business as usual. The change was arguably in the air.
Pre-pandemic, conflict emerging between the push of the digital economy and pull of the built environment seemed like a classic case of irresistible force meets immovable object. On the one hand, there was the World Economic Forum suggesting 70 % of new economic value created in the next decade could be digital, despite 47 % of people still lacking internet access. On the other, the urbanisation megatrend encircling the globe looked equally set to maintain its physical magnetism, with the United Nations forecasting 68 % of the world population will live in cities by 2050.
So given the lockdown-induced upsurge in digital networking and virtual meet-ups, what impact might the boom in working from home have on the city itself and the investment value of commercial real estate in the likes of the central business district? As COVID reshapes the metropolis of the future, is the towering city centre HQ set to become a stranded asset in much the same way as an ageing coal-fired power station?
For the fortunate workers still in secure employment, a lot of staff are liking the shift towards dispersed arrangements, says Freya Reynolds, people manager at Uncommon, London-based pioneers in co-working, private offices and flexible workspaces. “With greater appreciation for work-life balance, employees are driving this New Normal of remote working,” she says. COVID-19 has also had a marked effect on the intake of employees, she adds: “The scope of new hiring has changed and employee demands for flexible working have shifted the oncegrounded nine-to-five working day.”
As a result, employers are having to concede to demands from their staff, however by no means, all organisations are unhappy with the idea. Reynolds notes: “There are companies keen to benefit financially from not having office overheads, with the option to lease smaller spaces to accommodate ‘work on rotation’.” Indeed, there remains an affection among employees and, more importantly, an ongoing role for the office, as shown by a survey of 2,000 office workers conducted recently by global real-estate company JLL.
Collating findings across ten countries, the study reveals that while three-quarters of employees do want to continue working from home on a regular basis, the same proportion also still want the ability to come into an office. In fact, according to the JLL research, 70 % of staff consider the office the best place for team building and connecting with management, and almost half expressed the expectation that modern offices post-pandemic will offer space for socialising. Of course, the precise degree of win-win for both employers and their employees in this evolving scenario will always depend on the company concerned and the industry in which it operates. In addition, much as the pandemic has been a global phenomenon, it still plays out differently in a range of established regional and local contexts.
For example, according to Marcela Salazar, partner at Ius Laboris firm in Chile, Munita & Olavarría, the trend in city-centre office-based employment in Santiago, Chile, has been following the flow of wealth out towards the east of the country’s capital over the past few years, with COVID-19 only likely to accelerate this pre-existing pattern. “The riots that happened in Santiago in October and November 2019 affected lots of businesses. Employers feel the traditional city centre is no longer as safe as it used to be,” she says.
The particulars of national labour laws should, however, mitigate against any sudden urge to make impromptu COVID-driven changes to employment contracts, job specifications and formal HR policy. This is especially true in Chile, with the law on remote working and flexible conditions only having come into effect finally on April 1, 2020, following years of debate in the country’s congress. The new labour code provides legal protection to employees who work from home or in places other than the employer´s premises. Compliance does, however, raise some questions.
For instance, pursuant to article 184 of the code, the employer is obligated to take all necessary measures to effectively protect the lives and health of employees, to report any possible risks and to maintain adequate hygiene and safety conditions in the place of business, and also provide the tools needed to prevent accidents and occupational diseases. With remote working, therefore, the employer must find a way to ensure the work environment complies with all health and safety requirements, despite the added complication that they cannot legally enter an employee’s property without authorisation.
As well as employment scenarios varying by country, sector and company, there are also almost as many different and diverse flexi-work permutations as there are individual employees, each bringing their own personal particulars and preferences to the table.
Traditionally, staff already established in their careers and with young families, for example, have tended to welcome the opportunity to cut their daily commute and perhaps relocate to further out in the suburbs for lifestyle and real-estate benefits. By contrast, those newly recruited into the career of their choice, often more prepared to work long hours and keen to socialise with colleagues and network with contacts or peers, typically still relish the big-city experience, both the living and working environment. This workforce stereotype might be changing too, though, in post-COVID times. Based in Colorado, Paul Quaiser, founder of the US Human Sustainability Institute, is already witnessing new recruits moving out of high-rent urban environments, seeking larger spaces, easier access to outdoor activities and public amenities.
The shift is about more than simply helping employees liberate free time by eliminating their commute, while also reducing associated stress and exposure to pollution. True city transformation opens up longer-term urban planning to a real rethink. Quaiser argues: “De-urbanisation is providing an opportunity for business and cities to redesign and retrofit infrastructure to become more resilient, autonomous and ecologically benevolent. “Vacant buildings will be repurposed to grow food, generate and store energy, become multipurpose, rewild public spaces, and utilise frontier methods for waste and water management.
The major trend sees the establishment of vital, pedestrian-oriented cities.” Future gazing towards this radical, regenerative human habitat, soon transports us forward into a concept of community where built and natural environments integrate in a more holistic manner, interwoven throughout with distributed and democratised forms of value exchange, ranging from cryptocurrencies to bioregional assets and resources.
This is the evolution of the future city happening both on the ground and in our heads, from built assets to human resources. As well as potential impacts on the physical dynamics of structure and space, any impending rethink around the future of work affects organisational culture, adds Quaiser. “COVID-19 is simply a precursor for the greater need to be adaptable and resilient, such as supply chain variations, accelerating technology capacities and vulnerabilities.
Plus industry performance metrics and policies are occurring simultaneously. As a result, we are already seeing changes in priorities of value systems,” he says. “Organisational structures and their operating systems are migrating away from hierarchical models toward something more akin to molecular and cellular structures. The concept of leadership is even being evaluated. The organisation will be required to reorient from financial growth priorities towards developing and cultivating human factors organically.” This picture of a more people-centred, less office-based working culture is not ultimately being driven by vaccine rollout rates or herd immunity, however. The prospects for a truly centrifugal tomorrow extend far beyond post-pandemic scenario planning. This is a vision of the 21st-century digital cityscape.
Marcela Salazar, partner at Ius Laboris firm in Chile, Munita & Olavarría, says “COVID-19 has imposed a totally different paradigm on the workplace and forced HR to rethink internal plans, polices and norms. But those measures now need to be looked at again in respect of their long-term viability. In doing so, it’s worth noting what Chilean labour law says about ‘implied clauses’ and ‘acquired benefits’ in a labour relationship. If a company has made a payment, granted a benefit or applied a practice over a long period, the labour courts could rule that the employer cannot stop providing it without the employee’s consent. The ‘acquired benefits’ doctrine could potentially be applied to any of the modifications made by companies in response to the pandemic and employers could thereby be prevented from implementing changes to their internal rules based on what happened during the crisis. Whilst HR plans and policies are still in flux, it may be advisable for employers to be cautious about what they do now; treat any changes they’ve made during COVID as transitional; think very carefully about how to deal with longer-term strategic commitments to employees; and avoid taking the kind of big steps (e.g. restructurings) that they could regret later on.”