Public sector property strategy and the rise of hybrid working

Public sector and business leaders are facing a challenge no leader has faced before. The way we live, work and interact has been changed forever by the pandemic, the behaviours it has engendered and the trends it has accelerated. Leaders around the world must take their organisation through this disruption and ensure it has a future on the other side, whilst sustaining and enhancing productivity and culture.

That means addressing changes to how and where people work, and the ways in which they interact with one another and with the products and services they use. It means delivering the technology, skills and spaces needed. And for the public sector in particular it means taking an enhanced place shaping role to create vibrant workplaces that people want to be in and to regenerate the high street.

Of course for the public estate the hybrid working impact is not just on its offices but on the wider operational portfolio too – be that community hospitals and GP surgeries through virtual appointments or the hearing of virtual court cases.

It’s also not an issue for Property (or indeed HR or IT) to deal with in isolation. This must start at the top, because success depends upon being able to view the whole landscape, recognise the complex and intricate ways in which everything connects and define the overarching business case – before translating that into a clear estate strategy.

Challenge the current narrative

The narrative developing over the past year has focused on ‘the death of the office’. But while some people undoubtedly thrived working from home, others have struggled. Similarly, productivity gains seen in many organisations have come at the expense of employees’ work-life balance, as the working day expanded, unconstrained by commuting or social life.

Many people have missed daily interactions, serendipitous conversations that sparked creativity and the wellbeing boost of socialising with colleagues, clients and customers. Others have grown concerned about their personal and professional development if they cannot maintain and build stronger relationships with managers who control access to opportunity, and clients.

Whatever the reasons, many cannot wait to return to the workplace in some form. It may be different. It may serve a changed mix of activities and its value may come from the quality – not quantity – of time spent there.

But the office is not dead.

The property market is changing

The findings of PwC’s Future of the Office survey were announced on 3rd June 2021.

With over 250 responses from C-Suite executives and other senior employees across all industries and regions, the findings provide food for thought as organisations navigate their futures. Our key findings were:

  • Only 10% of organisations surveyed agreed that office working would return to pre-pandemic levels.
  • Around half expect that employees will work virtually 2-3 days a week
  • 4 in 5 organisations surveyed identified “encouraging collaboration” as the top driver for reconfiguring the office
  • Half of organisations surveyed think their organisation will reduce the size of its real estate portfolio
  • Over a third of organisations expecting to reduce their real estate footprint expect to do so by more than 30%
  • Over three quarters of organisations surveyed said they are likely to reconfigure existing office space

There is an emerging reduction in office demand, that much is clear, with a “flight to quality” amongst occupiers seeking excellent workplaces with strong facilities for employees as part of a wider landlord service offering.

A shift towards lower density workplaces is also likely to be enduring to some degree, even once the whole population is vaccinated – human psychology has a part to play here.

The direction of travel for tenant demand is towards shorter lease terms to provide future flexibility, with an uptick in interest in serviced office space also showing a move towards maximum flexibility in an uncertain world.

But there is also divergence of opinion.

Demand for edge of town locations is still unclear. So too is appetite for a decentralised hub and spoke office model and preference for regional offices over central HQs.

The role of landlords, legislative changes and future workplace standards driven by our new understanding of working through a pandemic will all only become clearer with time.

Assess your property needs

The assessment of business requirements should firstly be driven by a clear understanding of your workforce and the way it will work in the hybrid world. Definition of “role types” and testing them with the business is key here.

By understanding where roles sit on a spectrum between highly collaborative to highly focussed it is possible to assess how much time employees will be in the office as opposed to working remotely – and what spaces they will need. A clearer picture of space demand and the workplace vision can then emerge.

A key challenge, particularly for unionised sections of the public sector workforce, will be existing policies around contracted places of work and linked compensation policies (e.g. London pay weighting) and this will need to be considered at an early stage.

For the operational estate, the impact of virtual technology and interactions is key as this will drive changing demand for spaces such as consulting rooms, hearing rooms and other specialised spaces beyond the office, linked to new models of service delivery.

Across sectors with large office-based workforces, there has been an initial effort to downsize or find alternatives to their current set-up. While freeing up capital will buy organisations time, shrinking property portfolios as quickly and completely as possible could prove an over-adjustment. However, acting now to remove what has historically been under-utilised space – which is likely to never be required again – should be a priority.

Repurposing and reconfiguring space should be a greater focus for organisations and may prove a more effective approach for the long term. Where occupancy is down, space can be repurposed for use by partners (public or private sector), sub-letting (subject to the local market), or for everything from cafes to the introduction of doctors, dentists or gyms on-site in support of well-being.

Think about the societal implications of hybrid working

The pandemic has created a stronger sense of community in many people’s lives and the changes we make as we shape a future beyond it must harness that response.

Remodelling the public sector footprint presents an opportunity to address geographic and economic inequality, improve diversity and inclusion and create greater access to untapped talent pools across the UK, and even around the world.

This will support the UK government’s ‘levelling up’ agenda and social mobility by encouraging the growth of local economies. However, it will also create new opportunities for our major cities to evolve – as they always have – and remain exciting places to live, work and visit. The Government Hubs Programme is already aligned to this but now has even greater opportunity and potential to influence.

Of course a reduction in required footprint also creates tactical local opportunities for regeneration and economic development. Surplus buildings have always had a role to play in this, but with a potential acceleration in space release this is the time to reconsider how best to align now surplus assets with the place shaping agenda.

Make going to the workplace a benefit, not a chore

In city centres, the office will remain a draw for those who want to shop, eat or socialise after work. Public organisations should think more about how they support their people’s social lives and well-being, as well as the local economy by building closer relationships with local stores, cafes, bars, restaurants and well-being services. The aim should be to make the workplace a real destination for employees – somewhere that they can get a different experience and tangible benefits compared to working at home.

There will also be an opportunity to make the workplace a greater source of differentiation in the competition for talent. In the past, efforts to make the office a benefit in its own right have ranged from the occasionally superficial, with soft furnishings and a ping pong table, to more valuable investments such as creches and healthy food offerings.

Whatever you plan (and there is no “one size fits all” approach here), you must plan for ongoing change with flexibility and future-proofing a key design principle of the new workplace.

Critically, nobody should feel coerced into returning to the office. Reinventing presenteeism for the hybrid age will only result in top talent choosing more supportive employers (in the public or private sectors).

Business, not Buildings first…

The foundations of business and society have been shaken so significantly that doing nothing in response is not an option.

However, jumping in and making rash decisions in silos, with Property being just one, without considering the impact on colleagues, customers and clients must also be avoided, as must adopting an approach that is inflexible to further change. Recognising that right-sizing and reconfiguration of the public estate will be driven by more fundamental choices around service offering, delivery channels, ways of working and employee preferences is critical.

Leadership must take action, with a clear view of how change will affect the whole organisation and how that change can be delivered, with the underlying principle being “business, not buildings first”.

And those changes must start now.