Offices 2032: will tech have made them redundant?

When you are attempting to forecast the future it is normal to think about the next 1-2 years, where you probably have enough data and evidence to be quite certain about outcomes, and then to work out from there, from 2 to 5 years, 5 to 10, and then 10 years and beyond. And as you go outwards your focus increasingly diminishes, as uncertainty grows. Things starts to blur. But not all things. Some things we do know, well in advance.

For example, we do know that two ‘laws’ are very likely to remain true. First Amara’s Law, named after Ray, the American researcher, scientist, futurist and past president of the Institute for the Future. His ‘Law’ states that "We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run,”. And secondly, Moore’s Law, named after Gordon, one of the co-founders of Intel. The implication of his more famous ‘Law’, which has held for 50+ years, is that computers will double in power every 18 to 24 months.

So we can be sure that, however impressed we are today with the power of our smartphones and laptops, they will look like toys in 10 years time, compared to the 100 times more powerful devices we have at our disposal. And we can be sure that more will have changed about the world around us than we can imagine today. We are so far into the age of exponential change that every doubling in capability is a big deal.

In most industries a ten year view is not the default. 2-5 is more likely. But in real estate 10 years is a development cycle, or the lifespan of many funds. So in our industry a ten year view matters. Especially in commercial real estate, and even more so in terms of office assets.

In the context of the workplace it feels like an eternity.

In the twenty plus months we have been impacted by the pandemic we have broken through many ‘mindset walls’. We have realised that working remotely from our offices broadly works, we have realised we can be productive, and that there are technological tools already available that allow us to do things that many, perhaps even most of us, did not know were possible. We have realised that a better work/life balance is possible and that not commuting is, surprise surprise, a great pleasure. In short we have learnt that having flexibility and more agency over our lives is a good thing. And we do not want to give this up.

We have also learnt, or rather become more conscious of, what we lose when human connection is restricted. Yes we have, with exceptions, missed time with our families, but we’ve also missed time with our work friends and our colleagues. Do we want, or feel the need, to spend 40, 50 hours a week with them, like we used to? Mostly we do not, but we do now have a much clearer idea of when we’d like to spend time together, in person, and why? Rather than being together because that is just the ways things work, we are thinking more deliberatively. Is this a good use of my time. What can I learn or do or feel as part of a group of people together, that I could not learn or do or feel apart? 

In general, remote work is fine across quantitative factors, but across qualitative ones less so. Technology, today, can get us so far but no further. And this is why I feel differently about offices, as an asset class, short term than I do long term.

It is abundantly clear that most organisations, given the right data points, and the budget and motivation, should be able to produce a physical workplace that provides for the wants, needs and desires of employees. If you know, at an individual level, what those wants, needs and desires are, you can construct a plan to satisfy them. Perhaps not in their entirety for every individual but broadly so. Furthermore, if you then collect and analyse data around how your office is performing environmentally (by which I mean temperature, noise, air quality and lighting), and how it is actually being used (in the sense of occupancy, footfall etc) you can optimise and iterate your space to keep it suitable for the jobs to be done of your people.

It is faintly depressing to not see the above becoming the norm. There are some, many even, exemplars who are diving deep into understanding all of these factors and the better outcomes they engender, but one hears far too much talk of companies who are thinking little further than whether they should get people back in the office 2, 3 or 4 days a week. Everyone (or nearly everyone) appears to be bought into ‘hybrid’ working but few seem to have thought very hard about its implications for how they need to run their companies. Or modify their space. Or ensure it is a safe place to be. And as for landlords not universally demonstrating to their customers that their buildings have ventilation, fresh air and air filtration adequate for a post pandemic world. Well that simply baffles me. Though my suspicion is that most buildings do not have adequate air quality so maybe best not to say too much.

Inadequacy of thinking or systems aside, it is clear that offices do have a purpose based on the above. To provide a venue for people to make human connection. In various ways, for varying amounts of time, and in a different and particular manner for each and every company. This is what the technology of today cannot completely satisfy. As we said it can satisfy our quantitative needs but not all of our qualitative needs.

As such it is not surprising that the occupancy level of flex spaces is, in many geographies, far above that of traditional offices. They tend to provide better spaces for human connection. 

For the next 2-5 years those offices that can provide an environment that catalyses human skills, and connections, will win. This is their edge over remote working. A great space, with the right amenities, managed by a great operator, will have a distinct competitive advantage against plain vanilla spaces. Even high quality, but plain vanilla spaces are going to suffer. It’s simply a function of being able to provide what remote cannot. If there isn’t anything, then people will not go there. Why would they? What would be the point?

What though about 5 years hence? Or 10 years? What will the office provide then that we cannot get elsewhere?

This is where it gets worrying. Satya Nadella, CEO of Microsoft, gave a talk in November 21 where he was introducing a product called Mesh for Teams, that will begin rolling out in 2022. He described exactly what we’ve discussed above, that video calls are ok, but ‘remote meetings can feel impersonal and lack the small moments that build relationships and careers’. So Mesh combines mixed-reality, which allows people in different physical locations to join collaborative and shared holographic experiences, with the productivity tools of Microsoft Teams, where people can join virtual meetings, send chats, collaborate on shared documents and more. Jason Warnke, senior managing director and global digital experiences lead for Accenture, who have been working with Microsoft on this for years described his favourite feature as the ability to bump into colleagues from around the world and have deep and meaningful conversations.

In other words, this product provides, allegedly, just those personal, engaging, human experiences that today we need to get together physically, to experience. The current ‘job to be done’ of the office, post pandemic, that of being a venue for just these sort of human connections, becomes rather less valuable if this is the case. Or does it?

I’ve not tried Mesh, but I have heard it is surprisingly engaging. Citing Amara’s Law I suspect we will be overestimating the potential of this, and other such services, in the near term. Not least of all a lot of high end hardware is required to get the whole experience today.

But citing Moore’s Law, with maybe a hundred times as much computing power being available to us in 10 years time, one really has to be nervous about the future of the office. If technology can deal with our qualitative needs, through deep and personal immersion in high definition, smooth and perfect virtual environments, then what need do we have for an office at all. Its lunch has been eaten. Sure, we will still want to get together in person, and converse as real human to human, but why would we do that in an office. Or, more to the point, what would an office need to look like for that to be the natural venue for such a get together? And who would use it, and for how long?

We will always have workplaces, or at least places where we work. They will definitely employ a wide range of digital products and services that help enable us to be happy, healthy and productive. But with a ten year view in mind it’s already quite hard to see these being places we spend a lot of time travelling to and from each day. Do we need, and want, human connection? Yes. The trillion dollar question is ‘do we need offices for this’?