In France, companies have been working to organize the progressive return of employees to the office. In the short term, strong health measures have been put in place to ensure the safety and health of employees: social distancing, masks, closure of breakout areas and meeting rooms, rotation of staff, etc… During this period, it is highly likely that companies, especially large occupiers, will adopt a “wait-and-see” approach, postponing relocation projects to favor lease re-gears and renewals, as well as possible partial handover of sqm and sub-leases.

However, it is even more interesting to think of the long-term impact of this crisis on the organization of companies and therefore on the office market. We believe that the main disruption in the office market will be the increased need in flexibility for companies. Thus, we anticipate a fragmentation of real estate solutions into three main interconnected axes; the so-called "conventional" office offer, co-working and Work From Home (WFH).

Towards Conventional Offices 2.0

Conventional offices that still represent the workplace “par excellence” today will not disappear. However, owners will need to reinvent a model. This model shall take into account this need for flexibility, which is being taken on by more and more companies and exacerbated by the current health and economic crisis.

While offices were initially caught off guard by current events and WFH - which illustrated the progression of digital technology on the physical world of the company - employees have nonetheless realized the importance of a unifying common space that unites employees around company's values.

Some landlords have already understood this desire for flexibility by integrating coworking spaces into their buildings. The market will probably push them to go further in the disruption and in particular in the "tenant / owner" relationship. Also, in order to limit companies' CAPEX, why not take inspiration from the German model in which owners carry out fit-out work on behalf of companies? Generally speaking, a better balance in the "tenant/owner" relationship will have to be found and we therefore foresee great opportunities for owners and investors who will be the most daring and creative.

Work From Home, the New Rule?

Until now, in France, WFH has been favored mainly by large corporates, if not by start-ups, and should logically be deployed and generalized by many companies. This way of working should become established on a long-term basis; the current health crisis is acting as a trend accelerator. WFH is now a logical solution to give more flexibility to staff.

Employees should no longer be judged on the time they spend in the office, but on a more tangible analysis: productivity and results. No matter where they work from and at what time of the day. Indeed, in France, while some employees and managers still feel reassured by being present in the office from 9am to 5pm, this presence is not necessarily synonymous with productivity, the sacrosanct of companies. The lack of “slots of continuous of time" - offering the possibility of working without interruption, in the execution of tasks - makes productivity fall far short.

WFH implies a renewal of management style; based on trust and centered on people. One of the main challenges in the business world is, especially for the younger generations, to answer the question "Why" rather than "How". In short, to give more meaning to tasks and projects in order to seek greater involvement and motivation, through autonomy and empowerment. A happy employee is an involved, productive and more loyal employee. WFH also responds, in part, to the quest for a "private/work life" balance by giving employees more flexibility.

In order to ensure a balance between WFH and Work from the Office, a 2-day WFH / 3-day office formula could become the norm. It would free up office space and this generate savings by implementing a "flex office" policy. Then, employees would concentrate on tasks that require concentration and calm during WFH periods. The use of office space in companies would be modified to provide a place for exchanges, socialization, client meetings and reflecting the company's image and culture.

Coworking, an emblem of flexibility

For many years now, co-working - we prefer to say "flexible space" - has already largely begun to meet this growing need for flexibility. In France, this has been true mainly - but not only - for the sub-market of areas of less than 5,000 m² and especially for the Small and Medium-Sized Business (SMB) sub-market.

Co-working has many advantages, inherent to the flexible solution it represents. It promises occupiers a certain speed of execution of transactions - a serviced office agreement can be negotiated quickly, and the "turnkey" offer is then materialized by a single invoice that includes all real estate costs. In addition, it requires little or no investment in CAPEX. It is also a less restrictive solution; the commitment periods are shorter and the financial guarantees required are less restrictive, particularly for start-ups or foreign companies without legal entity in France. Coworking combines perfectly with modularity: for example, the tenant has the possibility of increasing or reducing the size of the spaces used during the course of the contract, allowing to adjust sqm and expenses as best as possible according to activity and needs. Finally, the flexible space solution allows occupiers to benefit from "Grade A" buildings, already fitted out, centrally located and carefully designed. In addition, they have a wide range of services, mainly focused on the well-being of staff.

In the context of this health crisis, some would say that co-working is under pressure because of its model of high density office space. However, not all service providers are concerned by high density and they are all adapting their workspaces to the "new world", just like all businesses.

The “Managed Office” Solution

Like conventional offices, co-working will not disappear either. However, the line between these two worlds will tend to blur, leaving more and more room for an intermediate solution known as "managed office".

In this context, the roles are reversed: the co-working provider leases the space on behalf of the occupier. It is no longer the occupier but the coworker who commits, over a long term lease. In addition, the co-working provider carries out all the office fit out the demise. The occupier can thus preserve its cash flow. Finally, the facility management of the workspace is ensured through a single service provider who offers a "turnkey" solution.

Although at early stages in France, this solution, which already exists on market (and is already implemented by our teams on behalf of customers), is, in our opinion, set to develop strongly as it meets perfectly the need for flexibility.  

The models of work organization - conventional offices, co-working and WFH, which until recently were rather dissociated from each other, should coexist to a greater extent or even become intertwined. Especially for large companies. Also, the generalization of WFH, together with the adoption of “flex office”, will see a good number of companies suddenly find themselves with unused space. This will enable Tenants to generate significant savings but it will however increase the office supply, with a trend of increasing vacancy rate in the coming months. It means that all players in the commercial real estate arena will have to adapt and innovate to be in line with this new era. In short, they too will have to be more flexible.

Any questions, feel free to contact the Savills France Tenant Representation and Workthere teams.