Are we really facing the death of the office?

Covid-19 and the threat of future pandemics have raised huge questions about where we work

But where will they all live? Prior to the unwelcome arrival of coronavirus, it used to be the question everyone asked whenever a major jobs announcement was made in Dublin.

The question of housing remains just as valid in the post-Covid-19 world we now inhabit, but it has taken on a new layer of complexity as everyone pauses to consider where we all might work in the face of this and future pandemics.

Were one to go with the utterances of Twitter founder Jack Dorsey, it's as simple as work at home "forever" if you want to, while for those hanging on the words of Facebook chief Mark Zuckerberg, working from home would appear to be a no-brainer given his expectation that at least half of the social media giant's workforce will operate from locations other than its offices within a decade.

Working at home, we made it work, but we think it's better and much more efficient when we're together

Whether Dorsey or Zuckerberg, two of the digital age’s greatest disrupters and self-publicists, actually follow through on these pronouncements remains to be seen. While there’s every chance they will, it could also be that they were simply capturing the mood of a public engaged in what certain commentators have dubbed the great working from home experiment.

Certainly, if their actions and those of their peers in the technology sector tell us anything, the office’s long-standing reign as the location of choice for employers would seem to be secure for the foreseeable future.

In Dublin alone, Facebook, Google, LinkedIn, Amazon and Salesforce are currently in the process of establishing five individual campuses capable of accommodating 36,000 workers between the north and south docklands, at the Baggot Street and Charlemont sections of the Grand Canal and in Ballsbridge. Outside of the city centre, meanwhile, Microsoft has established a 375,000sq ft facility for its Irish headquarters at South County Business Park in Sandyford.

The software giant isn’t the only one to have set down such substantial roots at the south Dublin scheme. Earlier this year, and immediately prior to the arrival of Covid-19, Mastercard signalled its intention to locate its first global tech hub there, with a commitment to lease 295,000sq ft at One, Two and Three South County.

Taken together, the offices of Microsoft and Mastercard have the capacity to accommodate 6,700 workers.

Although the current absence of a vaccine or effective treatment for Covid-19 would seem to render these numbers meaningless for now due to the requirement for social distancing, those with a direct financial interest in the office sector remain confident in relation to its viability in the medium to long term.

The president and chief operating officer of US private equity giant Blackstone, Jon Gray, for one, was reasonably bullish when asked by analysts in a first-quarter earnings call for his views on Covid-19's impact on the demand for offices. Asked specifically about the threat posed to the model by the rise of remote working, Gray said:

“There’s a question you’ve raised around will people still work more remotely. That’s a question. There will also be questions going the other way about will firms have the same density or will they spread out a little bit? I still believe in the fullness of time, I mean working at home, we made it work [during the Covid-19 pandemic], but we think it’s better and much more efficient when we’re together.”

And Blackstone’s chief executive, Steve Schwarzman, while acknowledging that there is no short-term solution to Covid-19 virus and the attendant difficulties it causes for the normal functioning of society, said in the same call that he believes that once a vaccine can be produced at mass, the current situation will have reached a “huge point of inflection”.

At that stage, Schwarzman noted, people “won’t be scared to be interfacing with everybody else and life can normalise very, very quickly”.

More recently, Bill McMorrow, the chairman and chief executive of US-headquartered real-estate investor Kennedy Wilson, dismissed suggestions that remote working will come to replace the traditional office. Asked for his views on the matter in his company’s first-quarter earnings call, McMorrow said:

“I listened to all of that [talk of remote working] in 2000. When the tech bubble happened, what was going on in the tech world at that time, including the big accounting firms. I remember like yesterday. They were all talking about how they were going to all work remotely. And I think, the two social things that relate to office space that can’t be underestimated is the need for human contact. And the fact that it’s logistically difficult – it’s not easy to work at home when you’ve got other distractions.”

The Kennedy Wilson chief said he expected there to be what he described as “extended discussions” in relation to remote working, but added that “over the long term, it’s not really going to amount to anything”.

Given the level of their interests in office properties across the globe, Blackstone and Kennedy Wilson are open to being accused of presenting the best-case scenario in an effort to reassure themselves and their investors.

It remains to be seen whether  Gray, Schwarzman and McMorrow are proven correct. But there is  little doubt that the future of the office, or at least the manner of its construction and design, is down for debate. To put it bluntly, Covid-19 and the threat of future pandemics has office landlords spooked.

That concern was reflected in a survey commercial real-estate adviser Savills conducted among 65,000 of its clients worldwide in late April. Seventy-one per cent of respondents to the survey said they believed Covid-19 would have a long-term impact on the design of offices, while 74 per cent said it would lead to changes in the size of the workplace.

And while an overwhelming 89 per cent of respondents agreed that the office would remain vital in the future, the experience of working from home has changed the purpose of existing office space for many, with emphasis now on in-person collaboration, decreased desk space allocation and reduced occupational density.

Commenting on this, Savills said: “In future, offices will need more social hubs to support team working, face-to-face meetings and events that enhance shared learning, career development and the reinforcement of a company’s brand and culture.”

Savills acknowledges that there will be an increase in flexible and remote working, but remains confident in relation to the future of the traditional office model, saying that it doesn’t expect there to be a significant impact on the total demand for office space.

That view is echoed by Deirdre Costello, senior director within commercial real-estate adviser JLL’s office division in Dublin. She says: “Over the last number of months, there has been much coverage around the redundancy of the office, which in my view is much exaggerated. Offices are described by many occupiers as critical in terms of creating their company culture and are an important element on winning the war on talent that is across many markets.

“While I think Covid-19 has no doubt accelerated the agile or flexible working policies that were already adopted by many firms, I do not believe it will replace the function of the office. Combined with this, the drive for higher density is likely to be reversed, which will counterbalance a reduction in space requirements due to remote working.”

Working from home for the last 15 weeks has tended to be people sitting at the kitchen table. That is a recipe for a personal injury claim

The predictions of these and other commercial property agents may yet be shown to be hopelessly optimistic should employers take the approach proposed by the founders of Twitter and Facebook, or follow the example already being set by Fujitsu.

Last month, the technology company said it would look to halve its office space in Japan as part of a wider effort to adapt to the “new normal” of the coronavirus pandemic. The “Work Life Shift” programme is set offer significant flexibility to Fujitsu’s 80,000-strong Japanese workforce, with flexible working hours and working from home being made standard wherever possible.

In a statement sent to the BBC, the company said it “will introduce a new way of working that promises a more empowering, productive and creative experience for employees that will boost innovation and deliver new value to its customers and society”.

Employees are now expected by Fujitsu to “begin to primarily work on a remote basis to achieve a working style that allows them to flexibly use their time according to the contents of their work, business roles and lifestyle”.

The company intends to allow its staff to choose whether they work from home, a major corporate hub or a satellite office. Fujitsu says it believes that that the increased autonomy offered to its workers will help to improve the performance of teams and increase productivity.

All of which sounds wonderful in theory. It may, however, prove to be more problematic in practice in Ireland and elsewhere. And it certainly isn’t as straightforward as Tánaiste Leo Varadkar made it look in a tweet posted on July 9th. In a message accompanying a photo of a new (and as-yet unpacked) Dell computer sitting on the desk in the spare room of his Dublin 15 home, Varadkar invited people to submit their views to the Government’s public consultation on remote working:

“Setting up my new home working station. The Govt wants remote working to become part of the new normal. If done right, the benefits will be huge; reduced business costs, better work-life balance especially for parents, less traffic, lower emissions and time saved on the commute.”

Solicitor and employment law specialist Richard Grogan takes a different view of the proposed movement from the traditional office to working from home or other forms of remote working. “Working from home for the last 15 [as of July 10th] weeks has tended to be people sitting at the kitchen table. That is a recipe for a personal injury claim. Issues connected to back and neck strain are already arising.

“If an employer wants somebody to work from home, the employer has to set up a proper work space. The employer who wants someone to work from home has to provide them with a proper work station that complies with the same rules that it would in a workplace. It can’t be a work station in a cupboard under the stairs and it has to be up to an appropriate standard. It is an extension of the workplace, and there will be a significant cost to the employer for doing that.

“The employer then has to think of the insurance costs, because now you have a residential property being used for work and business purposes. The employer is going to have to take out insurance to cover equipment if anything happens to it, or if there’s an accident caused.

“There will be issues if a workplace is not properly set up. How an employer does that without calling out to somebody’s home will be difficult.”

While such reservations may give businesses pause for thought, it would appear that having sampled the working-from-home experience, most employees are in no rush to return to their office desks.

According to the latest sustainability index from AIB, 80 per cent of those questioned for the June survey said they wanted a change from working in the office five days a week. Asked what their ideal working arrangement would be once normal life resumes, the highest preference (24 per cent) said they would like to work two to three days a week from home with the remainder spent in the office.

Twenty per cent of those who responded said they would like to work one to two days a week from home, while another 20 per cent expressed a preference for working three to four days a week from home. Fifteen per cent said they would like to go back to the office the way it was before the Covid-19 pandemic.

Interestingly, 77 per cent of those surveyed thought it would be better for employers if many of their employees continued to work from home.

The other difficulty with home working is the cost of setting it up, and the fact that those costs can only be spread over seven years

Leaving aside the difficulties employers would face in accommodating the variety of preferences expressed for this hybrid approach of working from the home and in the office, Grogan believes the move would present significant data-protection and cybersecurity issues for businesses

He says: “Employers and employees would be looking at data-protection issues. An employee could have access to information at home relating to you. It’s bad enough if that employee happens to be an accountant working on your tax returns. It’s worse if it’s somebody who’s an accountant working at home on a submission to the Revenue Commissioners as to why you should be allowed have an offshore bank account, or an issue relating to a tax demand for unpaid taxes. What if somebody walks in and sees that? They wouldn’t have seen it if the accountant was working in an office.

“Cybersecurity is an issue also. If you are working from home, you could end up importing a virus to your laptop which is then sent to everyone else in the company. That could be a virus that closes everything down, or it could be malware that simply circulates and gathers information.”

While the issues of data protection and cybersecurity might well be solvable, the costs involved in having employees working from home full time, or between the home and the office, would be unavoidable and substantial.

On this, Grogan says: “The other difficulty with home working is the cost of setting it up, and the fact that those costs can only be spread over seven years. That’s a disincentive for employers. With businesses at the present time down by anywhere between 30 per cent and 50 per cent on their revenues, the idea of spending €4,000 on a workspace when they’re only going to get 50 per cent of that as an allowance against their tax, and then having to pay tax on the money they have spent? So €4,000 then becomes closer to €6,000, and you have to do that for multiple employees?

“We’ve gone through months of everybody doing the best that they can in trying times. We’re now getting back to normality in terms of work. The employer can no longer say that this is an emergency. What was allowed in an emergency situation for 15 weeks won’t do in the future. The home-working space will have to be a mirror of the office.”

Ronald Quinlan

Ronald Quinlan

Ronald Quinlan is Acting Property Editor of The Irish Times