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The big ‘back to the office’ debate

Can SA expect a bounce-back in prime office space – and if so, when? Malcolm Horne, Group CEO of Broll Property Group, and organisational psychologist Dr Natasha Winkler-Titus weigh in.

There has been much talk, locally in SA and globally, about how Covid-19 is changing the world of work with the work-from-home phenomenon.

The so-called ‘Zoom boom’ has seen office workers and corporate executives becoming much more accustomed to virtual meetings from home – or, in fact, from almost anywhere.

This episode of The Property Pod is slightly different, as I speak to two guests, one face-to-face and another virtually via Zoom. It is apt though, considering the topic: The big ‘back to the office’ debate. 

Our guests on this special podcast and vodcast are Malcolm Horne, Group CEO of the Broll Property Group − a leading pan-African property services company; and Dr Natasha Winkler-Titus, a noted work or organisational psychologist and founder of SigniFYER.

Both Horne and Winkler-Titus have extensive experience in their respective fields.

Horne has been Group CEO of Broll for just over a decade, but has been in leadership positions at the company since 2003.

He says the group has subsequently grown to operate out of 13 countries across the African continent and runs 12 service lines.

“We’ve got about R260 billion worth of properties under management − 43 million square metres. We’ve grown the business extensively over that period of time, but we think we’ve still kept it as a very client-centric business because the clients and our people are at the heart of our business – and that’s where our growth will lie,” he adds.

Dr Winkler-Titus has more than 25 years’ experience in people leadership, executive development, and management consulting. Besides founding SigniFYER, she is a full-time faculty member of the University of Stellenbosch Business School, where she teaches and researches leadership and organisational behaviour.

The work-from-home and now hybrid working trends are major discussion points in the office-property market. But, with the Covid-19 vaccination drive globally and now in South Africa gaining traction, many employers and corporates want workers back in the office in some way.

In this episode, Horne and Winkler-Titus share some of their thoughts and insights on the big ‘back to the office’ debate.

Below are highlights of some of their comments. Listen to the full podcast in the link above or download it from iono, Spotify or Apple Podcasts. Alternatively, you can watch the video or vodcast here or on the Moneyweb Youtube channel.

Highlights

MALCOLM HORNE: Everyone talks about the period of the pandemic and whether March 27, 2020 defines us. But if you look at the office sector pre-pandemic there was a lot of consolidation happening. Corporates were all looking at their space requirements, [at what] they needed, and vacancies were rising because office accommodation is the second-biggest expense normally, other than staff.

The economy of South Africa wasn’t growing, so we had the landscape of corporates really having to look at their office needs and space [with] a lot of theory around remote work and agile workforces.

I think the relevance of March 27, 2020 was that it took all of the theorising of ‘We can do remote working, we can be agile, we can do all of that stuff’ into a state of reality, and we’ve actually journeyed through that state of reality. I think we’re not at the end of the reality yet.

I think we’re at the beginning of a journey to transform the workspace as we used to know it.

Does this mean that it’s the end of the office, as we know it?

MALCOLM HORNE: Not at all … I think all that we’re going to see is the purpose of the office being redefined. The office is going to become a collaborative space. It’s going to be a kind of space where things that you can’t do at home you can come and find in the office environment.

You’re going to find creativity happening in that environment, you’re going to find collaboration happening – and that ultimately leads to the redesigning of offices, and repurposing of offices and the office environment.

If you look again, pre-pandemic, I think a lot of corporates had too much office space anyway. They were in office accommodation with many cellular offices. I think all that’s going to happen is you’re going to find a redesign of the space and a repurposing of that space – but it’ll still be very relevant in the years to come.

The industrial or work-psychology perspective …

NATASHA WINKLER-TITUS: I actually just want to echo, I want to take it on from where Malcolm left it off. I do agree on that. I’ve also been doing a lot of work in the hybrid-work and remote-working space. One thing that the pandemic has done is it’s just elevated certain things that have been there all along anyway.

Two things, for example, I want to highlight. The pandemic, or the subsequent working from home, has spotlighted employee wellness and engagement in a way that we’ve not seen before. In South Africa we’ve had remote working, being truly locked down. Basically 4% of us qualified in this space [had been] doing remote work or virtual work, whereas with the pandemic we saw up to 40% of professional staff working from home.

Natasha Winkler-Titus, organisational psychologist, SigniFYER, Broll, The Property Pod, Covid-19

Dr Natasha Winkler-Titus, a noted work or organisational psychologist and founder of SigniFYER.

I don’t think we’re going to stay at 40%; I do think there’s going to be a return. But it’s opened up new ways of thinking about the work model and how we could work and how we should work.

There’s definitely a rethinking happening in the marketplace now around how you operationalise and optimise a hybrid-work model to give both the employer and the employee the benefit of both worlds. But there’s definitely a lot to consider when you go down that path.

Will we eventually see a rebound in the South African office sector, and when can we expect that?

MALCOLM HORNE: In the US again, if you [go back] six months, they were predicting a longer return to the office environment because the [Covid-19] vaccines hadn’t rolled out properly. Once the vaccines have rolled out in their market the jobs will be recreated and come back, thus leading to the demand for offices and the bounce-back of offices, which they are expecting by the middle of next year to have troughed out, and you will start seeing a gradual decline in vacancies and rental rates will firm up to the middle of next year and onwards.

We don’t have that luxury of an economic environment [in SA] because we are in an environment where we do not think we’re going to be the job-creator that the first world is. We can’t necessarily compare what’s going to happen in South Africa with that market [the US] …

I think what is a saving grace at the moment for our market is that we do have restrictions – as in Europe they have restrictions – on how many people can occupy offices. As long as those restrictions are in place, I think your office market [situation] is going to be sustained.

The big risk in the office market now – let’s take Sandton … is if we go look at the sub-let market in Sandton, which is really not formally recorded.

The opportunity in the sub-let market is immense because you can go to just about any corporate in Sandton and they will do a deal with you to take some of their space off their hands.

That will have an impact on how the office take-up operates on pure vacant space … I think we’re going to find B-grade tenants upgrading. You’re going to find a lot more incentives coming to market. And I think you’re going to find corporates recalibrating their space as renewals happen.

I think the office space is not going to bounce back as quickly as one would anticipate in the first world, but it’s going to become a different environment where you’ve probably got a tail end of B-grade space that needs something to be done.

You’ve got people upgrading, refurbishing, so I don’t think it’s a negative picture for the office market. I think there still will be activity in that space.

How important is the vaccination drive in the recovery – not just of the economy, but of the office property market?

MALCOLM HORNE: It is critical because you need certainty and safety to return to offices. Let me again take it to the microcosm of Sandton. The average vaccination rate in South Africa [was] probably 10 or 11% – I don’t know what the percentage is now – but if you look at the corporate worker in Sandton I’m sure it’s sitting at about 50% that have already been vaccinated.

The key is to make your office environment safe, secure, and a place where people want to return to. That’s a journey. That is something that you have to work at, you have to create it. Once that certainty is created, I think staff will want to return to offices.

I think they want to get out of their homes, they want a bit of separation between what’s happening at home and what’s happening at the office, and I think they want to see their colleagues. So, we’ve seen a lot of our client base wanting to return, albeit in a hybrid format, to the offices over the next few months.

How has Covid-19 impacted office workers psychologically?

NATASHA WINKLER-TITUS: We’ve definitely seen a spike in mental health [issues], but it’s also very difficult to really assess the picture because mental wellness has been an issue, even prior to Covid. Now everybody’s been locked in, working from their homes, and we’ve seen a spike in mental-health incidents.

The challenge is it’s a compounded thing. It’s not just about working from home, it’s not business as usual. We’ve all had to deal with the pandemic. We are all going through a number of things.

The trauma that we’ve experienced tends to compound the numbers a little bit but what I do want to highlight is that, even before a lockdown experience, mental wellness was an issue, but it wasn’t as in your face and on the surface and read and talked about on all organisational platforms. The Covid-19 pandemic has just brought it to the surface and raised more awareness.

In terms of returning to the office and some of the mental challenges that go with that, like Malcolm has mentioned with more people getting vaccinated, that is definitely opening up opportunities.

But I do always emphasise that companies need to take a longer-term view. When you take this whole situation, the vaccination drive and the immediate next step, the immediate return of people, then there’s the longer-term consideration of things like hybrid work, and what that can play into it.

Companies mustn’t rush into getting everybody back in the workplace. From a mental-health point of view, remember we’ve also raised awareness around stress-related issues around boundaries – keeping your distance, safe distance and so on.

Very recently the American Psychological Association reported that almost half, 48% of vaccinated adults are still hesitant to go back to in-person contact, and that includes returning to the office.

So, we have to be careful with the post-trauma stress. It was a big transition, a big change to cope with working from home. Now we are in a kind of rhythm, so coming back to a normal – an office – environment, is a new change for people as well, and we must deal with that trauma of returning back to something new, a new way of working.

How do corporates need to support their workers in coming back to the office?

NATASHA WINKLER-TITUS: In South Africa we do have legislative requirements and we do have space requirements, so more than half of the employers are revising their work models.

With the revising of the work model, as I said, don’t jump into decisions quickly. Do the diagnostic, understand your environment. Understand what type of work must be done in an office environment and ring-fence that. What are the rules around that? What are the positions that can be done in different platforms that would qualify in a hybrid model?

There’s also the safety of returning. What are the tactical types of thing that we must set up in the office environment – safe-distance pods to work in, how you set up your meeting spaces, and things like that? With a hybrid model, how do you create an environment like we are having now; you are in the office, I’m virtual, and we can make it work. So how do you set up your workspaces?

We can learn from the likes of the Googles and how they set up their meeting pods.

But the most important is authentic and very transparent communication. The one thing we’ve learned is that when you’re going through trauma and when you’re going through a lot of change, the last thing you need is ambiguity and complexity.

[Leaders should] be clear and transparent, and engage, and people [should] give input. But make decisions around the process. Also measure readiness. Remember there are going to be legislative issues. This whole vaccination question is still up in the air: can you force me? So, there’s a legislative side to it, there’s an employee-preference side to it, but there’s also risk and safety.

MALCOLM HORNE: If we look at the trend that is happening, we are seeing it at Broll’s Workspace Solutions business … we can’t stay ahead of talking to corporates – and it’s at the C-suite level about their business. So, we’re not just property people, we are getting involved in the DNA of businesses to make sure that that workspace is an environment which can work and generate revenue for the business.

I think that’s where the property-services space is professionalising beyond just leasing space. It’s becoming [about] that relevance to make the space usable and relevant to the workforce.

There’s a lot of that happening in the space and that’s positive for the office market, because what you are finding is innovative design coming to the fore. I think you’re going to find optimisation of design.

You’re going to find people will return to those environments because, ultimately, I think a lot of the businesses we’ve engaged with have said they can maintain their existing business in the current circumstances remotely.

But if you want to grow and nurture talent and do all those good things that we all need to do, you need to create an environment.

So I think the need for the office remains vital in the DNA of our country.

How does the office property sector adapt in this new world of work, and how does ESG [environmental, social and governance factors] fit in?

MALCOLM HORNE: Let me touch on the vaccination side first, and then I’ll get to the rest. I think a lot of the corporates we are engaging with are ultimately going to bring out policies that are pro-vaccination. They are pro what the science is saying.

The key component of that is how they [corporates] implement that in their businesses; that’s a journey that’s going to have to be travelled. But that’s part of the journey to make that workspace relevant, ESG-compliant, because a lot of ESG is coming to the fore, absolutely.

That said, a lot of the companies we are talking to do not have the capital to repurpose their space. They just want to survive this phase and get the economy growing so they can then start to repurpose … They also don’t have enough knowledge or insights and information about their staff, their workplace, what they need to do to actually spend that capital at that point of time.

What I also think has happened in the market, and I’ll refer you to another sector, the retail sector, where a while ago the retailers and the landlords or investors realigned the landscape to become more of a partnership landscape. And I think what’s happened with Covid – and it started happening before Covid – is we have investors that are taking a different approach.

They’re saying ‘How do we partner with our tenants? How do we look to the long-term sustainability of that tenant in our building? How do we re-adapt our building and repurpose our building to make sure it’s relevant?’

We are finding a lot more of that happening and I think those landlords that position their properties and their assets, and value their tenants, are going to be the winners at the end of the day.

I think where those have a closed-door policy, the tenants will move and find new spaces and new landlords who will happily journey those journeys with them.

Brought to you by Broll Property Group.

Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.

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