Top 5 reasons why companies are transforming their workplace

Changing employee expectations and workplace demographics are ushering in the future of the workplace — and many companies are adapting through real estate decisions that are more and more employee-centric.

Workplace consultancy expert Dr. Lee Elliott in an interview expounded on the top reasons that drive the workplace transformations of companies around the world. Dr. Elliott is the head of Global Occupier Research at Knight Frank, a global independent property consultancy, and is the author of the seminal research called (Y)our Space, which delves into the global trends propelling the transformation of corporate real estate.

Joining Dr. Elliott in the discussions was Abi da Silva, a workplace solutions expert and director of Occupier Services & Commercial Agency at Santos Knight Frank, the country’s first and largest fully integrated real estate services firm. Advocating that the workplace should work for people and not the other way around, Da Silva has guided a number of Philippine-based companies in workplace assessments, change managements, and workplace transformations.

The experts shed light on the increasing priority given on real estate as a strategic tool for business growth, and the factors influencing demand amidst a volatile economic environment and urbanization.

Dr. Lee Elliott, head of Global Occupier Research and lead of the Commercial Research Team at Knight Frank.

Here are the top five reasons why companies are transforming their workplace:

1. Slow global economic growth is driving businesses to prioritize cost-efficiency. Occupiers look at cost-saving initiatives differently when it comes to real estate in the middle of a 2.6 percent-slow global economic performance. “The low growth economic environment forces businesses to really think about how they’re structuring the business, and where they are locating it,” Dr. Elliott said.

Whereas before, real estate was seen as just a cost to manage and minimize, management teams are now “making very bold occupancy decisions, taking very good quality buildings and workspaces because they recognize that if they get the real estate right, many of the other challenges of the business are solved,” Dr. Elliott noted.

2. Changing workplace demographic is reshaping office design. The work location and workplace environment should be responsive to the needs of a workforce that is increasingly becoming multigenerational. Employees in a diverse and inclusive company may have different workstyles, and the workplace must be able to accommodate these preferences while allotting ample spaces and facilities that encourage collaboration. Only through collaboration can innovative ideas or solutions be produced, according to Dr. Elliott.

“It’s not any different in the Philippines with its impetus for urbanization and the workforce demographic being multigenerational. The average median age in your workforce is 24 years old,” he explained.

Da Silva attested that many local companies are acknowledging the value of real estate in improving employee satisfaction. “Local companies are gradually realizing that workplace design has a direct impact on employee engagement, overall wellbeing and productivity,” she shared.

3. Well-being and workplace experience are key to addressing attrition. Businesses are recognizing that investing in real estate is part of investing in multigenerational talent retention. Companies are spending a lot of money on trainings and other programs to keep their people, including on amenities for rest and recreation.

Abi da Silva, director of Occupier Services & Commercial Agency at Santos Knight Frank

“On average, 15 percent of the business costs go to real estate, and 55 percent would be on people,” said Dr. Elliott, as he continued to expound on the practical implications of office spaces in maintaining a healthy baseline. “The cost of losing someone is expensive — it would take somewhere between 100 to 150 percent of someone’s salary to replace them.

“Wellbeing and workplace experience is generating buzz in real estate circles. We have come from thinking about furniture, floor plate design, and desk layouts, to really considering what we can do with that environment to make it as productive for our people as possible. ‘How do we create experience?’ is one of the first questions we look at.”

Da Silva affirmed that premium buildings have the highest demand in the Philippines. “We have a lot of multinational and Business Process Outsourcing firms who want to be located in high-quality buildings for talent retention, to avoid the high costs of attrition,” she said.

4. Adapting technological advancements for workplace mobility. Digital disruption in the form of video conferencing facilities, 3D holographic imaging projectors, robotics, and other forms of artificial intelligence that can handle repetitive tasks are making it easier for employees to focus on decision-making, solve complex problems, and get tasks done more efficiently by working more closely with teammates and stakeholders.

Da Silva elaborated that “the most obvious change that technology brought to the office setup is mobility — we are not so tethered to our desks anymore. A workplace that supports internal mobility provides the platform for increased interaction among staff. These interactions lead to collaboration which can then result to innovative ideas.”

Globally, digital transformation has actually resulted in recent shifts in businesses’ expansion agendas. “If you look back to 10 to 15 years ago, the dominant paradigm in business is all about scale. It’s making yourself as big and as visible as possible. It’s a race to open as many offices as fast as you can. It’s not very sustainable. Businesses now recognize that their edge lies in their ability to innovate and that happens after collaboration, when people are not isolated in their workstations,” Dr. Elliott said.

5. New workplace solutions increase real estate options for businesses. Flexible and co-working spaces are seen as new drivers of the office segment. Both flexible and co-working spaces also usually have shorter lease terms that make them ideal solutions for small to medium-sized businesses who are still testing their success in the market.

As opposed to fixed workstations, flexible workspaces allow people to huddle or work in alternate locations within the workplace that make them ideal for employees who are usually out on the field or don’t necessarily have to perform work in one area. Co-working spaces, on the other hand, are shared between individuals — usually the self-employed, freelancers, or telecommuters — working collaboratively or independently.

The Knight Frank Global Occupier Survey featured in (Y)our Space indicated that two-thirds of companies around the world said they use co-working services and flexible office space comprise five percent of their current property portfolio. It also indicated that 69 percent of global corporations plan to increase their utilization of co-working spaces, and 80 percent expect to grow the amount of collaborative space they use over the next three years.

In the Philippines, Da Silva shared that the rise of flexible and co-working spaces are evident, with the advent of WeWork, Warehouse Eight, Loft Co-working Space Manila, and Acceler8 Rockwell, among many others. Flexible and co-working office spaces may be “sunrise” ideas in the country, but it will only be a matter of time before more companies take advantage of their lease term and cost efficiency benefits.

Enabling people to do their best work is the crux of the global transformation of the workplace. In the Philippines, with our “Build, build, build” and decentralization agenda, it is even more essential for businesses to unlock further growth potential to be able to keep up with competition amidst a strong economy — and the key to do this is having the right set of amenities, services, and infrastructure to stimulate innovative thinking, and attract and retain a multigenerational talent force.

Knight Frank has a network spanning over 500 offices across 60 countries. Santos Knight Frank, the counterpart of Knight Frank in the Philippines, is a leader in workplace consultancy, occupier services, real estate advisory, valuations, and property management, among other services.