How can real estate keep up with the changing workplace? An expert explains

The COVID-19 pandemic catalyzed a significant societal change: the move toward hybrid work and a fundamental rebalancing between our lives at work, at home and how the two interact.

For more than two years, many of the world’s workers have been carrying out their jobs effectively from the comfort of their homes — so, where does this leave the office?

But rumours of the corporate office’s complete demise are both premature and overstated. There is growing evidence that remote work is actually more stressful for employees, being constantly “on” with no physical divide between themselves and their place of work. Other workers may value time out of busy or distracting homes to focus on their work. Others value the organic collaboration and socialising that a central place of work provides.

It is becoming increasingly clear that the future of the workplace is hybrid and flexible. Any office that workers use must not simply replicate what they have available in their homes, but add value to their work and personal lives. Further, a workplace should be tailored to their strengths, with a renewed focus on collaboration, well-being, valuable socialising and improving equity and productivity.

A re-evaluation of the role of the workplace in our lives and work also provides an opportunity to improve equity and the environmental footprint of the places we work. Technology is a key enabler for this along with an emphasis on environmental, social and governance (ESG) principles that were not considered when these workspaces were first developed.

This change leaves the real estate sector at a crossroads, too. For years, the sector has thrived from companies needing centralized workplaces for all their employees and commercial workplace was seen by investors as one of the most stable real estate asset classes. Now, the industry must adapt to a new way of working.

We asked Nathalie Palladitcheff, President and Chief Executive Officer of real estate firm Ivanhoé Cambridge (the real estate subsidiary of Caisse de dépôt et placement du Québec) how the modern workplace can evolve to support new ways of working, and continue to add value as the wider culture undergoes seismic changes to how and where we work.

Below are several key points on the workplace that Palladitcheff discusses. The transcript has been edited for clarity.

"Hybrid work is just part of total societal change.

"It's not just about office. It's really about a new balanced life between work and personal life. Of course, it's going to have an impact in the way cities are going to evolve and in the way, as employers, you are going to deal with your teams."

"Modern offices are in competition now with what you can do at home. So, it means that you have to demonstrate that when you want people back to the office, they are going to have the tools and spaces which enable them to be more productive than what they could do by themselves.

"So I would say that modern spaces could be divided into three categories. The work you can do by yourself at the office, but in a more equipped environment, with a printer, a PC, good screens, everything. You're going to have collaboration spaces more and more. And that's why we do not see a decrease in the premises that the tenants lease for the time being, because they want more of those collaboration spaces and also creative spaces. So I would say that the modern workplace would probably have those three components.

"It's a real societal change and revolution. We don't know exactly how it is going to evolve. For that, you have to be a good listener. So I would say that CEOs would have to listen, to understand, to catch the new ideas and to survey from time to time their employees to know exactly what they're expecting from their new offices."

"To really asses productivity, we're probably going to see some new data and you will also see more and more buildings with sensors that are trying to understand the way people really use the buildings. It helps in two ways — for really understanding and listening to what your employees are saying about the way they are using the space, but also in terms of ESG because there's an advantage to being more intelligent in the way you are going to monitor your buildings.

"So, this new tech, which is really everywhere now in the buildings, are going to help both sides."

"ESG is the key of every line of the business. So, of course, when you talk about ESG relating to real estate, that's big because we know that construction and buildings represent 38% of global carbon emissions. So, of course, it's a big stake for us. It's also a big step for our employees who are really looking for green buildings in which they are going to feel safe in with a healthy environment and which are really matching their expectations of work today.

"So, it's not only what you find inside the building, but also outside - the connections, the means of transportation. You know, we think a lot about the way that people are going to feel really comfortable in their neighborhood.

"Our responsibility as an investor is not to just look at the building itself but also at the environment and the neighborhood, which are the components of ESG.

"It's an enthusiastic period to work in real estate, and I really think that this disruption is going to lead us to a better asset class."