Workspace, reworked: ride the wave of tech driven change
Technology is redefining how and where we work. Are you ready to ride the wave of change sweeping through real estate?
RIDE THE WAVE OF TECH DRIVEN CHANGE
DATA DEFINED WORKSPACE
The transformation of work
Technology is advancing at a fast- pace bringing drastic social, cultural and organisational change. This advance is now fundamentally altering how and where we work. Increasing access to and use of a variety of networked devices, converging with the improved speed and reliability of Internet connections is enabling new ways of working and changing how we behave at work.
As technology increasingly defines how all businesses operate and are structured, it is influencing how real estate is designed and managed, and how workers use their workspace.
Over the following pages we explore how this transformation is taking shape, looking ahead to 2025 and 2030.
Data in the driving seat
The data explosion – the ability to gather it, analyse it and store it in ever greater volumes – will continue to impact many areas of life. The workplace is not immune; data will drive the management of real estate space, boosting worker productivity and making buildings more sustainable.
The increased knowledge about how the workplace functions will drive how spaces are managed and used. While smart buildings have existed for some time, the tasks that are managed 'smartly' are often limited to operational tasks such as controlling lighting and access.
The next generation of smart buildings use Internet networks to create management systems that are similar to a computer operating system. Internet of Things (IoT) sensors can be integrated, while wall-mounted displays, and even devices could be managed through the system.
Beyond a building's facilities, the ubiquitous adoption of devices, such as smartphones, will facilitate a smarter approach to workforce management and influence worker behaviour. Retailers are already using sensors and devices to monitor footfall; the same technology is now working its way into offices.
Bank of America recently used sociometric badges – recording personal data during the working day – to identify why some call centre employees were more productive. Realising that the most productive employees took breaks together, break times were rescheduled, boosting productivity by 10%.
(Sociometric Solutions: Creating Better Workplaces and Organizations Through Social Sensor Data, HBS. https://openforum.hbs.org/challenge/understand-digitaltransformation-of-business/data/sociometric-solutions-creatingbetter-workplaces-and-organizations-through-social-sensor-data)
While data gathering and analysis will transform workplace management, the widespread adoption of greater technology is transforming how organisations are set-up and staffed, and how they use real estate space.
It is no secret that technology is a powerful disruptive force, creating new business models and providing the means for start-ups to displace incumbent businesses.
The pervasive nature of tech growth, however, is making all businesses technology companies. Today's cars are powered by software containing 100 million lines of code and controlled with sensors, processing large volumes of data. Investment bank, Goldman Sachs employs more people in its technology division than any other part of the company.
Goldman Puts Its Muscle Into Tech Push, Financial Times, December 2015. https://next.ft.com/content/f436ae7a-9d3b-11e5-8ce1- f6219b685d74#axzz3usGNuWKe
Products and services are often far quicker to bring to market today, while industries are increasingly formed around 'stacks': a select number of larger firms provide a base or platform on which smaller businesses develop their products or service. Sweeping cultural and social shifts, and an appetite for flexibility, is driving the development of these connections. It is how Apple and Google's operating platforms work: the base of the stack on which multiple companies develop apps.
New workers and expectations
Advancements in the field of artificial intelligence will increasingly automate many tasks, creating a different approach to how workspaces are managed and splitting process-driven activities from more creative, design and development roles. This will create different types of workers and new jobs.
Carlo Ratti Associati's Office 3.0 design, Agnelli Foundation, Turin
At the same time, the next generation of workers will be digital dependents, those who have grown up playing games on the family iPad and own smartphones. Attracting talent from this pool of workers will push workplace user experience up the priority list for organisations. Higher-spec core locations will be used to attract individuals with the right skills and expertise. Demand for software engineers and data analysts already outstrips supply, with innovative work locations used to attract the right people.
The convergence of these factors will create organisational structures made up of autonomous workers (machines), a smaller core workforce and contingent workers (freelance specialists).
Next, we explore how these changes will develop over 15 years from today.
The first truly smart buildings are up and running. Real-time sensors in staff badges track building occupancy, mobile devices are used to adjust lighting and temperature settings, while workers hold a meeting in one of the outdoor areas found on every floor. This is the scene at the Majunga Tower in Paris where the workspace has been reinvented, with user experience in mind.
Majunga Tower Getty
In 2013, auditor and consultancy PwC showed how older buildings can be transformed to be future ready when it refurbished its Embankment Place HQ in London to become the most efficient and environmentally friendly office building in the UK at the time.
PWC creates most sustainable building in the. The Guardian.2014. world https://www.theguardian.com/sustainable-business/sustainability-case-studies-pwc-one-embankment-place
At a smart buildings project in Vienna, engineering and manufacturing firm Siemens is using data to manage the energy use of a building using electric vehicles. The building's management system takes energy from the cars, when needed, while ensuring they are fully charged by the end of the working day.
Reducing energy consumption in manufacturing. Siemans. https://www.siemens.co.uk/en/insights/energy-consumption-in-manufacturing-with-pilkington.htm
The third wave
Web 2.0. Device sophistication and use has rocketed over the last decade, with 50% of the global adult population using a smartphone. Greater connectivity, cloud computing and device adoption have already created great social and cultural changes, impacting business operations and work.
Meanwhile, recent developments shed light on how the next wave of technology will sweep through the world of work. Augmented reality (VR and AR) has started to be tentatively used in the workplace. Cisco and Microsoft have created VR and AR solutions for meetings. Artificial intelligence – the technology that will facilitate more autonomous workers – has already taken steps forward in its use in the workplace. A headline-grabbing success came in 2016 when Google's Deepmind AlphaGo AI technology defeated world champion Lee Sedol at the game Go.
"The combination of a changing workforce and greater connectivity will enable the shift to real estate portfolios built around core hubs, made up of fewer locations. "
By 2025, the third wave of technological progress will be well under way. With billions of devices being used, there is better connectivity and more data is being processed than ever. The exponential advances in computing power are creating a digital ecosystem, transforming products, services and business models – and as a result how companies operate.
By 2025, at least 80% of the world's adults will own a smartphone; the rise in devices, integrated in the workplace, will come with the roll-out of 5G speed networks that could run over Wi-Fi. Connectivity will become a key driver of location choices for businesses.
What does it mean for real estate?
Smart buildings will become mainstream, with Internet of Things (IoT) sensors used to manage productivty, user experience and sustainability. The advancements in the application and use of Artificial Intelligence (AI), Augmented and Virtual Reality (AR & VR) will mean intelligent machines are part of working life for many people, while collaborative working will be facilitated across locations in new ways.
The change in the workforce will be driven by the ability to manage space more flexibly and a shift to a model where staff headcounts start to be reduced, with smaller core teams managed alongside contingent and autonomous workers.
The combination of a changing workforce and greater connectivity will enable the shift to real estate portfolios buillt around core hubs, made up of fewer locations. These hubs will reinforce culture, instil brand and encourage interaction and collaboration. Around these hubs will be networks of flexible space for staff to work from and to host the growing contingent workforce.
"In most instances AI will be used as a tool to supplement human work, rather than as a replacement for human workers"
Harry Armstrong, Senior Researcher, Futures Team, Nesta
Augmented reality (AR) is used to manage your digital life when you arrive at work. Access is controlled through sensors and you can select your workstation via your device on the way in. A morning meeting is conducted between a flexible co-working space in London to a core headquarters location in Chennai, using virtual reality (VR) headsets. That same afternoon, you're setting-up the office artificial intelligence (AI) on a new set of tasks. Welcome to 2030.
New world of work
Q&A with Harry Armstrong, Senior Researcher, Technology Futures at Nesta
Q. How quickly is artificial intelligence across workplaces expected to develop?
There is a wide variety of ways artificial intelligence (AI) will impact the workplace, and it is important to realise that in most instances it will be used as a tool to supplement human work rather than as a replacement for human workers. AI personal assistants, image recognition and algorithm-based decision making are already changing many areas from business to government. It may take a while before aspects of AI reach the workplace because of current technology limitations and issues of trust and understanding.
Q. What kind of industries are likely to be most affected?
It is difficult to say one industry over another is going to be more affected as the tasks AI tools can help with, or do, are applicable to all industries in some way. Levels of adoption are likely to decide impact as much as what the technology can do.
Q. How will this affect the skills needed for human workers?
It is important to remember that the introduction of AI, or automation more broadly, is only one trend which will change the skills needed in the future. In many cases it will not be the most important and may in any case be very difficult to tease apart from the other changes that are happening – think macro trends like globalisation, ageing or climate change.
This is the reason Nesta are running the Employment in 2030 project with Pearson, and Michael Osborne from the Oxford Martin School, to explore what future skills might be needed through a more holistic approach rather than just considering the impact of AI and automation.
What does it mean for real estate?
The pace of change to 2030 will mean working life for many people looks quite different in 15 years time. Smarter buildings that are utilising data intelligence will be designed with modular fit-outs, meaning facilities can be redesigned at lower expense to more zonal and flexible spaces, based on greater understanding of workspace use. Outsourcing to contingent workers is at a high level in many industries, making a core and flexible workspace strategy central to real estate.
How many processes could be automated in your sector?
More flexible real estate
in new locations
As the march of tech advancement revolutionises working life, the places we work will adapt and evolve.
Work space will become a more liquid concept. Core locations will be easier to adapt and sited in strategic centres.
Flexible space, such as co-working offices, will be used tactically as the structure of the workforce moves to a higher number of freelancers.
As technology drives this shift, connectivity will become the fourth utility – as essential to running most workplaces as electricity and water.
The innovative office
As real estate portfolios are streamlined, core locations (corporate HQs) will be found in more concentrated business centres in key cities. Some centres will become innovation districts, combining business units with accelerator, incubator and innovation spaces.
Accelerator and incubator spaces exist today to enable start-ups to bring ideas to market and facilitate the develop of new tech solutions, products and services. Larger businesses are already setting-up collaborative and innovative working environments, enabling them to tap into the potential new products and servcies that can come out of this work.
The growth of the digital ecosystem over the next 15 years is the main driver of this change of approach to location. It also reflects the restructuring of industry sectors to form stacks with greater collaboration between companies.
Companies have launched their own co-working brands, such as SAP's HanaHaus* in Palo Alto, and set-up of accelerator spaces to work with partners. Many of these spaces require specialist space for product development, separate to the strategic location where core business functions are carried out.
The changing workforce means core locations will be the focus of higher investment and greater attention. High spec locations will be used as a tool to attract the right talent, while the ability to change the internal configuration of a core location, or at least offer a variety of different spaces, will be key to allow the more intelligent management of space.
Connectivity is key
Granite and schist rock are some of the barriers less associated with technology pioneers, but these were the obstacles Spread Networks overcame in 2009. That year, the company began tunnelling through Pensylvania's Allegheny Mountains to lay over 800 miles of new fibre optic, high speed Internet cable, between Chicago and New York. Demand for the new, faster connectivity was high, driven by Wall Street firms looking to lease bandwidth and boost the speed of their trading desks.
While big financial firms have already spent billions building communications paths and computing facilities, the need across other industries to access always-on connectivity, with speed and resilience, is only growing.
Software, data storage and digital infrastructure is increasingly being accessed through cloud computing services. This makes connection speeds ever more important and will determine how attractive a building is to potential tenants.
It is not only a priority for individual businesses. Government policy often treats access to high speed Internet as a part of the critical infrastructure and essential for economic growth. Cities around the world are leading the way, with the rise of the gigabit city, offering residents and companies access to high speed Internet that slashes streaming and download times.
Next, discover where we are today and the trends that will drive real estate demand over the next 15 years.
The new approach to location is already beginning to take shape. Co-working spaces are growing in popularity, facilitating highly-skilled freelancer workers and greater partnership working between organisations.
Big firms, often industry incumbents, have adapted in the face of disruptive technology that threatens to snatch market share. They have also spotted the opportunity to partner with start-ups to drive the development of new business models, products or services.
"Innovation is key to competitive advantage and companies have realised that this can be achieved by collaborating with people external to their organisation. "
Owen King, Senior Consultant at Unwork
UK bank Barclays has created Rise, co-working and accelerator spaces in London, Manchester and New York. Rise runs an accelerator programme with Techstars to enable financial technology start-ups to explore opportunities, leveraging Barclays' network and systems.
Why Barclays’ Schools for Startups Are Different from the Rest, American Banker, August 2015. http://www.americanbanker.com/news/bank-technology/ why-barclays-schools-for-startups-are-different-from-therest-1075854-1.html
General Electric recently opened FirstBuild on the campus of the University of Louisville in Kentucky. This specialist environment allows product engineers to develop concepts and ideas using low volume manufacturing techniques.
Why GE has a ‘fail fast’ startup for rally fighters and pizza ovens, Wired, December 2015. http://www.wired.co.uk/magazine/archive/2015/12/features/gestartup-fail-fast-crowdsourcing
Connectivity is highly prized
When Caspi Development acquired the 161 Bowery building in New York for renovation, they invested in linking up each floor with fibre connections plugging into the high speed Internet connection outside the block.
161 Bowery Getty
Tenants flocked to the building with its WiredScore-certification, helping recoup the firm's initial investment. WiredScore rates buildings for their speed and reliability of internet connection in fifty cities. As dependency on connections to the cloud and infrastructure to support large data transfer grows, the importance of connectivity in location decisions will only increase for many businesses.
As companies move to a location strategy built out from a core, strategic location and surrounded by tactical flexible spaces, co-working providers will grow. The rise of lean companies, employing few staff directly, could also lead to an approach to real estate that only uses co-working and serviced-type office space. A stark example of the difference between the business model of the 2020s compared to the one we are used to now is the demise of Kodak versus the rise of Instagram.
In its heyday, photography firm Kodak employed 145,000 people; when photo app business Instagram was acquired by Facebook for $1bn it employed just 13 members of staff.
Q&A with Owen King, Senior Consultant at Unwork
Q. How important will real estate flexibility be to businesses?
It is becoming incredibly difficult for organisations to forecast their real estate requirements over the 5, 10 or 15 years of a typical office lease. With the pace of technological advancement, there is more uncertainty for businesses and a need to adopt a more agile, flexible organisational structure. This need for flexibility very much applies to real estate, which has traditionally been a fixed and intractable asset. To achieve this, companies will partner with co-working providers so they can scale their space commitments more dynamically.
Q. How has the use of innovation spaces, such as incubator and accelerator units, evolved?
Companies are increasingly focusing on value creation, as back office type functions are outsourced or automated. Innovation is key to competitive advantage and companies have realised that this can be achieved by collaborating with people external to their organisation. These spaces bring together bigger firms with start-ups, and isn’t a strategy just being used by technology firms anymore. Engineering firms and companies in the consumer goods and finance sectors have embraced this way of tapping into new technologies and ideas.
Q. Are certain industries more likely than others to be early adopters of the core and flexible real estate model?
This approach will develop as a curve. Technology firms, who are at the hard end of the changes taking place, will be the early adopters, but we will start to see this model being adopted by other sectors as digital disruption gathers pace. In the finance sector, for instance, a lot of the banks are investing in emerging technologies like block chain that will help them reduce inputs and costs. Consequently, they’re employing more software engineers and technologists and are starting to look more like their counterparts in the tech sector in terms of real estate requirements.
A core and flex model
By 2025, flexible spaces will account for 30% of the total real estate footprint of a large company. This space will complement the core locations sited in city centres and innovation districts, allowing partnership work with accelerator and incubator spaces. Exact requirements will vary, but a more varied mix of workspaces that build in greater flexibility will be a near universal requirement for many businesses.
This will lead to more flexible tenancy arrangements, with space under 10,000 sq. ft leased directly. The rise of digital platforms to quickly secure workspace will enable this shift.
Where would be the best centre for a core location in your sector?
- An innovation district outside of a major city centre
- An established urban centre, such as London or New York
- A fast-growing city in an emerging market
By 2030, there will be a concentration of core company locations in key centres with a high proportion of staff and contingent workers – operating flexibly from co-working environments and on the move.
Advances in computing power and artificial intelligence will transform how people work, allowing companies to operate leaner, more responsive business models. Remote working will be facilitated through faster connections via 5G networks and fibre optic cable, along with comprehensive network coverage and widespread adoption of cloud technology.
What does it mean for real estate?
Expectations about real estate will shift over the 15 years to 2030. Talent competition and advances in workplace data mean specification and fit-out will need to be actively managed to meet individual user and corporate tenant needs.
The next generation – the digital dependents – will expect greater personalisation and choice. For core locations, the ability to offer far greater customisation will be enabled by the rise of the Internet of Things (IoT) and device adoption.
Technological and architectural infrastructure will converge to become the framework for designing and selecting properties. Workspaces with high quality connectivity, designed to offer customisation, and situated in key city centres and innovation districts will command the greatest interest.
FUTURE PROOF PROPERTY
Are you ready for the workers of tomorrow?
Action plan to 2030
Technology is transforming the way businesses use real estate. Are you ready to react to the changes set to take place over the next fifteen years?
Businesses who fail to adapt their strategies today risk obsolescence tomorrow.
Discover how companies can use technology to make smarter decisions on location selection and workplace design, and how investors can position their portfolios for the accelerated change we are seeing.
As the world of work is transformed, the real estate landscape will shift. Those changes have already begun, and it is conceivable that a workplace designed on today's assumptions could become redundant for many businesses in little more than a decade.
As researchers at Nesta and Oxford University have identified, just the rise of automation in the workplace has the potential to completely redraw the type of jobs available and skills required over the next 15 years.
Between now and 2030, there are steps businesses can take to future proof their workspace design and management strategies. Read on to see whether you're prepared for the changes ahead.
Four things to do tomorrow
1. Put data science in the driving seat: embed technology into workplace strategy
2. Review locations and facilities: focus on flexibility, connectivity & user experience
3. Test new systems and technology: begin to embed smart systems into the fibre of buildings and get to grips
with data management
4. Take health and wellbeing seriously: tackle productivity, sustainability, health and wellbeing through intelligent
Now to 2025
How smart is your workspace?
How could you use sensors and data analytics to make the best use of real estate?
How connected is your real estate strategy?
Connectivity with be a key enabler of future work, will your location strategy be framed around connectivity?
Have you considered co-working or incubator sites?
How would you manage more flexible demands on working spaces?
Will facilities management be automated?
The rise of artificial intelligence will impact how buildings are run.
What makes a good core location?
Companies will move to fewer core locations in hubs surrounded by a network of flexible space to accomodate changing requirements.
How can buildings be designed and developed to meet the demands of 2030?
Changing requirements will mean greater ability to change internal spaces easily and a need for higher specs to attract the right workers.
By 2030, 30% of corporate real estate portfolios will comprise flexible space.
Are you ready to ride the wave of change? For more detailed action plans and analysis of the drivers of technological change, request a copy of the full report on the next page.