HomeNewsletterLatest NewsletterEY Future Workplace Index offers optimistic view of CRE investments

EY Future Workplace Index offers optimistic view of CRE investments

Ernst & Young recently announced that its second annual EY Future Workplace Index revealed surprisingly positive attitudes from company leaders on commercial real estate investment despite economic concerns. The index monitors executive sentiment and behavioral data around the workplace of the future.

Despite a slowing U.S. economy and an anticipated recession in 2023, the macroeconomic outlook is forcing CRE leaders to look more closely at their office portfolios from a new perspective, according to Ernst & Young. The Index revealed that only 33 percent of U.S. C-suite business leaders plan to decrease their CRE investments, even in the current interest rate environment and amid inflation. Meanwhile, 58 percent of leaders say they plan to invest in CRE, which could include enhancing or expanding the real estate footprint.

“The economic downturn will force leaders to make important decisions regarding their real estate portfolios — from investments to space optimization, to workforce models,” Mark Grinis, EY Americas Real Estate, Hospitality & Construction Leader, said in a statement. “Employers are beginning to understand that they need to earn the commute time of their employees, and many are investing in the ‘office of the future’ to achieve this.”

The latest EY Future Workplace Index also revealed that more than 70 percent of employees are working from home at least two to three days a week. This is a significant increase from the last year’s index, which found that only 42 percent of employers used the hybrid work model.

New and complicated working patterns have affected companies’ real estate strategies, including how much office space they need and how much it will cost to use it. Additionally, approximately 60 percent of respondents said they are either using, or will soon be using, reservation systems for space utilization and/or occupancy tracking.

More businesses are headed to the suburbs

More than 60% of EY’s survey respondents said they are leasing or thinking of leasing suburban office space since the COVID-19 pandemic. Employers’ response to the deurbanization of the workforce has been to invest in hyperlocal offices to encourage employees to return to in-person work. Companies see the physical office as a key factor in their ability to succeed now and in the future. They also believe the connection employees get from working in person is worth the investment.

In addition to predictable flexibility, companies are also investing in other avenues, such as in-person events (50 percent), providing meals (45 percent), reimbursement for commuting costs (38 percent) and childcare support programs (33 percent) to encourage employees to come into the office.

Flexible working models remain attractive to employees

The index revealed that 64 percent of executives believe flexible working options motivate employees. The combination of flexibility and technology is a top priority. Additionally, a lot of businesses are looking to use health and well-being management apps, along with other hybrid technologies like digital and virtual collaboration resources to optimize their workplaces.

For example, 44 percent of company leaders have activated or are beginning to invest in the metaverse for social interaction, training and/or recruiting purposes, and 62 percent have activated or are beginning to invest in health and safety innovations and monitoring, such as indoor air quality and touchless offices.

Businesses are offering shorter workweeks
Employers are doing what they can to attract and retain their workforce. One tactic has been to implement a four-day workweek, which 40 percent of the index respondents said they have started doing are in the process of doing. Companies now find themselves in a position where they have to offer some sort of hybrid model, or they risk losing workers to businesses that will offer it. Additionally, almost 70 percent of company leadership has implemented, or is implementing, hybrid work technologies, such as video collaboration platforms and virtual whiteboards to meet employees where they are.

“Data is paramount to understanding your workforce and creating the best space for a new era of work,” Francisco J. Acoba, Principal, EY Americas Strategy and Transactions and Co-lead – Corporate Real Estate Consulting and Technology, said in a statement. “Data-driven insights that uncover employees’ work habits will shape how executives design and approach the workplace moving forward.”

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