With COVID-19 now impacting most APAC markets, many businesses previously considering expansion and relocation of their offices are now delaying decision making. However, not all corporate real estate (CRE) heads can afford to wait too long for the uncertainty to lift, especially those faced with impending lease expirations. Although the long-term health, economic, and business impacts of the COVID-19 outbreak cannot be fully predicted, the current situation presents an opportunity for CRE professionals to re-evaluate their real estate, business continuity plans, and workplace strategies in order to minimise business risks from COVID-19 and any future viral epidemics.
Short term discussions with landlords
In certain markets such as Hong Kong, where office rents were already subdued in the wake of social unrest and trade disputes, COVID-19 will apply added pressure to office rents . Interestingly, this downward pressure has led to some activity, with companies taking advantage of more tenant friendly conditions to search for relocation options.
In affected cities, we expect landlords will quickly become aware of the need to meet the market with more flexible deals in terms of tenure, fit-out and rental concessions to secure renewals and ensure longer-term retention. Given that the COVID-19 situation is still developing, now may be the best time to negotiate short-term lease extensions or greater flexibility.
Allowing for work flexibility
We may now be seeing the biggest work-from-home experiment within Asia-Pacific. While a study by IWG found that 70% of global professionals work remotely at least once a week, not all companies are prepared to manage the unprecedented mass of employees now working from home during the outbreak due to cultural or technological barriers.
In a virtual environment, it can be a challenge to communicate complex ideas or nuanced messages, especially in Asia, where most countries have high-context cultures that rely heavily on social cues. A Huffington Post report in 2019 found that only 3% of workers in Japan have tried working remotely, with challenges in communication with co-workers as one of the major concerns about working from home. One way that companies are working around cultural barriers is by investing in video-chat apps like Zoom and WeChat Work, which have seen a surge in demand since the start of the COVID-19 outbreak. Aside from making sure employees have the right connectivity tools, IT infrastructure, and cybersecurity in place to allow for remote working, workplace strategists also need to ensure they communicate clear expectations and boundaries for staff working remotely. In Hong Kong, management trainees from Hang Seng Bankstirred controversy after posting photos of their hike while they were “working from home”. While some companies have struggled to establish an effective culture for remote work, those in digital sectors have found the shift quite easy and looking at incorporating it into employee benefits in the long-run. However, according to Dr. Lee Elliott, Knight Frank’s Global Head of Occupier Research,
“A greater shift to remote working in the long-run won’t spell the death of the physical office. Rather, the office will play an increasingly important role in bringing teams together to collaborate and establish company culture in a way that can’t be done virtually.”
As an alternative to a company-wide remote working policy, companies are also physically segregating teams between the office, alternative work sites, or from home to minimise the risk of infection between teams. While the demand for flexible space has already seen an increasing trend, this outbreak may spur more companies to consider having back-up offices to segregate teams for business continuity purposes.
Assessing geographical footprint and geographical diversity
With Hubei province as the epicentre of the COVID-19 epidemic, business all over Mainland China has been disrupted by travel restrictions and quarantine orders in order to contain the infectious spread. For global businesses which rely heavily on their China-based operations, the outbreak exposes the danger of relying too heavily on a single geographic location. While one cannot predict where a future viral epidemic will start next, CRE heads will want to place greater importance on geographic diversity when choosing where to locate staff and operations in order to ensure business continuity. It is possible business may now investigate a hub and spoke model that allows for some form of decentralisation.
Prioritising health and wellness
In order to attract and retain talent, employers have been more conscious about ensuring wellness in the workplace. However, the current viral outbreak highlights the need to include health and wellness in business continuity planning. With face masks and hand sanitisers low in stock across many cities in Asia, only the most well-prepared companies have been able to supply their staff with face masks, thermometers, hand sanitisers, and even vitamins. The current situation also highlights the importance of implementing a workplace culture which deters employee presenteeism – when employees show up to the office while sick, for fear of mistrust from their supervisors.
Furthermore, CRE heads may want to place heavier importance on a building’s ventilation systems and healthcare amenities when choosing a space to occupy. A study showed that viral transmission risk in a building can be reduced by 50% with adequate ventilation and filtration rates, supplemented with air purifiers. Patterns of infection during the SARS outbreak in Hong Kong also provided evidence that mass community spread could be caused by poor ventilation in certain buildings.
Short term actions and longer-term lessons
The COVID-19 situation is constantly developing, but the current trajectory points to a wider global spread which all workplace strategists need to prepare for. In the short-term, companies already need to be executing or getting ready to have remote or split-team working infrastructure in place and taking the opportunity to negotiate flexible terms with landlords while uncertainty prevails.
In the longer term, COVID-19 is acting as a catalyst for the bigger trend that we have been pointing to in our (Y)OUR SPACE research: the form and function of the office space is changing as the nature of work and the way companies collaborate is changing. The lessons that workplace strategists are taking from COVID-19 will be influential in shaping the future of the workplace.
If you’d like to have a confidential chat, contact Tim Armstrong, Head of Occupier Services and Commercial Agency, Asia Pacific