The office, as you know it, is dead
S E E D E D C O N T E N T
The office, as you know it, is dead
Bustling skyscrapers and office parks packed with workers could be a relic of the pre-pandemic world.
© Christopher Dilts/Bloomberg/Getty Images A social distancing marker is displayed on a table in a conference room at a JLL office in the Aon Center in Chicago, Illinois, U.S., on Thursday, June 24, 2020. After a three-month mandatory hiatus, corporations and their employees have largely adjusted to working from home successfully, but surveys suggest workers having a desire to get back to normal routines over working from home permanently. Photographer: Christopher Dilts/Bloomberg via Getty Images
The health crisis has forced millions of Americans to abandon their offices in favor of working from home, for better or worse. Now there are signs this may not be a short-term phenomenon, but more of a permanent shift in favor of remote work even after a Covid-19 vaccine is in place.
More than two-thirds (68%) of large company CEOs plan to downsize their office space, according to a survey released Tuesday by KPMG.
The pandemic is proving employees don't need to work in cubicles to be successful. And that in turn raises questions about the value of expensive office space, especially in high-priced cities like New York and San Francisco.
"We've proven we can be very effective and productive in virtual work environments," KPMG CEO Paul Knopp told CNN Business.
The survey, which captured responses mostly from companies with more than $1 billion in annual revenue, suggests that even if a vaccine were to be approved tomorrow, the shift to a more nimble virtual work model is not going away. Corporate America is accelerating its investments in digital transformation.
Nearly three-quarters of the CEOs surveyed said they plan to spend more on the digitization of operations and the creation of a next-generation operating model. Two-thirds of the CEOs plan to invest more on the creation of a new workforce model, increasing the use of automation and artificial intelligence alongside human workers.
"This is a longer-term trend. It's here to stay," said Knopp, who said everything from human resources and sales to customer service is being digitized. "Companies are focused on reducing real estate footprints."
Deeper talent pools, cheaper real estate costs
Employees have mixed feelings about working from home. Some feel liberated by ditching their long commutes and stuffy office attire. Others are struggling to work from home while taking care of children and elderly parents.
But, for companies, embracing remote work can be a way to save money and simultaneously deepen their talent pool.
For decades, major companies have spent heavily on prized office buildings in major cities. By shrinking their office footprint, those real estate costs can go down, in some cases dramatically.
At the same time, companies no longer need to exclusively hire people who live or are willing to relocate to major cities where their offices are.
Seventy-two percent of CEOs surveyed by KPMG said working remotely has widened their potential talent pool.
"Where you live is not as important as it used to be," said Knopp.
In some cases, that can allow companies to pay less for talent. For instance, a computer engineer living in Omaha, Nebraska or Fort Wayne, Indiana may not command the same salary as one living in San Francisco, London or another city with a high cost of living.
The pandemic has also forced companies to completely rethink how they hire.
"The CEOs I speak with can now interview, onboard and integrate workers into companies completely virtually, never having physically met the new employees," Knopp said.
Office building owners are getting crushed
The KPMG survey findings are alarming for commercial real estate companies that own prime office buildings in major cities. That's not to mention the bars, restaurants and other small businesses that cater to office workers.
Hopes that empty office buildings get repopulated this fall or in a post-vaccine world may be dashed.
Investors are already steering clear of many commercial real estate companies.
Shares of Vornado Realty Trust, which owns and operates offices and retail properties in New York City, have lost nearly half their value this year. SL Green Realty, another New York real estate investment trust that owns office and retail space, is down 46% in 2020.
Even Empire State Realty Trust, the owner of the iconic Empire State Building, has collapsed by 55% this year.
Offices to get a makeover
Yet some real estate executives are confident the pandemic won't doom office buildings. They note that remote work is no replacement for the intimacy and collaboration offered by in-person working.
"It is ludicrous to think that companies will not return to office. Anyone who says they're not going to be in offices is naive about how company culture is built," Brookfield Asset Management CEO Bruce Flatt told Reuters last month.
But the KPMG survey didn't ask CEOs wither they will pull the plug on office buildings entirely. Even if they wanted to, most companies can't do that because of the long-term nature of leases.
While some companies such as Twitter have said employees who want to work from home permanently can, KPMG said most companies will embrace a hybrid model in the future. That means offices will get a makeover to create more space for team meetings and less for individuals to work.
"The trend will be towards much less reliance on physical office space to get our work done and more reliance on digital collaboration tools," said Knopp, the KPMG boss. "Employees will come into physical offices for team meetings and to collaborate, but most days of the week many employees will work remotely."
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I saw this coming back in March in my own company. The senior execs have recently discussed changing over the office spaces for light manufacturing and assembly operations.
It's been something to adapt to. As a plant/manufacturing engineer, I need to be in the facility, but I have to say, there has been a 70% reduction in my need to have feet on the floor. It has recovered some of my personal time too. I can wake up at 06:50 get my much needed coffee, and still be at work by 07:00. No commute to or from the plant which can recover anything from 45minutes to two hours a day depending on traffic. Reduction of pollution from all the cars on the road is a good thing too.
What I do see as a critical negative is how are engineers entering their fields going to get the "hands on" knowledge that only comes from using their eyes, hands, and ears when looking at manufacturing operations. I've always put new engineers to work as a sort of apprenticeship program working with mechanics, electricians, and skilled machinists for 60 days. They learn to respect those in the trades and how to talk to people they are going to be leading. They learn to use tools, and to "listen and watch" machines. Lastly it's a point of safety. There are a thousand ways of getting hurt on the floor.
Can I just say that I love you for that!!! Engineers should have to be on the floor so to speak in whatever field they're in! It should be mandatory, but in most instances, it isn't.
I work in the engineering tools IT dept. and we have yet to find that we're necessary in office. We're a global support team, so we never gathered as a team face to face to begin with; however, our company purchased land and built a new building just two years ago, which cost them millions... so they're less than thrilled to find out that many of us could, in theory, work from home indefinitely. There's 4 floors to the building... First floor is garage services, labs, and collaboration spaces; people that work there, CANNOT work from home. Second and third floor are engineering teams and while some of their work can be done from home, not all of it can be; therefore, a building is necessary for them. The fourth floor on the other hand, is all support services and a cafeteria: IT, process and supplier quality, purchasing, upper management, and HR. Yes, some of the purchasing team needs space when they have a supplier visiting; upper management for clients and corporate meetings, and HR for all the things HR does will also require some in-house work. We also need an IT member (from the Support IT team) to be on call for server issues or upgrades to the system occasionally; however, the team I'm a part of (and a couple others) never really need to be in an office space. That would provide more space for engineers if they want.
I don't know... I love the fact that I don't have a 2 hour round-trip commute through Detroit now. Like you, I can get up at 6:00 am and be working by 6:30 am. I realize that there are people that are dealing with little ones at home and that would make it tough. Mine are older and can take care of themselves. It makes my life easier to work from home. And to be honest... I think my manager AND his manager both feel the same way. We have a few people that live across the border in Canada and they're pretty happy about working from home too.
The profession/business that I was in would find it impossible to work virtually unloading massive container ships. On the other hand, some of the ''office'' position could be done virtually but require working two shifts. In some cases, some of this work has been remote. The pier and physical operation in coastal cities and customer service in more inland (cheaper) cities. So perhaps a hybrid model might work.
Do you see a move to more autonomous operations? We can make trucks drive themselves. Think we can operate automate ship loading and unloading operations?
Automation of ship loading and unloading might be tough, because (if I'm not mistaken) it would require continuous calibration (which would also require automation) for that to be possible. There's too many variables.
In my mind, the physical picking and placing is just sensor and control with multiple ways of getting it done. Lets say you were to put benchmarks (bullseyes) on multiple surfaces on each of the containers and optical sensors on the spreader bar assembly to read position and adjust to those targets. A secondary system of simple doppler sensors would back up the optical system. These systems exist now in many different areas. Controls for them do as well.
My bigger concern would be load balancing, but that too should be done up front prior to loading operations. You could even cross check container weight making use of strain or torque data from the lifting crane against what the container is supposed to weigh.
The crossover point is how much cost to implement, by how much they save against human manpower to do the same job. Ship loading from what I see is pretty efficient. How much faster can an automated system load/unload containers than an operator currently does? Are loading schedules interrupted by operators getting sick or being on vacation?
I'm thinking that with cranes and cables, there's a wind factor, which isn't predictable. And you're right, it's quite efficient as it is; I don't know how much of a benefit it would be for it to be automated.
Anemometer and wind direction on the lifting device? They make use of them on the big cranes used with heavy lifts in shipyards.
But like you said.... how much of an increase in loading/unloading gets them an ROI worth considering?
Currently, the cranes that unload ships are manned and average around 30/35 CPH. The complete ship isn't unloaded at one port. Containers have to be unloaded in many different ways and the ships has to be reloaded at the same time. That vessel may have anywhere from 4 to 8 ports stops.
Loading and is done by computer weight/size/type have to be taken into consideration to maintain balance/center of gravity which is critical.
Much of the yard work is automated with bomb carts run by remote control.
That is just the loading/unloading. There are many other operations that are critical to the operaton. Gate operations being one.
Is it possible to make it more automated, absolutely it is and it will continue to evolve.
One thing to keep in mind on the port operations on the West Coast of the US, Alaska to San Diego the Longshoreman union has a built in minimum number of longies that has to be maintained.
More about that later.
Good stuff.......
It's time for all of us to read (re-read) Heinlein's Waldo and Asimov's The Naked Sun.
Waldo for the use of remote controlled "hands" and The Naked Sun for a society the only "views" via hologram rather than have physical meetings.
We now have the ability to virtually "off shore" even more jobs - not just modestly paying jobs - but high paying jobs that require expensive years of advanced education.
Will being an electrician or plumber turn out to be financially more rewarding and secure that getting a master's degree in robotics?
I knew "the times they are a changin" but I thought we had another 20 years or so.
I'm very glad that my daughter wants to go to school for HVAC. Trades is somewhere that humans are still needed.
but I thought we had another 20 years or so.
No. It's been calculated that people in the trades, by starting earlier and without the heavy financial burden of student loans are reaching financial independence faster than those in non-math/science related fields.