Hybrid video call in office

Workplace of the Future Index 2.0

So ... where are you working these days?

With a pandemic in the rear-view mirror and an economic downturn on the road ahead, the office is still the other half of hybrid.

It has never been more important for employers to consider how, where and when their employees work, and what resources will support sustained productivity and success. This is a critical inflection point in the evolution of the workplace, the physical office and various remote work locations.
Francisco J. Acoba
Principal, EY Americas Strategy and Transactions; Co-Lead - Corporate Real Estate Consulting and Technology Practice

As an economic downturn follows on the heels of a global pandemic, C-suite leaders across sectors are weighing how to invest in their employees — especially knowledge workers — moving forward.

The surprise? More than 60% have either recently leased new space, or will soon be leasing new office space, despite the grim financial outlook in the post-pandemic business climate. Overall, 58% will actively invest in the workplace or office portfolio one way or another, as shifting economic trends unfold.

The second annual EY Future Workplace Index, a national survey by Ernst and Young LLP, offers fresh insights into how leaders envision the road to a stable, balanced hybrid-work state. One of the top findings is that the likely economic recession is having a concrete impact on real estate decisions across the board, and surprisingly, almost 60% of survey respondents plan to invest in physical space, while 33% will downsize existing locations.

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

Other critical considerations include the competition for talent, how to build flexibility incentives, the central role of technology for hybrid workers and effective management of the hybrid workplace.

Group of multiracial businesspeople working together
(Chapter breaker)
1

Chapter #1

Don't write off the office just yet

Face time fosters connections, collaboration and knowledge sharing that help companies grow and thrive.

Corporate leaders still see value in providing an office environment as an important part of their hybrid work structure. Face time fosters connections, collaboration, knowledge sharing and the synergies generated from coincidental interactions that help companies grow and thrive.

According to the 2022 EY survey, the impending economic downturn is expected to push more than 90% of corporate leaders to make some change to their office space footprint – either reimagining, replacing, improving or cutting back.

Despite historically high costs and rising interest rates, 58% of the survey respondents said they plan on investing more in their real estate portfolio due to the impact of the downturn. Approximately a third plan on downsizing their real estate footprint, demonstrating the volatility an economic downturn can have on the real estate market. And compared to the inaugural 2021 EY Future Workplace Index, 11% fewer respondents said their employees will work exclusively from home.

  • Show accessible format #Hide accessible format

    More than 50% plan to invest more in real estate

    In which of the following areas, if any, is the current inflation or interest rate environment impacting your real-estate decision-making?

    • 58% - Investing
    • 25% - No impact: The inflation and interest rate environment is not impacting decision making
    • 33% - Downsizing
    • 2% - Don’t know
    • 1% - Other
Businesspeople discussing strategies during break in office
(Chapter breaker)
2

Chapter #2

In the race for talent, flexibility is winning

Employers are constantly seeking the perfect formula for attracting, recruiting, and retaining the best people for their business.

The sustained squeeze across the talent market means employers are constantly seeking the perfect formula for attracting, recruiting and retaining the best people for their business. Among mobile professionals, a hybrid work model clearly has become not just an incentive but an expectation. Defined as two to three days of remote work each week, hybrid work has increased 4% over the 2021 EY Future Workplace Index. That shift demands a clear tone and message from employers around accommodation of hybrid work scenarios.

Prior to the pandemic, 87% of employers reported that most or all employees worked from the office. Now, the EY Future Workplace Index shows that just 29% of companies have employees working only from the office. More than 70% of employees are working from home at least two to three days a week, and a surprising 40% of companies have either started using a four-day work week or are considering implementing one.

Five primary scenarios have emerged as the new normal, indicating a mass adoption of hybrid work.

  • Show accessible format #Hide accessible format

    The five most common hybrid scenarios

    Currently, what percentage of your employees are taking the following approaches to work location? The donut chart shows the following;

    • Majority (28.5%) are fully-office based., or experience less than 1 day a week of remote working
    • 20.1% work on a hybrid basis (2/3 days of remote working)
    • 19.5% work fully remote (less than 1 day a month in the office)
    • 17.*% work mostly office-based (3/4 days a week in the office)
    • Only 14.1% work mostly remote (1 day a week in the office, occasionally more)

Whatever scenario is most effective for them, companies that don’t clearly define structure and policy around multiple work locations will be at a disadvantage, as 62% of companies report putting more focus on virtual collaboration and remote-based relationship development during the past two years.

  • Show accessible format #Hide accessible format

    Collaboration continues to be a priority focus area

    Which of the following best describes how your approach to collaboration and independent work has changed over the past 2 years?

    • Individual work activities at home (people undertaking heads-down work remotely)
      • 21% - Less focus on this
      • 42% - About the same
      • 37% - More focus on this
      • 1% - Don’t know/unsure
    • Individual work activities at the office (people working independently when in the office)
      • 6% - Less focus on this
      • 33% - About the same
      • 60% - More focus on this
      • 1% - Don’t know/unsure
    • Virtual relationship development (e.g. project meetings, work sessions, all-hands meeting, training activities, etc)
      • 12% - Less focus on this
      • 50% - About the same
      • 36% - More focus on this
      • 1% - Don’t know/unsure
    • In person relationship development (e.g. informal team meetings/catch-ups, social events, etc.)
      • 7% - Less focus on this
      • 39% - About the same
      • 54% - More focus on this
      • 1% - Don’t know/unsure
Group of office people walking in office open space
(Chapter breaker)
3

Chapter #3

Just another Tuesday/Thursday at the office

Deploying the right mix of flexibility and technology in the workplace is paramount.

Hybrid is working, with 64% of executives convinced that flexible options motivate employees to do their best. While office use hasn’t returned to its pre-pandemic levels, physical office occupancy levels in top 10 markets have increased since August 2022, according to Kastle Systems.

Deploying the right mix of flexibility and technology in the workplace is paramount. Most leaders are looking at the use of health and wellbeing management apps, emerging collaboration software platforms and other hybrid-work technologies to optimize the workplace.

During the past year, 30% to 50% of companies have added new components to office layouts, including café and lounge spaces, a variety of informal and formal collaboration areas, and outdoor amenity spaces, among others. Flexibility continues to be a major focus, with 42% of companies planning or considering more co-working spaces, while another 27% already have. Leading organizations are leveraging a mix of leading-edge technology, including virtual collaboration tools and digital workplace apps, as well as learning and development opportunities and in-person events to entice employees back to the office.

Across industry sectors, health care, professional services and retail are the most likely to demand onsite or in-office time from employees. Telecommunications and more hardware-driven tech jobs are tracking toward fully remote.

  • Show accessible format #Hide accessible format

    Work model approach by sector

    Which of the following best aligns with the business activity of the organization within which you currently work?

    Professional services consulting

    16% - Fully remote

    11% - Occasionally (1 day)

    22% - 2-3 days

    19% - 3-4 days (mostly office)

    31% - Fully office-based

    Telecommunications

    25% - Fully remote

    16% - Occasionally (1 day)

    24% - 2-3 days

    24% - 3-4 days (mostly office)

    11% - Fully office-based

    Technology hardware including Semiconductors and Electronics

    37% - Fully remote

    18% - Occasionally (1 day)

    13% - 2-3 days

    21% - 3-4 days (mostly office)

    12% - Fully office-based

    Technology software including SaaS, IT Services and Internet

    24% - Fully remote

    16% - Occasionally (1 day)

    21% - 2-3 days

    16% - 3-4 days (mostly office)

    23% - Fully office-based

    Real Estate

    15% - Fully remote

    16% - Occasionally (1 day)

    22% - 2-3 days

    31% - 3-4 days (mostly office)

    16% - Fully office-based

    Health

    18% - Fully remote

    11% - Occasionally (1 day)

    14% - 2-3 days

    17% - 3-4 days (mostly office)

    39% - Fully office-based

    Banking and capital markets

    20% - Fully remote

    14% - Occasionally (1 day)

    20% - 2-3 days

    18% - 3-4 days (mostly office)

    29% - Fully office-based

    Retail

    13% - Fully remote

    12% - Occasionally (1 day)

    20% - 2-3 days

    17% - 3-4 days (mostly office)

    39% - Fully office-based

    Consumer products

    14% - Fully remote

    15% - Occasionally (1 day)

    20% - 2-3 days

    20% - 3-4 days (mostly office)

    31% - Fully office-base

  • Show accessible format #Hide accessible format

    Collaboration continues to be a priority focus area

    Which of the following best describes how your approach to collaboration and independent work has changed over the past 2 years?

    • Individual work activities at home (people undertaking heads-down work remotely)
      • 21% - Less focus on this
      • 42% - About the same
      • 37% - More focus on this
      • 1% - Don’t know/unsure
    • Individual work activities at the office (people working independently when in the office)
      • 6% - Less focus on this
      • 33% - About the same
      • 60% - More focus on this
      • 1% - Don’t know/unsure
    • Virtual relationship development (e.g. project meetings, work sessions, all-hands meeting, training activities, etc)
      • 22% - Less focus on this
      • 41% - About the same
      • 36% - More focus on this
      • 1% - Don’t know/unsure
    • In person relationship development (e.g. informal team meetings/catch-ups, social events, etc.)
      • 7% - Less focus on this
      • 39% - About the same
      • 53% - More focus on this
      • 1% - Don’t know/unsure
It has never been more important for employers to consider how, where and when their employees work and what resources will support sustained productivity and success. This is a critical inflection point in the evolution of the workplace, inclusive of the physical office and various remote work locations.
Francisco J. Acoba
Principal, EY Americas Strategy and Transactions; Co-Lead - Corporate Real Estate Consulting and Technology Practice
Group of young happy asian creative businesspeople
(Chapter breaker)
4

Chapter #4

Meeting at the intersection of flexibility, technology and clear direction

Accelerated by necessity, pandemic practices took root faster than corporate policies and technology could keep up.

Some leaders are finding that hybrid work may have gotten a little ahead of itself. Accelerated by necessity, pandemic practices took root faster than corporate policies and technology could keep up. Now the complexities of managing a hybrid workforce and workplace are becoming clearer.

At the start of the pandemic, a lot of office space available for sublease flooded the market. Mainly due to mandatory office closures and forced remote working, companies reevaluated their office footprint.

According to recent reporting by Global Commercial Real Estate Services, more than two years later, the overall volume of available sublet space continues to increase. Major markets such as Chicago, New York, and San Francisco have recently reported an increase in sublet space on the market.

  • Show accessible format #Hide accessible format

    Working model strategies

    Which of the following strategies are you currently deploying, or might you consider adopting?

    Utilizing more co-working spaces (e.g. WeWork)

    • 27% - Acted upon
    • 21% - Deploying
    • 22% - Considering (not yet in use)
    • 16% - May be of interest in the future
    • 12% - Won’t be considering this
    • 3% - N/A

    A four-day work week for employees

    • 21% - Acted upon
    • 19% - Deploying
    • 26% - Considering (not yet in use)
    • 21% - May be of interest in the future
    • 11% - Won’t be considering this
    • 1% - N/A

    Investing in suburban real estate markets

    • 23% - Acted upon
    • 18% - Deploying
    • 23% - Considering (not yet in use)
    • 17% - May be of interest in the future
    • 15% - Won’t be considering this
    • 3% - N/A

    Leasing space in major real estate markets

    • 22% - Acted upon
    • 17% - Deploying
    • 22% - Considering (not yet in use)
    • 20% - May be of interest in the future
    • 16% - Won’t be considering this
    • 3% - N/A

    Purchasing space in major city real estate markets

    • 21% - Acted upon
    • 18% - Deploying
    • 24% - Considering (not yet in use)
    • 19% - May be of interest in the future
    • 15% - Won’t be considering this
    • 3% - N/A

    Investing in more digital/virtual collaboration resources

    • 42% - Acted upon
    • 22% - Deploying
    • 24% - Considering (not yet in use)
    • 19% - May be of interest in the future
    • 4% - Won’t be considering this
    • 1% - N/A

    Downsizing your office real estate portfolio or physical footprint

    • 25% - Acted upon
    • 17% - Deploying
    • 23% - Considering (not yet in use)
    • 17% - May be of interest in the future
    • 16% - Won’t be considering this
    • 3% - N/A

It’s worth noting that a debate over the role of the office may be growing between employer and employee. A recent survey from a major technology company shows that bosses and workers fundamentally disagree about productivity when working from home. According to the 2022 EY survey, most bosses worry about whether working from home is as productive as being in the office, while workers felt they worked as efficiently from home, if not more.

The nine-to-five scenario has faded and a new one has emerged. At the same time, a large portion of the existing office stock in major cities is no longer attractive to companies that desire to use the workplace as a differentiator and convert the office into a destination. These trends are driving a flight to quality, where buildings in the right location, with state-of-the-art technology infrastructure, a focus on sustainability, and hospitality-focused services and amenities are in increasingly high demand.
Francisco J. Acoba
Principal, EY Americas Strategy and Transactions; Co-Lead - Corporate Real Estate Consulting and Technology Practice

A high-quality building with smart and sustainable features will carry less transition risk and increase value going forward, making it easier to attract environmentally conscious tenants and investors. With changing work patterns and tight labor markets, occupier flight to quality is expected to continue.

  • Show accessible format #Hide accessible format

    Making collaboration count

    Which of the following programs, if any, has your organization deployed to encourage employees to return to the office?

    • 56% - Predictable flexibility (i.e., work schedules)
    • 51% - Leading-edge workplace and collaboration technology
    • 50% - In-person social events and activities
    • 46% - Employer provided coffee/barista
    • 45% - Employer provided breakfast, lunch, snacks, etc.
    • 38% - Reimbursement for commuting travel costs
      (e.g., public transport costs, gas, parking, etc.)
    • 33% - Childcare programs (implemented or extended)
    • 19% - Pet care programs (implemented or extended)
    • 1% - Other (please specify)

    *Respondents were able to pick multiple answers, therefore total percentage will not add to 100%.

With Generation Z expected to make up a large portion of the workforce over the next decade, managers will need to understand how this generation likes to work and what motivates them.

The working structure in many companies has dramatically changed, from a model where most employees spent a significant amount of their time in the office to a more dynamic model, in which employees have more freedom and control over when and where they work. Companies need to consider which amenities, services and technology to invest in, as well as the right amount of office space to effectively enable the hybrid working culture.

Download the report

Download the full report on EY Future Workplace Index 2.0

Contact us

Like what you’ve seen? Get in touch to learn more.

Contact us

EY Future Workplace Index 1.0

Our inaugural EY Future Workplace Index, one of the first of its kind, offers a new window into the office.

Read more

Real Estate, Hospitality & Construction Consulting Services

We help real estate, hospitality and construction companies achieve a balance between success today and what growth requires tomorrow.

Read more