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

Corporate Real Estate Consulting and Technology Practice Co-Lead; Principal, Strategy and Transactions, Ernst & Young LLP

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 & 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.

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Chapter #1

Don't write off the office just yet

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

How EY can help

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.


Busy day. Group of multiracial business people working together in the creative co-working space. Team building concept. Office life. Web banner
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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.

How EY can help

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.


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.


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Chapter #3

Just another Tuesday/Thursday at the office

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

How EY can help

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.



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

Corporate Real Estate Consulting and Technology Practice Co-Lead; Principal, Strategy and Transactions, Ernst & Young LLP
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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.

How EY can help

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.


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

Corporate Real Estate Consulting and Technology Practice Co-Lead; Principal, Strategy and Transactions, Ernst & Young LLP

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.


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.

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