“We are not out of the woods yet…” So begins Jones Lang LaSalle’s 2022 outlook. In its research report, the Chicago-based commercial real-estate giant, whose 90,000-plus employees manage investments and property across 80 countries, cites twin headwinds in the Omicron variant and inflation.
I caught up with JLL president and CEO Christian Ulbrich a couple of weeks ago to better understand how commercial real estate is thinking about remote work, the blurry lines between home and office, and the future of where labor is done. Here are excerpts, edited for space and clarity:
You sit at the intersection of real estate and what the future of work looks like. At a high level, could you place where JLL thinks we are in the pandemic right now?
We have learned that this pandemic works with politics in different ways across the world. In many countries we are clearly at the point where we are leaving the pandemic behind us. Even within countries, if you take the US as an example, whether you're in San Francisco or Chicago versus Texas and Florida, it’s different.
It’s still very early days but offices are refilling again, depending on which city and which state you are in. People are quite keen to get back to something which is more like the way they've operated pre-pandemic.
What did we learn from this most recent surge of Omicron? It sent a lot of people into a depression, like, ‘Oh no. Here we go again.’ On the other hand, it seemed to create an acceptance that we’re going to go through a few of these for the coming few years possibly. What does that mean for office space? Are you planning for periods of normalcy punctuated by surges or even another variant?
The pandemic has accelerated trends which we had seen before but maybe weren't that visible. For example, the rise of the importance of the workplace and how much companies are putting an emphasis on the workplace has been there for many, many years. But the pandemic has accelerated that trend massively, and so this is now clearly a c-suite topic.
The pandemic coming in and then people believing we have it behind us and then coming back again. It's just enforcing that we have to create a workplace environment very comfortable to our colleagues, safe and focused on health and wellbeing.
Before, workplace cost-per-head was a very important KPI [key performance indicator, a common measure of performance over time]. Frankly, I never hear that KPI now. In current discussions, it's all about how can I create an environment which attracts my people to come to the office, to retain them in the company, to pursue their careers within our organization.
That then drives also the overall productivity of the company. But the word ‘productivity’ comes last in all those sentences because it's obviously much more expensive for companies to constantly find new employees, rehire employees, train them, and so on versus creating an exciting workplace right from the start.
You mention the labor market being so tight. Does office space play some role in retention or the attraction of a company? Again, here I’ve heard some people only want remote work, and others want to go in and talk about free lunch and cocktails on Wednesdays.
First and foremost, a workplace shall allow people to experience the culture and the purpose of their employer. And so if you enter a building or the floor you're working on, you should always experience the purpose and the culture of the organization.
And I think that is one of the most important differences. In the past, we had a lot of office buildings where you could have just changed the name at the entrance door. All the offices look pretty much the same, whether you work for a financial services company or whether you work for a consumer goods company or a technology company.
But if you don't know, within five minutes, which company you're working for when you are in an office space, then something is wrong with the office space. Something is wrong with the workplace.
So you're really connecting the purpose to the space…
And not only to the space from the inside. In an ideal world also from the outside. If a company is saying that they are totally transparent and that they want to be part of the local community, and then they sit in a kind of completely locked-up environment where security doesn't even let you come to the entrance door and there is no transparency at all, then that doesn't feel in sync with the purpose.
What do you think of remote work? As a commercial real-estate company, is there an official company line that you all have taken about the premise of remote work?
Remote work, if you mean working from anywhere, is just a fact of life. It was a fact of life before the pandemic but to a much smaller degree. For a global company like JLL, it's quite normal because you're always remote. You can go to an office if you want to, but your stakeholders will not always be in the same place.
Every company should accept that, for a certain part of the organization, work from anywhere will be the reality of our lives. What is important is that we are organizing it in a way that the face-to-face collaboration and the connection to the culture of the organization is not lost.
That is the big fear: when the workforce is not coming in on a regular basis to the office where they are usually based.
Do you have thoughts on the role of a commute in workers’ lives?
The commute is very much dependent on the cultural situation. I was speaking this morning with a new colleague working for us in London, and I asked, ‘How long is your commute?’ And the response was, ‘I have a short commute. It's about an hour door to door.’
If you ask the same question to somebody on the continent, in Germany or in the Netherlands, and they had a one-hour commute, they would say, ‘Oh, my commute is a nightmare.’
The second thing that’s relevant is how are you commuting?
If you drive in your own car, people find that quite fine. They are on their own. They feel safe. They use their mobile phones or they listen to music or to an audio book. If they are sitting on a comfortable train, like in Japan or France, people are fine with that commute.
Where it gets nasty is if they are sitting in a really dodgy, overcrowded tube, that is a deterrent. That’s where in places like New York or Chicago, they are still suffering and why people are not as keen to come back into the downtown offices than elsewhere.
I am sure you have been reading memos from CEOs to their staff. There’ve been so many written over the last few years, and a lot of them end up on Twitter and are mocked for being insensitive. One line I hear over and over: Was this written by our building’s landlord or a real-estate company? What’s your reaction to that?
If you go back 25 years, there was only one way of communicating. And now you can communicate in all kinds of ways to a lot of people. A friend of mine is now sending very professionally made monthly videos and uses a film studio to communicate with this division. That's an interesting approach. I wonder whether people will get bored with those videos as they are getting bored with emails, but for the time being, they find that exciting because it's new.
The other challenge we have is that the sensitivity of people has heightened. And it has heightened even more during the pandemic. And so if you want to be nice and maybe highlight a specific group of your workforce, you immediately are risking a storm from the people you haven't highlighted in that note. It's sometimes super difficult to get it right.
The most important part is authenticity. If recipients of those communications know you reasonably well and can see what you are standing for as the messenger, then I think you will have much higher success rates to bring across what you want to bring across. When people know this was written by somebody else, that was a little bit of the risk during the pandemic, that people were sending these kinds of artificial notes out there, which were not in line with themselves.
People were also hearing from those leaders in other circumstances, publicly on TV, the CEOs saying people don't have to come to the office. They can work from anywhere. Then a couple of days later, they get a note that says you should come back to the office.
What did I forget to ask you?
I was constantly asked in the second and third quarter of 2020 onwards: Is this the end of the office? I always said it will not be the end of the office.
Luckily that is what we are currently seeing. We are seeing bigger bifurcation. We have on the one hand, very successful companies who are asking for the best possible space, the highest quality space they can identify, and they are very price insensitive.
And then we also have exactly the opposite. We are seeing space dropping out because there’s no quality space. It's hard to find tenants for that space, and it's becoming cheaper and cheaper. And at the end of the day, it may be repurposed into something completely different.