While other sectors of commercial real estate have been invigorated in the process of adapting to a post-pandemic reality, offices have been fundamentally disrupted by demographic movements and cultural changes in the way we work. With lagging office utilization and more leases than ever facing renewal, there is an opportunity to critically engage with how the office supports new ways of work. Modifying the built environment can make the office a more focused, purposeful place: a well-designed post-pandemic office enhances unique collaboration opportunities, provides a healthy and inclusive environment, adapts to hybrid or other work cadences, and supports both owner and occupier sustainability initiatives. As such, workplace strategy and design will play a major role in successfully charting the future of offices.
JLL’s 2023 US and Canada Office Fit Out Guide explores the trends in design that address these aims and provides baseline construction costs across a range of styles and qualities of office fit outs, all ready to work in the post-covid era. The fit out guide focuses on the average costs of specific forward-looking designs drawn from JLL’s vast experience in the sector. The data is sourced from thousands of recently completed fit outs managed by JLL and the extensive expertise of JLL Design backed by our Cost Consulting group. The trends share common underlying themes: each is forward looking, efficient, and human focused. More specifically, this translates to offices that are smaller, greener, more open, and more sophisticated.
Smaller
After three years of navigating work from home and now negotiating return to office, occupiers are continuing to right size their space. For the vast majority, this has meant shedding square footage. The average size of a JLL-managed fit out in North America decreased by 11 per cent over the past two years. Lower daily head counts and more efficient, denser uses of space have brought required footprints down for most occupiers. In Canada, the cost saving exercise of balancing lease obligations by renegotiation, demising, or subleasing is occurring in parallel with new models of use that go beyond financial concerns. Occupiers have embraced a flattening of hierarchies with respect to private office and workspace size, and are planning for better, more consistent utilization of all spaces and programs. The guide addresses this trend by shrinking our U.S. and Canada test fit’s floor plate to 20,000 square feet and details three levels of quality and three styles.
More Open and Sophisticated
Baseline amenities and tech requirements have increased significantly over the past two years. In 2021, offices across all quality and style categories increased their baseline tech infrastructure, adding significant IT and AV capacity to support hybrid work. Lower tier fit outs that had not incorporated these features prior to the pandemic saw a disproportionate increase in costs that has been maintained to present. In 2022, health and wellness amenities saw similar baseline expectation growth. Non-gendered bathrooms, wellness spaces, and community areas once reserved for high-end progressive builds are now appearing across all qualities and styles of office fit outs. A focus on the employee is holistically emerging from introspection on how to best support performance under new ways of working, leading to an increasingly common pursuit of health-focused WELL certifications. Occupiers and owners must provide a variety of settings to satisfy different modalities of work that are now a part of many knowledge workers’ everyday life to encourage better utilization and occupancy. These settings take many forms, from tenant lounges and lower-level retail offerings to arboretums and IT bars. The prevalence and complexity of this need across Canadian firms has made it necessary to integrate change assistance right into initial workplace strategy offerings. The guide addresses this trend by incorporating these features into the test fits as standard, as well as providing pricing for several specialized amenities.
Greener
Beyond reimagining employee engagement and support, occupiers and owners are recognizing the unique opportunity to achieve their environmental goals. With many leases expiring and a need for tenants to right size and revamp, new forms of collaboration for the greener good are taking off. Green leasing adoption is rapidly growing under a new Green Leasing 2.0 paradigm that embraces the whole building cycle rather than a single leasing event. Supported by new options to earn LEED energy points through green leases and a strong embrace by the REIT community — with four REITS achieving a gold level in the Green Lease Leaders program in 2022 — recognition of the effectiveness and opportunities is more widespread than ever and global adoption is expected to more than double by 2025. However, LEED is becoming a “standard basis of design” in Canada regardless of final certifications.
Of course, these trends carry costs, and, across the board, the costs have increased. In Canada, strong demand in other commercial real estate sectors will keep costs moving in a largely uniform direction: up (albeit at a much slower rate than the past two years). In 2022, office fit out prices grew by roughly 10 per cent, mostly due to hard cost increases, and continue to rise overall.
There is a skilled labour shortage in major markets that, coupled with supply chain backlogs, extend project schedules, and increase both carrying costs and interim solution costs. Heightened costs make purposeful workplace strategy and design even more necessary; a critical evaluation of every aspect of most occupiers’ space needs and performance requirements is in store for the next five years. This is an opportunity for the best workplace strategies and designs to advance more than just a return to office and, at this critical juncture in the office using world, planning, strategy, and design can illuminate a path through uncertainty.
Andrew Volz is Construction Research Lead and Rob Ramsay is executive vice president and National Lead of Project & Development Services at JLL.