Flexible workspace supply has grown by 22 percent annually in New Zealand over the past decade.
With most SME employing fewer than 20 staff, we can expect continued expansion over the next five years.
The “hub-and-spoke” model — a combination of central offices and third-party co-working spaces — will likely become the norm for corporates
Pierre Ferrandon examines how these upcoming shifts impact the current work week and how workspaces and work patterns may evolve following the COVID-19 era and the rise of AI supported hybrid work
Technological advancements throughout history have led many to believe that jobs would be permanently destroyed and could never be replaced.
Reality has shown otherwise. The productivity improvement resulting from these technological advancements has, so far, always resulted in job creation in other industries, as well as the emergence of entirely new industries
One of the most disrupted sectors in the AI transformation of the way we do business will be commercial office space and real estate. Increased remote work and growing demand for collaborative spaces over individual workstations have already led to a significant drop in demand for older commercial office space. Prices have declined globally.
To navigate this challenge, we will need to embrace new ways of working. The future of work must be efficient, flexible and collaborative to thrive in the ever-developing AI era.
Revised regulations
In this new age, policymakers need to take a hard look at regulations governing employee and employer relations, as well as how the additional wealth created by technological advancements will be redistributed.
If we look at the current cycle of technological advancement with artificial intelligence, the main area of uncertainty lies in the forecast pace of change.
It is currently estimated that 47 percent of all jobs in the United States could be replaced by robots within the decade. By comparison, the Industrial Revolution affected around 15 percent of jobs, the computer revolution 25 percent, and the internet 30 percent.
The main challenge, therefore, is not the destruction of jobs but the retraining of the workforce for newly created roles:
- How do we bridge the time gap for workers whose jobs are eliminated until new jobs are created?
- How do we bridge the geographical gap between where current jobs are located and where future jobs will be?
- How do we bridge the skill gap between what is needed for today’s workforce and the skills required for the jobs of tomorrow
Considering that only five percent of organisations worldwide say they have the capabilities they need, it is clear that businesses will need to significantly improve their ability to retrain employees and enable workforce mobility.
Learning and upskilling
When adding other transformative trends such as an aging population, the energy transition, the monetisation of previously unpaid work, and investments in new technologies, it is estimated that around eight percent of the global workforce of 2.66 billion people could be in new occupations by the end of the decade.
This will be a key challenge for future economies. The rapid adoption of AI will lead to about 50 percent of all current work activities being automated, with six out of 10 current occupations having more than 30 percent of their tasks capable of being automated.
This means that by 2030, it is estimated that between 15 percent and 30 percent of workers (400 million to 800 million) could see parts of their jobs automated, with three percent to 14 percent (75 million to 375 million) needing to switch occupational categories entirely.
The geographical gap
As the nature of work changes, so too will its location. Automation will eliminate the need for physical human presence in many industries, reducing location-based constraints.
The remote work trend, accelerated by the COVID-19 pandemic, will gain even more traction as automation adoption accelerates.
The relocation of workers to match the locations of new jobs will become a key challenge, with studies indicating that over 200 million people will need to move to new jobs by 2030.
A reduced work week
In other words, technological advancement without productivity gains.
Despite AI advancements, labour productivity growth across OECD countries, for example has been slowing.
This raises the question. Nearly a century after Henry Ford discovered that fewer hours led to greater output, are we on the verge of needing to reduce working hours again to enhance productivity?
Jamie Dimon, CEO of JP Morgan Chase, envisions a future where AI enables employees to work one and a half days less per week while maintaining productivity.
AI is expected not to eliminate jobs but to enhance efficiency, enabling a better work-life balance.
Just as Ford’s division of labour required workers to have more downtime to capitalise on technological advancements, perhaps the modern workforce needs more rest to maximise the benefits of AI.
Different business sectors
This latest cycle of technological innovation will affect industries differently.
Small and medium-sized enterprises (SME), already thriving in the gig economy (a free market system in which temporary or short term positions are common) will need access to flexibility in both infrastructure and workforce to remain agile.
For SME, efficient access to learning and development, external on-demand labour, and a vast eco-system of suppliers and contractors will be critical.
At the corporate level, the focus will be on maintaining company culture and supporting employees through the cost-of-work crisis that is expected to peak in the coming years. Corporations will also face the challenge of reskilling their workforce.
Unlike SME, they must build internal learning and development capabilities to retain culture while retraining employees for newly created roles.
Flexible workspaces
The increasing pace of workforce change makes the development of flexible workspaces more essential than ever. Collaboration and continuous learning are now critical business needs, and workspace flexibility must align with workforce demands.
This shift has an impact on the commercial property market and already created a growing disparity in property attractiveness.
High-quality workspaces with desirable amenities are experiencing record demand, while vacancies in lower-quality buildings are reaching all-time highs.
The surging demand for flexible workspaces which could account for 30 percent of total corporate office use by 2030 is the result.
CBRE, one of the world’s largest real estate firms, recently acquired Industrious Coworking for $800 million to capitalise on the sector’s expected growth.
Environmental win
Flexible workspaces also offer a solution to the growing obsolescence of lower-quality office buildings.
By repurposing outdated spaces into coworking environments, landlords can achieve higher returns per square meter while keeping costs affordable for tenants.
On average, flexible workspaces generate 2.5 times the gross rent per square meter compared to traditional leases. This translates into higher net yields and improved capital efficiency.
It avoids the growth of construction and demolition waste which already accounts for 50 percent of landfill waste. Given that flexible workspaces typically have a lifespan of 20–25 years compared to 10 years for traditional office fit-outs, they also contribute to significantly lower carbon emissions per user.
