'Stunning' Percentage Of Companies Haven't Set Hybrid Work Plans: EY Survey

Company leaders are increasingly finding that their businesses function better with workers at home at least some of the time, and most firms have yet to put formal arrangements into place.

The shift to hybrid work could have a knock-on effect on corporate real estate strategy with major office market impacts: a move away from a centralized headquarters. 

Seventy-five percent of the 500 U.S. C-suite and business leaders Ernst & Young surveyed in its inaugural Future Workplace Index said they don’t expect having one main work location in the long term.

The index, released Monday, found just 20% of companies have more than 90% of their employees either in the office or working full time from home — and a scant 13% of respondents expect to have the most of employees back in the office once the coronavirus pandemic subsides.

But despite this trend toward hybrid arrangements, 3 in 5 companies haven't formalized their arrangements, EY found, indicating an extended period of uncertainty across the office sector.

“A lot of clients also say, ‘We still want to be careful we're not wrong.’ Sixty percent have not implemented a plan. I think that is stunning,” EY Real Estate, Hospitality and Construction Leader Mark Grinis told Bisnow. "Admittedly, we've been forced to work virtually. But you've had a year and a half."

“We are at a very early stage, I think people are hungry to get back together," Grinis said. "But I think we're going to fall back very quickly into the personal choice. It is absolutely imperative to employees that desire for flexibility … That's where we're headed.”

A strong work culture and the need to collaborate are often touted by office proponents as the reasons people will eventually return in big numbers to their desks. But many leaders are reporting an improved sense of culture and better productivity as a result of hybrid work arrangements, according to EY.

In fact, between 70% and 85% of those surveyed said their current arrangement is just as effective, or more so, when compared to how they worked before the pandemic. And 62% of companies that say their culture has improved since the start of the pandemic are currently running a hybrid work model. In all, 57% of all companies describe productivity as being better today than it was before the pandemic.

But few have taken concrete steps to implement these plans in terms of adjusting their office footprint, Grinis said.

“[Companies are thinking] ‘We have 13 floors, we think we only need seven … [but] what if there's a big blowback back into the office?’” he said, adding that 48% of occupiers are redesigning their space in some way.

“I think that is the fear that a lot of occupiers are faced with right now," Grinis said. "They're taking the luxury of time and saying, ‘Let's wait and see what happens.’”

He said the companies that have announced formal hybrid plans to their employees are still very much in the “first inning solution” to a really constructive work environment, though that may not last for long.

“The productivity, the collaboration, culture, all those things for employee retention are huge," he said. "That requires a bit of a more sophisticated strategy around what are really your policies around hybrid.”

Widespread use of the hybrid model is expected to have ramifications across multiple sectors as the corporate world undergoes a tectonic shift. In New York City, office occupancy is trending up: It was at 31% as of Wednesday, Oct. 13, according to security firm Kastle Systems, 1.6% higher than the week before. But office availability has remained at a record high of 18% as demand significantly outstripped supply, and uncertainty will continue to permeate the market, Grinis said.

“This is going to be a bit of a gradual transformation ... Some buildings will do great, some buildings won't do great,” he said. “It's not catastrophic. But it’s a weakened office market for the next two to three years, as this transformation moves its way through.”

Still, at Bisnow’s Workplace of the Future event last week, there was widespread optimism about the future of the sector in New York City.

"Office is not dead,” said Rachel Wachtel, a senior vice president of flexible workspace at Brookfield Properties. “What we're hearing from our tenants now is that space is more important than ever, it might be about how space is configured. And it might be what amenities are in the space. But space will continue to remain a focal point for everybody."