Hybrid Work Is the New Normal, as Companies Rethink Work Habits and Office and Retail Space

Hybrid work has changed where and how many people work. Experts say the time for employers, cities and retailers to adapt is now.

Hybrid Work Is the New Normal, as Companies Rethink Work Habits and Office and Retail Space

According to a recent report, office attendance is now 30% lower than it was prior to the Covid-19 pandemic.

The demand for office space will drop below what it was in 2019.

The office culture is changing and influencing the places where people shop and live.

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Employees pushing back

Return-to-office Plans and the

hybrid work model

The idea of returning to the office five days a week, after three days in person seemed to be the sweetspot, has hit a brick wall.

The office attendance is now 30% lower than it used to be.

Pandemic of Covid-19

According to a

McKinsey's Global Institute report


Brian Vickery is a partner with McKinsey & Co. He said, "There are a lot of people who travel a few times a week." The firm conducted a survey in nine major cities, including New York City, San Francisco, London, and Tokyo.

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Vickery said that the results of the survey showed that this is very similar to what people want in the future. Many companies have let individual teams decide what they think is best.

Office demand declines

Flexibility is driving down the demand for office space. McKinsey estimates that by 2030, the demand for office space could be up to 20% lower in some cities than it was last year. The trend towards more desks and less space, as well as the shift to automation, were all factors in the analysis.

Companies are rethinking their real estate to fit with the new working habits. Office workers who have flexibility cite the following reasons for working on-site: increasing productivity and working in teams.

Most office environments do not meet the needs of employees. Jordan Goldstein is a managing principal of architecture firm Gensler. He says that having spaces where employees can work without distractions and noises are "critical" to their job performance.

It's also important to create "meeting equality" so that people in the office can conduct business with people working remotely. Goldstein said that the days of a room for four to six people with a 42" flat screen mounted on the wall were over. He suggests that employers create an environment in which virtual and physical offices can be brought together.

The ripple effect of people moving out

People's choice of where to live has changed as a result of the evolution in office culture. The survey respondents who moved after March 20th, 2020 are the most likely to have done so.

McKinsey found that 20% of respondents said their move was only possible because they now worked from home more often.

Researchers studied neighborhoods in San Francisco and Houston, as well as the Manhattan borough in New York. They found that people were moving out of expensive ZIP codes with a high concentration of offices and into ones where there was a greater mix of uses of real estate.

McKinsey compared the effects of the pandemic on New York City's Financial District with the Lower East Side. Mixed-use neighborhoods that offered a variety of office, retail and residential space did the best.

The Financial District is 80% office property, has a high concentration of workers, and an average price of $1.5 million. People are leaving at a rate more than twice as fast in the Lower East Side where the average price is $500,000 less and only 7% of the real estate is office space.

The retail demand is changing

The pandemic also affected shopping patterns, as remote and hybrid workers were less likely to shop near their offices.

Jan Mischke, partner at McKinsey Global Institute said that retailers need to rethink the way they do business. Foot traffic, spending and sales are all declining, especially in areas with high concentrations of offices, and online shopping is taking market share away from brick-and-mortar stores. He said that the demand for retail space in 2030 would be lower than in 2019.

Mischke said, "We have enough clarity to know what we need to do." This means that at the city-level, more mixed-use environments are needed, as they proved to be more resilient during pandemic.