Insights

Since the pandemic, there’s been a recognition that employers need to provide more to their workers to draw them back to the office. This shift in what makes an attractive office building - and where it’s expected to be - can be pivotal for investors planning a long-term strategy.

Originally published on October 1, 2024, by Fidelity International.
Written by Kim Politzer, Director of Research, European Real Estate and Nina Flitman, Senior Writer

Bosses have tried calling it “morally wrong,”¹ have left “condescending” notes on employees’ desks,² and even forked out $10 a day for every worker that comes back.³ But since the pandemic, many companies have struggled to convince staff to rebalance their working from home schedule in favour of the office. 

It’s something of a conundrum for companies, but it’s a question for investors too. How to find those commercial office buildings that have real value by ensuring they’re the ones that employees want to work in? 

Research has shown time and again that people do still see the benefits of coming into the office – at least some of the time.⁴ They see the benefits that come from collaborating, socializing, boosting well-being, and being able to separate their work and personal lives. But what they want from their working environment has changed. Investors have to be much more specific about where their money is going, even down to the precise location of the buildings they’re considering, to ensure any assets they acquire satisfy the demands of employees and their companies. 

Well, well, well

High on that list of requirements are amenities that cater to employees’ welfare. These can include bright and comfortable places to get work done, canteens that provide healthy food at lower prices, social spaces to catch up with colleagues, green roof terraces for strolls in the sunshine, and health facilities such as rooms to take Pilates classes. 

The growing popularity of the WELL Building Standard, an accreditation that examines how a workspace serves employees’ health and wellness, is testament to how these considerations are moving up employers’ agendas. The certificate considers a building’s air, water, light, sound, material, and thermal quality alongside how it encourages people to move, to eat healthily and sustainably, to build community and culture, and to maintain their cognitive and emotional well-being. 

These elements may seem “fluffy” at first glance, but they add value. Research suggests that workspaces that meet the highest of healthy building standards can demand rents between 4.4% and 7.7% higher per square foot than non-certified offices.⁵ An asset’s ten-year net present value could grow by $115 per square foot in the healthiest, highest performing buildings.⁶ Workspaces with enhanced ventilation and high-quality air can also expect to see an 8% increase in employee performance.⁷

Features like this can also demonstrate an employer’s consideration for their workers and can be important boosters not only to office attendance but also to the attractiveness of a company as a place to work. 

The place to be

However, the most important aspect of the attractiveness of a workplace is its accessibility. A recent survey of U.K. workers found that the cost and time spent commuting was the biggest deterrent for people going into the office.⁸

This is echoed in a report from CBRE, which revealed that 89% of businesses regard public transport access as a key location driver for new facilities, up from 80% in 2023 and from 44% in 2022.⁹ The report also showed that the most desirable features of a building are those that make a commute as easy and sustainable as possible, with bicycle and scooter storage and electric vehicle charging wanted by 80% and 69% of employers, respectively.

These preferences are changing the way that buildings across different areas of a city are valued. Once, commercial real estate focused on comparing the office market city by city, noting which metropolis, or even which region, offered the most long-term potential in terms of economic growth, or where new industries may emerge. But now the micro-location of a building – its specific positioning within a small area of a city – has become the focus, and those areas within a city that offer the best travel connections have quickly become the most attractive. 

This is creating an interesting trend in many European and U.S. cities as companies move away from designated business areas on the outskirts and back to historic city centres. To the east of central London, for example, Canary Wharf, once-derelict dockland that was developed in the 1980s as a financial hub, is now seeing some of its banking residents move out and is instead evolving to become a mixed-use zone focused on life sciences. Banking giant HSBC is one of the largest firms that has announced it will be shifting its headquarters from Canary Wharf to the City.

Similarly in Paris, La Défense, another area originally designed to alleviate pressure on the city centre, is falling out of favour as companies show a renewed preference for the central business district. 

Much of this change can be ascribed to the range of public transport options that are typically available in the centre of a city, but historic city centres have other attractive benefits too. Employees want to work in offices that are close to amenities that make their lives easier, and the CBRE survey reveals that cafes, restaurants, and food shops are now very important (for 88% of respondents), while fitness facilities and shops are also popular.

But the cultural capital of city centres – the varied architecture of an environment that has evolved over centuries, the broad offering of small businesses and niche restaurants, and the access to cultural facilities such as museums and theatres – is also increasingly important to workers.

The changing approach to work seen in the last five years had led some to question whether the office was dead.¹⁰ The office is alive, but the old expectations of what companies want, and how investors can provide them with the most attractive assets for the strongest returns, certainly seem to have passed on.