Viewpoints

Workplace Transformation: How Human Capital is Impacting Investment in Real Estate

Posted on February 27, 2015 in Viewpoints by admin

By  Peter Weingarten, AIA LEED AP BD+C
Principal, Gensler

 

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What is the future of the workplace? Users and investors want to maximize value in their companies and real estate investments. Right now.

The question itself is interesting, but it’s not nearly as important as what is motivating everyone to talk about this issue: the growing importance of human capital and the war to retain and attract the most talented people, the kind of people capable of driving innovation, growth, and economic success in a global economy. For the real estate industry, these issues are critical to developing the type of assets capable of attracting the best tenants and offering the greatest return on investment.

The primary groups responsible for defining the current workplace are the Baby Boomers and the Millennials, two generations similar in size but dissimilar in outlook and value sets. Boomer workplaces have dominated until recently. They are now being superseded by the Millennial workplaces, also known as Creative Workspaces. This new type of workspace was born in avant-garde fields like creative media, design, and advertising agencies in alternative, entrepreneurial, cities like San Francisco. But it is no longer confined to such enclaves. The Millennial workplace is now a ubiquitous condition that exists across the country and is desired by all types of industries and organizations, including tradition-heavy professional service and financial service firms. The fundamental shift from the button-downed Boomer perspective on work to the freewheeling Millennial perspective can be explained as a shift from desiring Live/Work BALANCE (Boomers) to Live/Work INTEGRATION (Millennials).

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Companies large and small have adapted and changed their corporate structure to better align with the Millennial perspective.   They have moved from hierarchy to community, from commanding to coaching, from instruction to dialogue, from control to empowerment, and from employee to entrepreneur. This structural shift results in a culture of experience where authenticity, diversity, wellness, and interconnectivity are highly valued and help inform the type of place and shared purpose a Millennial workplace must exude.

 

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For the real estate industry, these shifts in how companies interact with their employees necessitates a massive change in what key metrics the industry relies upon to inform the design of new workplaces. It applies to how the industry evaluates the efficacy of new and existing buildings, from their cores and shells to the design of their interiors. If we accept the notion that workplaces must now help accelerate innovation and function as intra-organization cultural touchstones, we can better understand the impact traditional design considerations are having on “speculative” development. For example, lease depths are getting bigger or are going away as a defining planning attribute as cores are moving away from being central planning obstructions. Floor plate sizes are also increasing to maximize the area of unobstructed space for teaming, and ceiling heights have increased, as volume and deeper daylight penetration are valued attributes in creating a great workplace experience. The needle has moved much closer to “Build to Suit” rather than “Spec.” This is challenging traditional notions of exit strategy and multi-tenancy.

When Gensler began design of NVIDIA’s new campus in Santa Clara notions of exit strategy ran counter to the company’s success-oriented outlook. What mattered most was creating a work environment that “captured the soul” of the company and to enhance the experience for employees and improve collaboration. The result is a total build-to-suit project designed from the inside out with the emphasis putting people together on large 250,000 square-foot floor plates that are hyper connected via pathways to programmed spaces, amenities, and openness between floors.

 

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This shift comes at time when there is greater tolerance and encouragement for experimentation in the design of workplace. Facilities managers are looking for creative solutions to meet growing demand, mobility, and flexibility. Density has continued to increase (from a gaudy 350sf to a cozy 150sf/person or less), as collaborative open work environments that support agile workflows and “scrum” teaming have become the norm. Workplace design is guided by the idea that talent must collide as often and as spontaneously as possible throughout the workday. Despite all the technology facilitated interaction (email, social networking, etc.) people experience on a daily basis, research suggests that the highest impact on idea generation and knowledge sharing still occurs from direct, face-to-face, contact. Tom Allen at MIT conducted research about how often people interact within buildings and in campus environments. His research revealed that people who occupy the same floor have a 95% chance of encountering a colleague on the same floor. If they’re on separate floors in the same building, the rate drops to 5%. In separate buildings, it hovers at a lowly .2%. The current design response to the need to facilitate interaction between colleagues has been bigger floor plates, more open work areas, and more interconnections between floors. The results from the first wave of such workplaces are mixed. In Gensler’s most recent U.S. Workplace Survey, we found that U.S. workers are struggling to work effectively due to an inability to focus. It seems that mastering the open plan requires careful attention to balancing collaboration spaces with focus areas. Innovation can only be driven by diversity and options.

 

NAREIM_Article_Images_005A great example of this is the work Gensler did for Facebook at their newly repurposed campus in Menlo Park. When Facebook announced in early 2011 that it was moving from its Palo Alto headquarters to an over 1M square foot, suburban campus that was the former home of Sun Microsystems, it seemed hard to imagine the social-media juggernaut thriving in such a relic of early ‘90s corporate office parks. At the project inception, as is often the case, the design team received a brief that contained both qualitative and quantitative goals. The quantitative were more easily understood, but the interpretation of a qualitative narrative often represents a unique challenge for real estate professionals and design teams: how to make space that experientially captures the written word or sometimes just a conversation with the CEO. In this case the questions were “how do we stay true to our Startup roots” and “how do we bring what we love about Palo Alto to our new place?”

To resolve the “Startup Root” question, the design team needed to create an armature for free expression and to resist the impulse to be overly curatorial, a shift in itself for many designers who have been so trained to consider the smallest details in the most retentive manner. At Facebook, the spirit of making things permeates the culture. So we designed the campus so that its inhabitants could take ownership over their environment. Facebook Employees are encouraged to add personality to their spaces through artwork and other installations. They also have the ability to simply reconfigure their spaces. A dynamic artist-in-residency program, where emerging artists are brought in to create featured works, adds dynamism to the workplace helps employees find their creative way.

The new Facebook Headquarters features a deconstructed style of plywood ceiling elements, concrete floors, and shop lighting. This work-in-progress aesthetic often compels visitors to ask when the headquarters will be completed, but represents a design response to the agile, “hackable”, work process many hi-tech companies employ and exemplifies the fundamental shift towards Millennial workplace values.

 

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This notion of “hacking” is quite common across the spectrum of creative workplace tenants and can be extrapolated to the building scale as was done at the Gensler designed C3 (Culver City Creative) project. Here the entire building is available for customization by the tenants that allows for the creation of individual company identity with each tenant able to create their own “front door”. In addition, permeability of the façade allows for open connections to the outdoors and increases pathways for people to travel between spaces with flexible vertical circulation moved to the perimeter that can be deployed at any location. Increased floor-to-floor heights and the ability to connect vertically inside and out helps break down the barriers associated with typical multi-level development that is so dependent on elevators and disconnected pancake floor plates.

 

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Similarly challenges exist at the suburban campus scale both in the buildings and in the space between buildings – often devoted to parking cars and not creating compelling spaces for people to work. The notion of quality space is the underlying premise at Facebook where the belief is that innovation isn’t driven by the amount of collaboration, but rather by the quality of the collaboration. It’s this critical mix of spaces that support collaboration and spaces that support focus work that distinguishes the project. Groups at Facebook can innovate and individuals at Facebook can innovate. By providing spaces for both, a company like Facebook can accelerate innovation in ways that neither approach can do independently.

Perhaps the biggest project challenge was meeting Facebook’s stated objective of bringing Palo Alto and its sense of urbanity to this 90’s campus’ staid inner landscape. Through the design process of the first building, the team arrived at the overall concept for the entire campus, bringing lessons from diverse urban environments into what had been an isolated suburban office park. The ornately landscaped English Garden was converted into a vibrant urban street, lined with operable doors that allow porosity in and out of buildings at the ground plane, and activation from diverse retail and amenity offerings that bring a variety of design voices to the project.

It’s important to examine opportunities and to see that workspaces are designed with people, culture, and place in mind. Mitigate risk for investment by challenging design teams to articulate the value proposition their development yields from both a quantitative and a qualitative point of view. Successful developments demonstrate an understanding of what is driving business and innovation today and supporting the needs of the talent they employ. Possessing sensitivity about incremental decisions that may not always appear to have a significant impact on the user experience is critical to making the right choices. This is the differentiator that will help deliver the highest return on those investments.