A 4-day work week is becoming an increasingly hot topic. Although in Poland it still appears to be a thing of the future, recent years have shown how quickly labour market trends are changing. AI is also broadly expected to have a significant effect on the workplace. How will all of this impact the commercial real estate market?
Social expectations regarding professional development have changed significantly in recent years. The evolution of the work model also has a direct impact on commercial real estate markets which so far have been largely shaped by economic cycles.
However, rapid technological advances and the ongoing debate on new employment strategies and employee needs mean that the property market will need to adapt to emerging trends, say experts from BNP Paribas Real Estate Poland, Hays Poland, and law firm Gide in their report “A 4-day Work Week”.
“The rise of flexible working has been high on the agenda for years, but the pandemic has accelerated it, leading to a dizzying pace of change. As you would expect, the biggest transformation is taking place in the workplace, with the growing popularity of remote and hybrid working. However, there is more to the widespread adoption of the home office model because many firms have also in recent years changed their views on working hours and employee wellbeing. Today, when shorter work weeks have not been regulated by law yet, companies offering such working arrangements stand out against the competition. The implementation of a 4-day work week requires intense preparations within an organisation, employee engagement, appropriate technical resources and optimisation of business processes,” says Łukasz Grzeszczyk, CEE Executive Director, Investors Consulting & Talent Location
Strategy, Hays.
Remote working has already translated into office design and sizes, leading to an increased trend towards space optimisation. Looking ahead, the commercial property market will undergo deeper structural changes than ever before. This transformation will naturally take place gradually and reflect the specific features of each market segment, but in about a dozen years from now the real estate landscape will be completely different to what it is today.
Offices of the future
Paradoxically, it was progress and technology that drove demand for office work in the past. As digitalisation continued to advance, new jobs emerged – these included business analysts and IT professionals who needed a workspace. Modern technologies accelerated the growth of the office market in terms of both total stock and type of available office space. Alongside traditional centrally located offices, new locations opened up with lease options for companies from such sectors as BPO (Business Process Outsourcing) and SSC (Shared Services Centers). Today, however, progress and AI adoption on a larger scale are expected to be major productivity drivers, leading to a reduction in or even a transformation of some office formats. In the long term, further AI advances are likely to see employees who perform basic administrative duties – frequently in BPO/SSCs – being phased out.
BNP Paribas Real Estate Poland also notes that technological advances and the resultant proliferation of remote work are likely to reduce the burden on transport infrastructure, leading to increased office availability in central urban locations. Key non-central office locations will, however, remain important and will increasingly see new office concepts emerge that will either provide more flexible office leasing options or allow for greater integration with other uses (mixed-use schemes).
The concept of a 15-minute city will also increase in importance, leading to more offices opening and operating near people’s homes. These will include both head and satellite offices as the hub & spoke1 work model is likely to be a strong office market trend.
“This model comprises a company’s headquarters – frequently in a city centre – and smaller offices that are usually situated closer to employees’ homes, largely in less central locations. Satellite offices may be located outside cities and sometimes even abroad. The hub & spoke system is still in its infancy but is spreading to medium-sized cities across Poland. Many corporations will probably consider changing their consolidated model of operations into a dispersed one. The latter is more costly in the short term, but in emergencies such as a pandemic will help ensure customer service continuity and may be an important asset in the ongoing fight for talent. In addition, it benefits not only employees and employers but also regional economies,” adds Małgorzata Fibakiewicz, Head of Office Agency, BNP Paribas Real Estate Poland.
What’s more, technology- and AI-powered growth in productivity is likely to create space for the implementation of a 4-day work week, which, however, is unlikely to take place within a foreseeable timeframe. We may be nearing a point where technology will establish a different order in which new work models will begin to dominate, the office market will have to accept a slower pace of growth and standing office buildings will be expected to provide even more added value.
No matter which scenario unfolds, the near future will be a time of flexible, hybrid and decentralised offices that will foster employee well-being by providing better quality air, smart lighting, ergonomic furniture, sustainable practices and dedicated breakout spaces, to name just a few.
Traditional retail is unlikely to disappear but will become more digital
Technological transformation is also happening in retail – right before our eyes. While cashierless stores are opening up, e-commerce is becoming increasingly effective at reaching customers with its offer. Many shopping centres are turning from shopping destinations into leisure venues with a large entertainment and F&B component. Less attractive large stores are becoming deserted and will have to reinvent themselves to attract customers. Brick-and-mortar stores are here to stay with us. Traditional retail is experiencing high footfall levels post-pandemic as many shoppers highly value ‘first-hand experiences’ such as being able to feel and touch a product to assess its quality or simply to try on shoes or clothes in-store. The retail sector will, however, evolve, with physical retailing embracing digital solutions typical of the online realm.
A shorter work week in retail is hard to imagine today. However, wider adoption of technologies and automated customer service models will probably result in new solutions that could eliminate some barriers in the future and enable entrepreneurs to embrace flexible and shorter working time arrangements more fully.
A new reality for warehouses
The industrial and logistics sector appears to have the brightest future ahead of all property market segments. More technology in our lives will mean more space for its manufacture and for storing intermediate goods. This, coupled with the growth in global consumption, shows that the sector has great potential. Poland’s total stock of modern warehouse and production space has quadrupled in recent years, says BNP Paribas Real Estate Poland. In the long term, this class of assets is expected to maintain solid foundations for further growth and to attract investors.
The new reality – in the light of the reconfiguration of supply chains – also means an increased role and demand for last-mile delivery warehouses supporting an integrated network for the distribution of goods and products, including e-commerce operations. Such warehouses will continue to become more and more technologically advanced. The implementation of the Internet of Things (IoT), virtual reality (VR), drones and continued digitalisation of operations will optimise the sector’s efficiency, cut operating costs and allow for better stock control. This will, in turn, create space in the future for a more effective use of human resources and the adoption of flexible work models in the warehouse sector.
When to expect a change in Poland?
The subject of reduced working hours is not new to labour law – it emerged long before the rapid technological growth. A working week shorter than 40 hours is a legal reality in some EU member states, but it is mostly associated with a 35-hour working week and not the exclusion of one working day (eight hours) from the working week. That said, some employers are increasingly experimenting with four-day working weeks.
“Irrespective of the adoption of remote working, some Polish employers are already gradually shortening working hours on selected weekdays as part of putting their internal policies of work-life balance into practice. In Poland, a legislative initiative – the first of its kind – has also been put forth to reduce working hours. It will be subject to many discussions with social partners. Shorter working hours should not, however, put an employer’s financial liquidity and consequently employment stability at risk. Such discussions will also be a good opportunity to consider what global working time arrangements have been the most favourable for the labour market and employee wellbeing,” comments Joanna Jasiewicz, Advocate, Of Counsel, Employment Law Practice, Gide.
The debate on new work models and technological advances facilitating remote work and changing the way people live will continue to gather momentum. The question is not if but when and how these developments will reshape each segment of the commercial property market. This will, in turn, be reflected in the strategies of developers and equity investors who should start now – at an even greater turning point than ever before – to think about their assets long-term.
