EY’s Top Real Estate Adviser On What Office Tenants Want Post-COVID
Catherine von Seggern says flexibility, as well as health and safety, will be keys to a return to normal
If it wasn’t already a capital of finance, of hedge funds and corporate law, of insurance, and creative companies— think tech, advertising, entertainment — New York might also be a capital of accounting. All of the so-called Big Four — PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young — have major offices in the city.
Ernst & Young, or EY, makes its home at 5 Times Square, having agreed to go there in 1999 when the building was under construction. It is moving to one of the towers at Manhattan West, part of the Hudson Yards development zone.
One of the executives stationed for the moment at 5 Times Square is Catherine von Seggern, EY’s managing director of construction and real estate advisory services. Von Seggern helps companies with their real estate, focusing almost entirely on their office needs.
She, therefore, has a front-row seat to the latest trends and needs of office tenants.
She spoke by phone with Commercial Observer in late January about the office market. Her remarks have been edited for brevity and clarity.
Commercial Observer: What are the commonalities of your clients? Do they tend to be big or small, in particular industries or a diversity?
Catherine von Seggern: I work with clients across all industries, probably of varying sizes. Most are larger organizations, which tend to have their own internal corporate real estate team. We work with a lot of Fortune 1000-type clients. A lot of work in financial services, as well as technology and health care clients.
A lot of clients are reimagining the workplace right now, and what it’s going to look like in the future. A lot of those things are still in development, and a lot of clients haven’t yet put that strategy together and aren’t ready to communicate it to the broader public. Many of the companies we work with are not fully bringing their employees back to the office. They’re waiting for vaccines and herd immunity to take place.
What sort of trends are you seeing, and things that your clients are seeking that they didn’t seek a few years ago?
There are a couple of changes that we’re expecting. The first is around “What will the purpose of the office be?” I don’t foresee the office going away, but many are rethinking what is the purpose of the office. Is it going to be a place of focused work, or are the types of activities that take place in the office different?
More collaboration, or innovation, or networking, training or learning. Companies are rethinking the allocation of space from those individual-type activities, to broader, more collective, collaboration-type space.
We’re also seeing a shift in technology, the use of technology in the workplace. We can continue to collaborate while working remotely. Increasingly, we’re seeing reservation systems, and interactive real estate platforms that help align an employee’s need to figure out where they need to go in the office and the employer’s desire to optimize the use of their space.
There’s also increased desire for technology around health surveillance. Everybody needing to do a health certification before they enter the workplace — that they had the vaccine, perhaps. Infection control is taking on an increased priority. We’re looking at technology to do health certification, or measuring and tracking air quality.
What is a fad, what is a fashion, and what changes are here to stay?
I’ve seen less focus on “Do we need to go back to 6-foot offices?” [and] “Do we need to have plastic glass screens?” At the moment, it appears to be less focus on that and more focus on managing health and safety and well-being through things, such as air quality and lower density within the office space. We don’t have as many people coming in.
[Personal protective equipment] is a big focus right now. I do think there’s going to be more of a focus on the technology impact. There’s no question that climate change and wellness and sustainability are even more important for many of our clients.
And so, being able to understand that type of information in the workplace, and to communicate that to tenants, as to how there’s an increased focus — continue to discuss smart cities, campuses, really understanding who’s in the buildings and at what time.
It’s no longer a requirement to be in the office. You have to want to be there, because so many people have learned to work from home. But do you still have to do it if you want to collaborate with somebody? Is that where you see us going?
In part. I think that companies are realizing they need to provide employees with increased flexibility. You can’t say, “You can’t work from home,” because everybody knows that you now can.
Many organizations have been able to show that productivity has not significantly declined.
But I do think it’s going to be a matter of the organization, specifically, and the culture also of that organization, how flexible they choose to be.
A number of our financial services clients tend to be more conservative around their thinking about how many people are going to come back into the office, and for how many days a week, given some of the regulatory and compliance considerations. Technology organizations are much more flexible, because they’ve done a lot of in-house work from other locations, there’s a lot of demand for technology time.
We’re seeing a lot of companies say, “Let our employees tell us how they want to work.” Other organizations are less flexible.
A lot of the culture, and the way the organization has historically worked, and how they train their people — a lot of different factors come into play. All of these workforce considerations are going to have a significant impact in the future on what’s the role of the building.
Do you think this is going to result in companies needing fewer offices? Are square footages going to go down because of this?
There will probably be a redistribution of the type of space that comes from these needs. So, it may be the big headquarters offices don’t have to be quite as big as they used to be. I think there will be more flexible options being given to employees. Even though we may not need as many pews or desks, we might want bigger space to support training, to support client interactions, to support things that are more collaborative, more technology-enabled within the workplace.
What are the one or two things that are dealbreakers today?
Obviously, some of the older buildings, given the new requirements around air quality and filtration, and being able to support that increased requirement will, obviously, be a factor.
Certainly, newer buildings that can provide systems, that are able to articulate air quality measurement to their employees, the ability to support all of the collaboration and that have made investments around technology requirements.
I think some of the amenity space is going to be interesting. We’re starting to hear tenants talk about [how] “we couldn’t shrink our footprint because, maybe, we won’t have as many people coming into the office, but what if twice as many people show up on a specific day that we weren’t anticipating?” It’s flexibility in cases of increased need that maybe is acquired in a different way.
It’s amazing how important pushing the elevator buttons have become.
We have to be comfortable that the elevator buttons have been cleaned, or we don’t need to touch an elevator button. Everybody has a heightened sense of awareness.
Did you ever think going into this line of work that who touches an elevator button was going to be a big deal?
I did not. Or having phones on the desk. Or having keyboards which someone else touches. Thinking over what’s shared is something we will continue to think about over the next few years.
What changes do you see COVID bringing to real estate, and what do you see staying once COVID is gone?
We’ve seen the need for touchless building technologies, and the need for more specific solutions to protect the employee in the workplace. Maybe less need for congregation, and the health and safety and well-being aspect.