COVID-19 will change the entire notion of offices: Companies eye rental savings after working from home

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Even as the U.S. and Europe begin discussing how to reopen businesses, company leaders themselves say the coronavirus has jolted them into thinking about more permanent changes in how we all work—shifts that will last much longer than this crisis and could forever reconfigure the entire notion of offices.

In interviews this week, executives at global companies say COVID-19 has hurled them at warp speed into a future that they had envisioned unfolding slowly over many years. And to their astonishment, their online-only operations have worked well—raising the possibility of continuing much of the lockdown’s online-first work that has dominated since early March.

“We’re trying things in 24 hours, and then just rolling it out,” David Kenny, CEO of the global data analytics company Nielsen, says. “I hate this pandemic. But the velocity of experimenting with new things, I love that. I think some of that will stay.”

For tech veterans, the Zooming and online collaboration have been nothing new, and they have watched for weeks as the world races to catch up to them. Some predict a profound shift in working habits. “In some ways you can create something more efficient and better than what was there before,” Bill Gates said on a LinkedIn podcast on April 11. 

Companies have begun realizing that, too. Take, for example, the daily commute to the office—a hugely time-consuming task that now seems fruitless, not to mention ravaging to the environment.

“What this has shown us is that there are a lot of unnecessary meetings and trips, and that is not going to happen anymore,” says Robert Walters, CEO of the Robert Walters Group, a recruitment agency headquartered in London, with about 4,500 staff in 31 countries. “Cramming yourself on a train every morning at eight o’clock? You don’t need it all the time.”

The needless commuting has led executives to ask an obvious question about life after COVID-19: Why pay rent for commercial space, if employees do not need to come to the office every workday? Walters predicts that once employees are allowed to return to work, they will come to the office only about half the week, and the rest of the time work from home—as all of them have now proved they can do.

“We could look at a 25% reduction in office space, as leases expire,” he says.

The same calculations are playing out at other companies, as they begin preparing to reopen.

“If this is working well, and we’ve been doing virtual work for five years, do we need as much floor space?” Michael Fraccaro, chief people officer of Mastercard, asks. The company, headquartered in Purchase, N.Y., has about 20,000 employees in 78 countries, almost all of whom are currently working from home. “Do we need as much office space if work can be done virtually?”

If companies truly begin shifting away from offices, it would be a radical change. Until COVID-19 emptied offices, only about 3.6% of U.S. employees worked from home at least half the workweek, according to San Diego firm Global Workplace Analytics, citing U.S. Census data. That figure could surge to between 25% and 30% by the end of next year, according to a blog post the company’s president, Kate Lister, wrote earlier this month. “The genie is out of the bottle, and it is not likely to go back in,” she wrote.

Mastercard’s Fraccaro says that during the five weeks since the crisis in the U.S. began, the company has drastically rethought the range of work that can be done online. “This has a major structural and society shift in the way we think about work,” he says. “There is a long-term impact on how we think about this: Do we really need to travel on a jet, or can we do this in a different way?”

Three-month internships at Mastercard—slated to begin in early May—have been transformed into four-week online programs, with interns still being paid full-rate. Other corporate events—including presentations at conferences and weeklong management training programs scheduled to take place in South Africa and Costa Rica during March and April—were canceled. Fraccaro says there is no clear idea when they will resume: It will depend on when staff feel comfortable attending such gatherings, as well as when managers feel it is safe enough to dispatch them on business trips.

Likewise, Kenny says Nielsen has already begun a drastic rethink of how to use its pricey Manhattan office space once employees are allowed to return to work. The company has about 47,000 employees in 31 countries, including 3,000 people in New York City.

The most obvious change would be allowing employees to come into the office when it’s necessary, and to work from home when it’s not.

Teamwork and face-to-face collaboration is still hugely enriching, Kenny says. But clocking in at the office every morning suddenly seems absurd. He says the company has not yet calculated the amount it might save—likely millions—and he envisions investing some of that savings into ramping up the staff’s home offices and technology.

“I certainly think this will change real estate,” he says.

Other costs also seem unnecessary now, thanks to COVID-19. Take, for example, flying directors in for quarterly board meetings. On Friday, Walters was preparing for a shareholders’ meeting—entirely on Zoom. He admits a remote gathering is not quite as good as the in-person version, but it’s a viable substitute.

“You cannot see the whites of their eyes, and there will always be a need for human contact,” he says. “But you could say every other board meeting can be virtual.”

Kenny, who previously headed IBM’s Watson A.I. research division, says he spent years preparing for a steady transition to automated, less face-to-face business operations. When he was appointed to run Nielsen in 2018, he focused on slowly automating some of the company’s vast data-collection processes. He imagined the transition would unfold over the coming years.

Instead, it has taken weeks, in the wake of COVID-19. Almost as soon as Nielsen realized it could manage to operate well under the lockdown, it began discussing how to keep certain aspects as permanent features of the company. Kenny says that, to his astonishment, Nielsen has released daily products since the lockdown began, without slowing down any of its scheduled operations.

In some ways, he says, work is being done better than before. Meetings—held on Google Hangout—are speedy, focused, and devoid of time-wasting chitchat or diversions.

“We have found we can still make decisions, execute, and implement, quite well,” he says. “It has forced people to be smarter about how we make decisions.” Those work habits, he believes, are here to stay.

More coronavirus coverage from Fortune:

22 million lost their jobs in the past month—real unemployment rate likely near 18%
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Inside the surreal “Mask Economy”: Price-gouging, bidding wars, and armed guards
—The IRS just launched “Get My Payment” portal for tracking your stimulus check status
—How every sector of the S&P 500 has been impacted by the coronavirus selloff
—If you’ve been a little busy lately, here’s what’s going on with the 2020 election
—Military experts: We need to fight the coronavirus like we fight insurgents on the battlefield
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19

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