The current multi-generational workforce that comprises the Baby Boomers and the younger generations (X, Millennials, and Z) represents a significant and high-speed evolution of the workplace. Over the next five to seven years, the workforce is facing a shortage of experienced talent as Boomers retire en masse, and an influx of young employees who possess vastly different work styles, expectations and preferences enter the workforce.

PLANNING FOR FUTURE OFFICE SPACE NEEDS IN THE FACE OF CHANGING WORKFORCE DEMOGRAPHICS

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Companies are racing to catch up in order to recruit and retain the best of the best within these new groups. In addition to the responsibilities that HR departments have for understanding the wide range of demographics and generational interests, and adjusting corporate policies in response, real estate professionals must also adapt to the changing workforce.

This demographic workforce transition directly impacts real estate planning and management today and into the future. Office space requirements must reflect the ongoing shifts in workforce demographics, culture and workstyles to enable everyone to work well together and

be productive within the same space. Commercial real estate teams are addressing these challenges with:

• Shorter lease terms to enable greater flexibility

• Smaller square footage / greater density (or similar square footage but dispersed in different types of spaces)

• Increased portfolio diversity (leased, owned, serviced)

• Changing location priorities

• Space planning that supports flexibility, collaboration, and activity-based working

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The Four-Generation Workforce: Who Are They, What Do They Mean for the Future of Office Space?

Silent18%

Greatest2%

Silent2%

Boomer29%

Gen X34%

Millennial34%

MillennialPost

1%

Boomer49%

Gen X31%

LABOR FORCE COMPOSITION BY GENERATION Pew Research Center study.

1995 2015

2010 and are just beginning to dip their toes into the workforce (although many are still in elementary school).

The biggest forces impacting the workplace today (and for the next 5-10 years) are the outgoing Boomers and the incoming Millennials. The in-between Generation X is being lost in both numbers and media attention, and is characteristically the middle

ground between the Boomers’ workaholic mentality and Millennials’ tech-reliant and collaborative nature.

How can an office space meet the needs of Baby Boomers, Gen X, Millennials and Gen Z at the same time? Before we address the options, we should first understand the common characteristics for each generation.

For the first time in history, there are four generations (or five, if you include the few remaining from the Silent Generation, the precursor to the Baby Boomers) currently in the workforce -- with three of them representing the majority of today’s employees. Analyses of all four current working generations have been well-documented, allowing us deep understanding about the influences that have shaped each generation’s identity, and how their expectations and priorities are expected to inform the future of work.

Baby Boomers, who were born between 1946 and 1964, are retiring at a rate of 10,000 per day for the next decade or more, and are leaving a significant gap at the top of the corporate ladder. Generation X had a short-lived period as the largest generation within the workforce, from 2012 to 2015, but is being overtaken by Millennials. With a population of 83 million and growing, Millennials are a larger cohort than either Gen X (a population of 65 million) or the Boomers (77 million), and are quickly gaining ground in the workforce. The Brookings Institute estimates that by 2025, Millennials will make up fully 75 percent of the workforce. They are taking leadership roles that are vacated by outgoing Boomers, and their distinctly different work styles and preferences are just beginning to create change within today’s workplace culture.

The next upcoming group is Generation Z, who were born between 1995 and

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Baby Boomers: The Workaholic GenerationDuring the 1980’s, when Boomers’ were the most populace generation in the workforce, office culture was defined by hierarchy and formal space definitions using private offices and cubicles. “Live to work” was the name of the game, and technology was a new tool to be learned and adapted. Traits of this generation include:

• Productive and hard-working

• Loyalty to their employers is important

• Dedicated to working long hours

• Team players

• Like to hold meetings

• Communications are direct and in-person

The landscape began to shift toward more flexibility in the 1990s and 2000s, as technology enabled an increasingly mobile workplace and hierarchies flattened.

Generation X: The Sandwich GenerationThe oldest Gen Xers are 50 years old and, sandwiched between the outspoken Baby Boomers and the young up-and-coming Millennials, they are quietly leading the majority of growing companies. In fact, 68 percent of Inc. 500 CEOs are Gen Xers.

The latchkey children of Baby Boomers, who were raised in households with two working parents or were children of divorce bounced from one parent to the other, Gen X are inherently independent and self-sufficient. Other qualities associated with Gen X include:

• Tech savvy

• Highly educated

• Adaptable

• Prioritize work/life balance

• Change jobs every 3-5 years

• Distrust corporate motivations

Head down and quietly following the rules, while struggling to raise the children they had later in life and care for aging parents, Gen X goes largely unnoticed by corporate America and the news media. However, they are just beginning to come into their own in terms of taking on significant leadership roles.

THERE ARE 80 MILLION BABY BOOMERS

WHO ARE GOING TO RETIRE OVER THE

NEXT FIVE TO SEVEN YEARS, AND THEY’RE

GOING TO BE REPLACED BY 40 MILLION

GENERATION XERS. THAT’S TWO TO ONE, SO

YOU’D BETTER BE DEVELOPING YOUR NEXT

GENERATION NOW IF YOU’RE GOING TO BE

READY FOR THAT TRANSITION.

Michael White, The Directv Group Inc.

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Millennials: Autonomy, Feedback and TechnologyThe Millennial Generation contrasts starkly with the Baby Boomers. Millennials are focused on self-fulfillment and want their work to relate to their personal passions. They require regular feedback on their performance, and are highly ambitious, expecting to rise through the corporate ranks quickly. Raised on a diet of parental nurturing and praise, Millennials believe that the world is their oyster. They grew up with technology, and it is integral to their daily lives (professional and personal). Currently the most populace generation in the workforce, and growing daily, Millennials are driving the majority of workplace change that will occur over the coming years. Work-related characteristics of the Millennial Generation are that they:

• Prioritize flexibility over salary

• Communicate in short messages

• Feel less job loyalty

• Expect instant access to information

• Value transparency, and are uncomfortable with rigid corporate structures

• Prefer urban locations with short commutes and many amenities

• Desire work environments that emphasize teamwork and community

While Millennials appreciate the knowledge and experience that Baby Boomers possess, and enjoy learning from mentor relationships with older colleagues, there is also generational friction. Differences in technology usage can create frustrations, and the two groups prefer to communicate and work in very different ways.

Generation Z: Multi-Taskers with a Personal MissionIn the next few years, 30 percent of Generation Z will enter the workforce. Less idealistic than the Millennials, Generation Z is highly entrepreneurial and technology-reliant. This group of young people has grown up immersed in digital and social media, with a mobile phone in their hands at all times. As they enter the workforce, they will be highly-educated multi-taskers. It will be equally important for this group to find work that relates to their personal passions, and to feel valued and appreciated for their contributions.

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My Generation, Your Generation: There’s More to it Than X, Y, Z

While some of these generational identities are the direct result of specific cultural influences, many of the demographics associated with each generation can also be attributed to that generation’s current age range and life stage.

The Influence of Life StageAn average, single 20-something could generally be expected to be in a growth phase of his or her career, with priorities for professional advancement, socializing with peers, and living in a diverse and accessible urban location. Alternately, a married 30-something with two children could be expected to prioritize a home in an area with excellent schools, a reliable and dependable source of income and benefits, and flexible work/life balance that allows for ample time at home with a young family.

Neither of these examples are specific to any one generational identity, but instead are indicative of a specific life space that is both universal and fluid. As we graduate from one life stage to another, our motivations and interests change.

While there is a limit to the value to be garnered from generalizations, many people travel through several of the following primary life stages during their working years:

• Single

• Married / Partnered

• Parenthood

• Empty Nesters / Nearing Retirement

These life stages impact our personal priorities and preferences, and are important for companies to consider when planning their real estate and workplace environment. A start-up technology company that thrives on innovation and demands long hours with the potential for big financial rewards may prefer to hire 20-somethings for their tech sophistication and career ambitions. As a result, their real estate strategy should respond to the priorities of this target group. Does this relate more to the age and life stage of the target employees, or their identities as part of the Millennial generation? It may be impossible to differentiate whether generational identities or life stage are most influential, but it is important to consider both when it comes to developing future office space plans.

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A Bigger Picture: The Shifting Culture of WorkIn addition to both generational influences and life-space (or age-related) influences, workplace strategy is also impacted by the macro changes in workplace culture. The way we work, and the way we interact at work, has changed dramatically over the past 10 years. Largely the result of technology advancements, but also owing to globalization and other factors, social trends and expectations for the role of work within our daily life has become less defined. We can work at any time, from anywhere. Flexible policies enable employees to work from home or a local coffee shop, mobile phones allow us to reply to emails and conduct conference calls from our cars or the train (not to mention the grocery store or playground), and co-working and satellite offices provide non-committal office space for entrepreneurs and employees who travel frequently.

Our collective mindset has transitioned from top-down toward inclusion and diversity across all aspects of society. We place a higher premium on collaboration and feeling valued for individual contributions. Traditional command and control hierarchies with a penchant for confidentiality and structure are being traded for transparency and co-creation.

Creating office spaces that support the continuously evolving cultural influences on the way we work is another factor in keeping pace with constantly changing work styles.

ONLY 30% OF CEO’S HAVE THE TALENT THEY NEED TO FULFILL THEIR

FUTURE GROWTH AMBITIONS.

PwC 15th Annual CEO Survey

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Workspace Planning in the Face of Changing DemographicsUnderstanding how all of these factors influence the way we work now and into the future is critical for real estate teams in order to plan for future office space that will continue to function in line with corporate business goals.

The keys to creating work spaces that are comfortable, productive and supportive for a wide range of generations and work styles are: flexibility, providing opportunities for collaboration, a location that meets the needs of the business, promoting health and well-being, configurability and customizability, and fostering inclusiveness.

1. Flexibility Imagine that in a single workspace, the Boomer wants to keep his private office, the Xer wants to work from home twice a week, and the millennial wants a Zen room for quiet meditation. Companies can’t just keep adding square footage and creating new policies to meet changing needs. At some point, it becomes necessary to make tough decisions about priorities.

The solution is to build in flexibility by creating environments that play multiple roles and offer options. This approach enables companies to reduce or maintain their overall square footage, but disperse it across different space types. New advancements in office furniture products offer easy customization and the ability to quickly move things around within the office space. Combined with other innovations in real estate business models such as shorter lease terms, new contracts and insurance terms, these innovations are redefining the traditional ideas of office space.

Activity-Based WorkingThe concept of activity-based working removes space ownership (employees don’t have their own desk or office) and creates a mix of spaces including: unassigned offices and work stations, quiet zones, social area and collaboration spaces–all precisely designed to support an organization’s different work styles and needs.

These flexible, purpose-built environments allow people the freedom to make choices based on their individual work style, mood, task and preferences. Through the course of a day, employees determine where they want or need to be working. Used in conjunction with mobile technology, this flexible approach to location-independent working can lead to increased productivity and employee satisfaction. Activity-based working has been adopted by companies such as Lego, BT, Google and Unilever, which have determined it has a significant impact on productivity, recruiting and retention.

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2. More Collaboration OpportunitiesAs younger generations desire a transfer of experience and knowledge from more experienced workers, and as the mobile workforce continues to grow, more opportunities for collaboration will be an important part of future offices. Getting the right mix of collaborative spaces in the workplace is important and should be based on knowledge of your meeting types. Typical meeting types include: • Information sharing and decision-making

• Creative and brainstorming

• Skill building and training

• Team building

With the mix of meeting types identified, spaces can be designed to address collaboration requirements. These generally will include formats such as:

• Enclosed Reservable: Rooms of varying sizes that are reserved for scheduled meetings.

• Enclosed Unreservable: Small to medium-sized rooms that are available for ad hoc gatherings.

• Open Collaboration: Casual locations for meetings that do not require privacy.

• Assembly: Flexible large meeting areas that can support a range of activities and meetings.

• Virtual: Spaces where people meet long-distance, using technology to work together and share ideas.

3. Location: Urban or Suburban?While the decision of where to locate a corporate office is based on many factors including infrastructure, government incentives and the price of real estate, recruiting is also a significant factor. Many younger workers (Millennials and Generation Z) prefer urban locations for the easy commuting options and abundant amenities, while older generations tend to prioritize school district quality, residential real estate prices and community. The rise of live-work-play communities that create a combined residential/office/commercial district within smaller cities or suburbs may be an ideal middle ground to meet a range of preferences.

Demand-Based SpacesCoworking spaces aren’t only for entrepreneurs and start-ups. Office space that can expand and contract based on need provides flexible CRE options for large enterprises as well. Individual employees occupy less permanent space and companies use more flexible models to accommodate the organization’s needs. Distributed workers can get productive work done while supporting corporate remote work policies, and companies can more easily attract employees who demand flexible work locations and schedules.

Coworking spaces also allow users to share set-up costs (everything from furnishings to IT infrastructure and reception staffing) across a larger base of users. In fact, Nick Clark, founder of Dallas coworking space The Common Desk, says that a business could save up to 75% in total costs by opting for a communal office space.

The confluence of many different professionals in a single co-working space is also a great opportunity for networking, collaborative brainstorming, and fodder for a creative and inspiring environment. A flexible environment also allows workers to choose to work alone or in groups, and with many coworking spaces offering 24-hour access, people can choose to work at whatever time is ideal for them.

As an alternative to leasing additional square footage, or as a supplement to standard leased space, coworking spaces offer a flexible option that benefits companies and employees alike.

BUSINESS COULD SAVE UP TO 75% IN TOTAL

COSTS BY OPTING FOR A COMMUNAL

OFFICE SPACE.

Nick Clark, Common Desk

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4. Promote Health and Well-BeingActive design is an approach to creating office space that encourages physical activity. This will appeal to Generation X, Millennials and Gen Z, who all have an interest in on-site gyms and other fitness amenities, and will benefit the aging Baby Boomers who are interested in remaining fit and active. Active design may include:

• Designing appealing stairways to encourage climbing rather than taking the elevator

• Locating functional areas like coffee rooms and copy centers on opposite sides of the building to encourage walking between these frequently used places

• Offering standing desks

• Providing fitness center amenities, or offering athletic classes on-site like yoga, or creating lunchtime walking clubs

Employees who are given the opportunity to move and stretch can more easily manage stress and maintain their physical health, leading to greater overall satisfaction at work.

However, physical health is not the only contributor to overall employee well-being. Employers who can successfully promote holistic well-being among their employees are reaping the benefits of better retention, increased productivity and higher engagement and satisfaction overall.

Well-being encompasses mental and social wellness, in addition to physical wellness. Gallup and Healthways have developed a scientific survey instrument to track the well-being of populations (graphic below). Based on how respondents rate each facet of well-being, they can be classified as thriving, struggling or suffering.

Strategies for promoting employee well-being will vary greatly between companies, and will appeal to different generations, life stages, demographics and cultures in different ways. Possible strategies may be:

• Scheduling flexibility to fit daily life: Sometimes we get sick, or a child is sick, or the car won’t start, or a contractor has to come for a home repair. Providing employees the flexibility to take care of their life needs while maintaining their work responsibilities (by

working a bit later, or coming in early, or telecommuting occasionally) is a significant contributor to well-being.

• Create Social Opportunities: Isolation is stressful for many people. Companies that encourage their employees to socialize, and provide activities such as small celebrations of company or personal events (we won a new client or today is Susan’s birthday!) or charity volunteer events can help people form bonds and build a company culture.

• Model Well-Being from the Top: Company leaders should set an example for well-being, including taking vacations and personal time, exercising, eating healthfully, and socializing with coworkers.

Gallup and Healthways have developed a comprehensive, definitive source of well-being measurement. This scientific survey instrument measures, tracks, and reports on the five essential elements of well-being.

Purpose: liking what you do each day and being motivated to achieve your goals

Social: having supportive relationships and love in your life

Financial: managing your economic life to reduce stress and increase activity

Community: liking where you live, feeling safe and having pride in your community

Physical: having good health and enough energy to get things done daily

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5. Give Employees Some Control Over Customizing Their Workspace

Many studies have shown that employers that offer user control and encourage staff to customize their surroundings will see a positive impact on employee engagement. In fact, employees who have control over the layout of their workspace are not only happier and healthier — they’re also up to 32% more productive, according to Dr. Craig Knight and the University of Exeter’s School of Psychology.

Everyone has different preferences and needs to create a comfortable and ideal work environment, which can span a broad range including:

- room temperature - light levels - seating comfort - noise levels - desk height - levels of privacy - colors - the amount and types of personal décor

Providing employees the option to customize some or all of these factors to their personal preferences can make a significant impact on satisfaction and engagement.

6. Design For InclusivenessMillennials and Generation Z are more diverse than any that came before them. Future office space should encourage cognitive inclusiveness (the open sharing of different perspectives and ideas), be attentive to employees of different cultural and gender identities, and address a wide range of physical abilities to support older workers and those with disabilities.

To start, inclusive design may include:

- Single occupancy or unisex bathrooms - Accessibility considerations and safety precautions for a range of physical abilities

- Spaces for cultural practices, such as meditation rooms - Arts programs that highlight diversity

Offices that embrace inclusiveness can help support talent recruitment, employee retention, collaboration and overall happiness.

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The Tools of Workplace DevelopmentCRE teams are increasingly being tasked with (and recognized for) their role in enabling productivity, satisfaction, collaboration, and overall organizational performance. Workplace strategy is a key component of these successes; it aligns environments, technologies, and operational processes with business strategies to develop a physical workplace that not only represents the company’s current culture and goals, but also gives shape to its future direction.

The current stratification of the workforce into four primary generational identities presents an imperative for Corporate Real Estate to partner with Human Resources and Information Technology teams to transform the corporate workplace from the ground up. Revamping the physical work space and updating corporate policies to meet the needs of new generations of employees are the keys to developing the workplace of tomorrow.

To achieve this, companies will need to understand their own unique culture and needs, and gather first-hand knowledge of what is important to their people. This can be achieved using a series of assessments to determine:

• Space usage

• Employee demographics

• How the business will change in the future

• Dominant work styles

• Organizational culture profile

• Change readiness

Using this data, companies can identify priorities that meet the needs of their demographics, work styles and cultural profiles.

While the typical workplace development process occurs every five to seven years when companies are facing lease renewal (or three to five years for growth companies), businesses need a more frequent process for checking in with their employees and assessing how their workplace aligns with current and future business goals. In order to be able to make changes in real-time as needed, office spaces need to have enough built-in flexibility to change easily.

The process of workplace development is complex and far-reaching, and can become stalled or face barriers as fear is often a powerful deterrent to change. For guidance in starting and driving a workplace strategy program to successful completion, contact us.

Learn More Cresa Consulting GroupRick Ybarra703.568.6390 | rybarra@cresa.com

Jeff Gagnon415.394.1027 | jgagnon@cresa.com

Reza Ahmadi , Ph.D.415.699.7250 | rahmadi@cresa.com