Transitioning a B2B Manufacturer to Tap into Today’s Office Marketplace Opportunities

The office isn’t what it used to be.

But then, people who use offices aren’t what they used to be.

Just pick up and read some of the recent articles in the Wall Street Journal.

• Turning Empty Offices into Apartments is Getting Even Harder (WSJ, Nov. 6 by Konrad Putzier and Will Park)
• Strip Malls are the New King of Real Estate (WSJ, Oct. 30 by Kate King)
• The Money has Stopped Flowing in Commercial Real Estate (WSJ, Oct. 31 by Peter Grant)
• The Clearest Sign Yet that Commercial Real Estate is in Trouble (WSJ, Nov. 13 by Konrad Putzier)

Gensler, probably the top architecture firm in the world, publishes a newsletter called Dialogue Now. The publication contains personal insights and opinions from Gensler’s global experts on how design is shaping the future of cities, and anyone can subscribe. If anyone knows offices, Gensler should know.

In a recent issue, Gensler explored this topic calling it, “Workplace Design for the Future of Work.” This topic makes enormous sense because from an architect’s point of view, making offices work is critical to their job as architects. However, what complicates their work is that there is rampant confusion among manufacturers who supply offices in buildings with equipment (not just furniture, but the plumbing, electrical, HVAC) that exists the B2B marketplace. If tenants and owners don’t know how to use the commercial space, how can architects design it? And if they can’t design it, how can a manufacturer create products and services that belong in it?

Gensler wants to help all of us figure it out.

Frankly, B2B manufacturers who make things for offices are in a holding pattern because WHAT an office is or is not has been disrupted.[1] Perhaps more important, WHO is going to use those offices has been equally disrupted!

For example, one of our clients is struggling with whether to redirect its salesforce to start attacking the vacant office buildings based on the assumption they will “convert” to apartments. But as the WSJ articles above point out, that’s not happening soon.

What are offices going to become? For that matter, what is the work in offices going to be? In other words, what’s up with workplaces these days especially in what was known as an “office?”

Maybe a better question is, what should be in the office workplace?

Gensler put a thesis together this way to answer that question:

Around the world, people’s work patterns and expectations have changed. Office developers and their tenants are now challenged with adapting buildings and workplaces that are agile and flexible enough to evolve with changing demands and useful enough to earn people’s commutes.

Like all thesis statements, it’s important to take the words apart to understand what’s really being said if we are to learn anything.

First, the thesis points out that work patterns and expectations have changed. Then, it says developers and their tenants are “challenged.” How? On how to “adapt” their buildings and workplaces to the changes. What are those changes? To make the offices “useful enough to earn people’s commutes.”

While there’s nothing new about things changing or challenges to keep up with change, what is new is the concept of trying to make a building useful enough to “earn” people’s commutes. While people have been commuting to offices since offices were created, the word “earn” was not in the commuting equation. Whether or not a person went to the office was a “given” if that person wanted to work at that company.

Gensler, however, now sees it differently and backs up their thesis with solid research.

How Gensler Sees What It Sees

Janet Pogue McLaurin and Anita Grabowska pointed out changing patterns of the office space in their Gensler piece, “As New Work Patterns Emerge, the Workplace Must Respond.” Gensler, who has the resources to do this type of analysis, studied 14,000 office workers across nine countries and 10 industries. So, we can all benefit from what they found!

And they found a gap!

It seems employees were coming into the office half of their time, but say they ideally needed the office two-thirds of a typical work week for their productivity. How does that gap compute – that they (whoever they are) want to come to the office more often? What we’ve been hearing in the news is that people don’t want to return to the office.[2]

We all know the devastation from COVID (or I should say from the government reaction to COVID?). The world shut down, and in many cases, is now nothing near what “normal” was before the virus. People call this the “hybrid” workplace nowadays, and it is still being sorted out.

But Gensler makes an important point: employees are saying they need to come to the workplace MORE to be more productive. So what’s stopping them?

Gensler thinks it’s the office itself.

The Gensler thesis — that developers and owners now have to make their offices into places that “earn people’s commutes” — is a paradigm shift if it is true. In the past, an office was an office; that is, it was a place where you went to WORK. What Gensler is suggesting is that this is no longer true and that now, the office itself has to be transformed into something more than a place to work.

They refer to one generation in particular on why this is so: Gen Z.

Gen Z Takes Center Stage

Why is so much attention being focused on Gen Z all of a sudden?

McKinsey & Company defined them this way: Generation Z comprises people born between 1996 and 2010. This generation’s identity has been shaped by the digital age, climate anxiety, a shifting financial landscape, and COVID-19.[3]

Gen Zers are people who are 13 to 27 years old. McKinsey tells us they were the first generation to grow up with the internet. So they are “extremely online” and spend over six hours on their phones daily according to the consultants. And like all of us, they become victims of their generational knowledge. Where is this leading to in the Gensler thesis?

In What This Baby Boomer Learned About GenZ, I documented what I learned about this generation. Tiffany Zhong, one of the presenters and a GenZer herself, put it this way: “We have the power of the internet and know how to utilize it to get things done or get our messages out there.” She added: “Who do we trust? There is no trust. That makes it harder as GenZ goes into the workforce. Does the future of work become project-based, freelancers? The generation that figures it out, hustles on the internet. We can do it from our bedrooms. We work from any physical location.”

In that webinar is the crux of the matter: the definition of work itself, and their belief “we work from any physical location.” So if Gensler’s research is true, they want to come to the office more – but only under certain conditions.

Loneliness of the Long Distance Commuter

It really doesn’t matter how many hours you spend on your phones, without interaction with live people, the individual (GenZers included) is going to a hit wall called loneliness[4].

People need people as the song said, and while Zoom might cut it for a while, the nature of a human is to seek out other humans to fully develop. The office has always served this purpose. However, COVID changed that: by STOPPING all activity in an office, they gave generations a taste of WORK not in the office. Then after COVID, when companies wanted to return to “normal,” people no longer wanted normal because they got a taste of abnormal – or new normal if you want to call it that.

Whether intentional or not, locking us up was inhumane, and the effects of that are a long time coming, beginning with redefining what is work, what is a workplace, what is interaction and where it should take place.

More Research

So the question is really, do you adapt the workplace to the workforce, or the workforce to the workplace? What will make a GenZer (or any other generation for that matter) commute if they “can work anywhere.” More important, what is the “work” they are doing?

Gensler, as a result of the gap they found and this question, was driven to do another research study of 4,000 remote and office workers in six major U.S. cities. The researchers wanted “to better understand the emerging factors in employees’ work and life that impact how and why they use the office.”[5]

From these Gensler studies emerged a collection of “patterns” or areas that we should consider about an office. Knowing these patterns will help a B2B manufacturer who makes things for offices position their products and services in ways that will be totally different than in the past.

Unique Life Factors Impacting How and Where Employees Work

You can’t please everyone all the time, so the goal is to find out “common” places that make sense on creating office space. We can never forget, however, that it will be the work that defines the space – and then the kind of workers who will be doing the work. It also defines what a manufacturer (including the KIND of manufacturer) is going to require to penetrate these new opportunities. Here is how Gensler sees it.

Generation. This was the generation that had that gap of people who were coming to the office but wanted to come more. The research, however, neglected to explain what KIND of work was being done. All generations come “to the office” for many reasons, not the least of which is change of scenery. But socializing and professional development all play a role – which may or may not have anything to do with how the office looks, what’s in the office, and so on.

Life Stage. The Gensler research outlined differences of people with children and those without. While important, those are not crucial in “earning” a person’s commute.[6] The office space, depending on the business, may be designed in myriad ways to accommodate these differences.

Commute. Time is the only true non-renewable resource, so the Gensler research revealed 45 minutes seems to be the cutoff point for coming in the least to the office. Distance has always been a factor in “earning” the employee commute, regardless of size of company.

Gensler also noted that distributed work and team types impact how workers perceive the office: “Media and technology workers come into the office the least but say they need the office most, while legal, not-for-profit, and government/defense workers report needing the office less than they currently do.”

Time zones affect a person’s preference for “being in the office.” Working across multiple zones makes a person need the office less. Since most workers are “team” based, the type of team determines the employee preference. But here again, the type of work determines whether or not an employee needs to be in the office.[7] But most team members require “quiet” time (i.e., writing a research analysis needs an area where even day-to-day “action” isn’t apparent).

According to Gensler’s research, 63% of global workers have returned to physical workplaces that have not been remodeled since the pandemic. Naturally, Gensler would like that work – and based on this new paradigm shift, probably desparately needs it due to the redefinition of work, and how people work. They also found while 72% of U.S. workers have choice of where to work within the workplace, they may not have the choices they need.

Disection of an Office

Gensler believes there are four areas in an office important to earning a employee’s commute. First, you need space for the individual to work, for a group to work, a “quiet” place, and a “connection” space. Exactly what these mean depends on the work!

Their research found that 90% of office workers have easy access to at least one of these spaces; however, only 47% have access to all four. That impacts productivity according to their studies.

Interestingly, they found that most employees want what they don’t have in office space.[8]

Crystal Ball

Gensler sees a disconnect: while they have to rethink the office “to accommodate all office workers,” that thinking “ignores the fact that people work and live in different ways.” It’s complex, but the answer is as usual, compromise. Where does satisfying the employee’s wishes start and end? Where does satisfying the company’s wishes start and end?

Gensler concludes: “Workplaces must evolve and be ever-changing, consistent with the dynamic nature of work and the changing needs of the people who use them.” That statement is very broad. Celebrating our uniqueness is one thing, but collaboration dictates that you put aside uniqueness for the common good. If round tables are perfect for the type of work, don’t ask for a square one.

Kicking Off Ideas

It’s obvious from this analysis that the type of market that can benefit from repurposing office space largely depends on the specific location, size of the space, and local demand. Examining these factors can lead to creative ideas to put into motion. Check these out.

Flexible Workspaces. If Gensler’s thesis is correct, and aglity of a space is important, especially in “earning people’s commutes,” then some of the markets that would benefit from such flexibility are

Entrepreneurs, startups, freelancers, remote workers, and small businesses. Regus is one of those companies who has built an entire business model on offering such space. Their worldwide network of workspaces has created a global business community of 2.5 million people. While there are others, the market is not just limited to these specialized companies.

For example, a developer may devote a floor or two of his vacant space for providing services to entrepreneurs or freelancers. Arranging the space for such accommodations can lead to additional opportunities should the businesses take off. These spaces serve individuals and small teams seeking a professional environment without the commitment of a traditional office lease.

Healthcare Clinics and Medical. Healthcare providers, doctors, dentists, therapists, and medical practitioners are targets for this type of space. Converting vacant offices into healthcare clinics or medical offices can help address the growing demand for accessible healthcare services in various communities. In fact, Future Market Insights says the urgent care market valuation is US$ 26,099.8 million in 2023 and is anticipated to reach US$ 40,828.4 million by 2033. Global demand for urgent care is expected to increase at a CAGR of 4.6% from 2023 to 2033.[9] What’s to prevent expansion of these centers into office buildings?

Education/Training Centers. Many educational institutions at UPCEA, an online and professional education association, reported that the pandemic and recent events across the country changed the operational dynamics of their organizations.[10] And despite the advance of digital interfaces for learning (i.e., LMS systems), physical collaboration is still essential, perhaps more so with the over-reliance on our phones. Organizations such as professional associations or large corporations have ongoing, professional development needs.

Repurposing office space into training rooms, classrooms, or educational centers can accommodate workshops, courses, and seminars for these companies. There are 16,243 offices in construction at the time of this writing, so the market is vast – and ready for ideas.

Art Studios and Creative Space. Advertising agencies aren’t the only types of company looking for newly designed space. Markets such as artists, designers, photographers, and creative professionals can utilize such repurposed spaces. Transforming office space into art studios or creative workspaces can provide affordable, well-lit spaces for artists and creative individuals to work. These “offices” will look completely different than what a typical office looks like in our minds. It’s up to the imagination and creativity of architects and designers to establish these spaces.

Tech Incubators and Innovation Hubs. Coworking spaces have been a popular choice for budding entrepreneurs to get their businesses off the ground. Some coworking spaces have expanded their offerings to include incubator services and programs. These spaces also offer incubator services including programming, networking opportunities, and mentorship – all designed specifically for up and coming start-ups. Combining these offers will attract tech startups, innovation-focused organizations and entrepreneurs. After all, who would ever have thought you can just “rent” an entire network-equipped space with trained professionals to help you get off the ground?

Besides fostering collaboration and innovation, physical space can also be used to connect digitally with global sources for such collaboration. Everything depends on the needs between digital and physical collaboration. For example, according to Markerly, a pioneer in Influencer Marketing, a new term has risen to prominence: “Phygital.” They said that this word “encompasses the symbiotic convergence of the physical and digital worlds. It’s not merely a buzzword; it’s a transformative concept that reshapes our understanding of experiences and interactions.”[11]

The agency points out that Retail, traditionally a space of tangible interactions, is undergoing a metamorphosis — not about replacing the in-store experience but enhancing it with digital touchpoints. That means the office itself can be transformed in a similar way. The old word for this was “convergence,” and that word is still valid (I don’t know if “Phygital” will take off in usage).

The idea is to rethink physical, and then blend digital together with that rethinking. For example, imagine having a Nike store on the 9^th floor of an office building. Or a Wal-Mart where workers throughout the building can pickup their groceries on the way home. That might be just the way to “earn their commute.”

Fitness and Wellness Centers. According to The Business Research company, the global personal fitness trainer market is epxected to grow from $36.83B to $39.1B in 2023. But according to IBIS World research, the personal trainer industry operates in two general areas. The largest segment is in gyms and other fitness centers, while the other segment is in-house operations, tailoring workouts and regiments to the individual client and their needs at home.[12]

Imagine building an area in an office for the training to take place! Or, imagine (as found in hotels) a floor for the training of the entire building. As discussed, the location and need dictates the re-imagined space; however, who isn’t interested in expanding on their forcus on health? Converting office space into fitness studios, yoga centers, or wellness clinics that can cater to those seeking physical and mental well-being makes so much sense.

Other ideas for using office space to “earn people’s commute,” include:

• Pop-up shops or temporary retail locations can help businesses test new markets and engage with customers.
• Repurposing space for shared production facilities can provide cost-effective spaces for manufacturing and production processes.
• Transforming office space into community centers or meeting spaces can serve as hubs for local events, gatherings, and social activities.
• Adapting office space into restaurants, cafes, or food preparation areas can meet the demand for dining and culinary experiences. (In fact, the concept of “Ghost kitchens” that produced food only for delivery or takeout came about during the pandemic when the hotel industry rented its empty kitchens and banquet spaces to restaurateurs.)
• Large office spaces can be used for warehousing and storage purposes to accommodate inventory and goods.
• Office spaces with ample natural light can be converted into greenhouses for cultivating plants or vegetables.

The key to successful repurposing is conducting market research to assess local demand and collaborating with professionals in the chosen industry. Additionally, partner with architects such as Gensler to ensure that any necessary zoning, permits, and renovations are in compliance with local regulations and building codes. Construction has always been a “design team” operation, with architect, owner, contractor participation being essential to a successful outcome.

Let us know your thoughts! And thanks for reading.

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[1] Commercial Edge publishes a National Office Report and notes Office Projects Face Delays, Cancelations as Uncertainties Linger. Highlights of this report include: the average U.S. office listing rate stood at $37.77 per square foot, down 40 basis points year-over-year — Up 150 basis points over year-ago figures, the national vacancy rate reached 17.8% at the end of October; and, there were 98.7 million square feet of office space under construction, accounting for 1.5% of existing stock.

[2] In Why Your Workforce Doesn’t Want To Go Back To Work by Daniel Barber, the CEO of DataGrailnoted that “a lot of people don’t want to give up what they perceive as a better situation. The pressure is on for companies to find the right mix, and the answers are not clear-cut.” Moreover, In a recent poll, 65% of workers said they would prefer to work remotely indefinitely says an officesoftware.com blog. USA Today noted office vacancy rates hit an all-time high this year, topping 20% in some major cities. And a new Bankrate survey found that 81% of employees want a permanent four-day work week. Computerworld cited studies that have shown that most bosses believe remote work hurts worker productivity. “A survey of 20,000 people in 11 countries by Microsoft this spring found that 85% of business leaders believe the shift to hybrid work has made it harder to have confidence that employees are being productive.”

[3] What is Gen Z? March 20, 2023.

[4] Think about this: GenZ homicides hit a 25-year high during COVID, and the suicide rate was the worst in over 50 years according to the CDC.  What Gensler calls “values-forward workplace” doesn’t make much sense if people are confused about how they fit together in a workplace, or what a workplace is

[5] As New Work Patterns Emerge, the Workplace Must Respond, November 06, 2023, by Janet Pogue McLaurin, Anita Grabowska.

[6] I remember when I started my business, I hired a retired account executive in my client’s industry to track the news. I shipped 25 magazines each month to his home, and he marked the news items of interest, and shipped everything back. It was one of the best investments I had BEFORE the internet was invented. What’s more, I told the client whom the account executive served of my intention. “That’s a great idea,” my client said, knowing the value of the account executive’s eyes.

[7] I had a simple philosophy: you have to be where the action is. When I started the company, that was the phone. As technology evolved, the phone followed the employee. Today, the actions are in your pocket, or your purse.

[8] There is always a disconnect here. In one research report by Accountability Information Management, Inc., the room most wanted by consumers in their home was a wine cellar, but “wine cellar” was defined as anything from the one that comes to most people’s minds (controlled air room) to a refrigerator beneath the stairs. For a copy of this report, called “What do Consumers Want in a Home Really?” go to: https://www.a-i-m.com/docs/What-Consumer-Want-in-a-Home-ASID-Leave-Behind.pdf

[9] Urgent Care Market Outlook for 2023 to 2033

[10] FOUR TRENDS IN PROFESSIONAL & CONTINUING EDUCATION, by Rowena Clima.

[11] Phygital Fusion: The Evolution of Digital Marketing in a Physical-Digital World, Sept. 2023.

[12] Personal Trainers in the US – Market Size, Industry Analysis, Trends and Forecasts (2023-2028).