I  4 MIN READ  I    15 October 2020

Comments on the Property Market by Amanda Robertson

Original article by Andrew O’Keefe, Director Hardwired Humans, published 2 October 2020.

There has been a resurgence of inner city dwellers buying up in regional areas.   Driven by the Covid pandemic and the necessity of working from home, people have been seeking safer locations, wider spaces and extra rooms.

As businesses start to return to work in their offices, ongoing, will we really want to work from home and what impact will that have on the regional property markets.

Andrew O’Keefe, a colleague from my prior professional career, wrote an interesting article about humans and the question of wanting to work from home in the future.

So let’s combine the thoughts and explore the impact on the property market.

Andrew wrote: Earlier this week, my wife Jude and I visited a showroom to investigate terrace tiles. We’ve dealt with the retailer previously and he and we were pleased to see each. In welcoming us he smiled and asked, “Are you back to shaking hands or still doing elbow rubs?” Apart from letting him know that we are staying with elbow rubs for a while yet, I was surprised and intrigued by his question.

“Are people back to shaking hands?” I asked.

“Yes, just in the last week or so,” he answered. The COVID-19 infection rate in Sydney has dropped and we have had just had six consecutive days with zero infections.  

“What proportion of clients are back to shaking hands?” I asked.

“About 80%.”

How quickly normal behaviour resumes. How about normal behaviours when people have the option of returning to the office?  

I started to think about those normal behaviours and how people have changed in their interaction with their homes and their office space.  Andrew in his article explores the question of will we really want to work from home and potentially will our employers allow this.  

Will the “old” normal bring people back from the regional areas to the city, or will a new normal be created, and what impact will that have on the way we interact with our work colleagues and the culture of our organisations.  Maybe we’ll see a larger group of commuters,  mixing some working days in the city with some days from home.  Or will there be a return to 5 days in the office and what will that mean for people who chose to relocate to regional areas.  

I was talking to an Agent in the Hunter Valley recently, they literally can’t keep up with the property sales, selling a property a day, with the average days on market in single digits.   Will the continued  growth of property sales in regional areas be sustainable, or will we see a divergence in regional areas in a couple of years time as people return full time to their city work places.  

Across Sydney’s upper north shore, we are seeing stable house prices.  This is partly due to the demand and the lack of quality homes for sale.  Houses with rooms to accomodate a home office, extra study space for other family members and casual living areas are well sought after.   Access to good transport connections are still high on the list of must haves, while people may not be travelling on public transport as much at the moment, these buyers recognise that when things return to “normal” they will need good transport connections.  The upper north shore continues to be a very attractive option for families upsizing, looking for a bit of distance between neighbours and the opportunity to live in a quiet leafy area, still within good striking distance of the CBD and other city regional business hubs.

Let’s return to the heart of Andrew’s article and the discussion around will we really want to work from home?

Three Months Later

Three months ago, maybe because it made for more sensational headlines, most news reports gave coverage to the chief executives making the early call that everything has changed and remote working is here to stay. Twitter CEO announced that employees can work from home forever. Fujitsu announced that working remotely will be the primary pattern of work from now on. At the same time, Fujitsu announced that, at least in Japan, it was selling half its office space. 

Now three months later, risking accusations of being old fashioned, some chief executives are declaring that working from home is not sustainable. Barclays CEO has said that he expects people back together in the office as soon as it is safe to do so. He says being together is important for culture and governance. 

Which view of the future is most accurate – Fujitsu or Barclays? Human instincts helps answer that question. A colleague, Rhonda Sparks-Tranks, and I recently ran a couple of webinars to discuss the subject. Given the interest in the webinar, I’ll cover what we spoke about and ideas that came from the participants. 

Policy Versus Behaviour

When organisations like Fujitsu announce policy changes, they sometimes forget that there is a separate force that also comes into play: nature. The choice people make is different to policies that organisations announce. The government might declare social distancing, but people choose whether to shake hands. An organisation might decide that people can work from home in perpetuity, but what will people choose? The choice is driven by culture and instinct. 

The force of nature driving people’s behaviour is that we are a social being. This will, I predict, drive people to prefer to be back to the office as soon as it’s safe to do so. There are a number of factors that will drive behaviour.  

1. Social Belonging   

People need to belong, and that’s harder at a distance. People are or will miss each other and the value that relationships and friendships add to our lives. How about being a new hire of Fujitsu with most of your colleagues working from home? I think you’d feel very isolated and it would be hard to fit in. Working from home during COVID has been okay because the team all know each other. That will be harder as time goes by. 

2. Relationships  

Relationships are so much easier to develop in person, rather than at a distance. This is because we form relationships by bonding, and we bond through chit-chat – those critical informal conversations. We can’t bond unless we engage in chit-chat conversations. Irrespective of organisation policy, we’d expect that people will prefer to be back working together because they value the quality of relationships – even friendships.  

Netflix CEO, Reed Hastings regrets not being with people: “I don’t see any positives (about remote working). Not being able to get together in person…is a pure negative.” 

3. We Learn Through Social Interaction  

Ask any parent of school kids about the weeks or months of lockdown and I expect almost all will say that learning is better in person (no one is advocating kids can choose home schooling in perpetuity). Adults are the same. A lot of our learning is from random or casual conversations, from overhearing others, from hearing stories and from helpful comments from experienced colleagues. The cracks will soon show, I think, in organisations that institute significant working from home.   

The CEO of a Wall Street financial services firm expressed this point powerfully: “I am concerned that we would somehow believe that we can basically take kids from college, put them in front of Zoom, and think that three years from now, they’ll be every bit as productive as they would have been had they had the personal interactions (of work in offices).” (Ronald J. Kruszewski, CEO of Stifel Financial Corp.) 

4. Impact on Culture

Because ‘culture’ is an intangible, it’s importance might have been obscured from many leaders over the past six months. Culture is the rules of belonging to an organisation. It’s the glue that connects people, sets the standards, the values and the expected behaviours. These elements are absorbed by people being around each other and observing how things get done. In organisations that go with extensive remote working, leaders will find, I predict, that the rules of belonging and the standards of controls will decline. 

Andi Owen, the CEO of Herman Miller says, “That unplanned kind of interaction that contributes so much to how we build relationships with people and how we build culture, those things are what are missing.” 

5. Creativity Versus Transactional Work 

Most work in the lockdown has been transactional work. The organisation has kept going and it’s been okay. But what about the next wave of innovation – where will that come from? Creativity and innovation is accelerated when people have spontaneous interactions in incidental conversations. One CEO says, “What I worry about most is innovation. Innovation is impossible to schedule.” (Ellen Kullman of 3D printing start-up, Carbon Inc.) 

A big part of creativity is collaboration. We collaborate with ‘friends’, not strangers. We tend to classify people as strangers until we know them. As time goes by in organisations with a large amount of remote work, with more new people employed, collaboration will likely decline.  

A few years ago, IBM and Yahoo drastically reduced working from home options. They found the negative impact on culture and creativity too great.  

6. Politics and Being Noticed   

In human social systems there is an underlying current of small “p” politics – who we collaborate with, our alliances, our connections and networks. People will drift back to the office to be better connected. There was a study years ago that looked at high performers in GE. The standout attribute of the high performers was the extent of their internal network. Their network allowed them to get things done quickly, because they knew who to go to. 

When more people in an organisation opt to return to the office, staff who are preferring to work from home will intuit that they are missing out. They’ll start saying that they are forgotten and they are made to feel like ‘second class citizens’. This will be an unintended consequence of their choice to work from home. 

Also, we like to be noticed and be appreciated. This doesn’t mean boasting and big-noting. Many moments of appreciation are expressed by colleagues, informally. That’s more likely in the office.

What’s the future look like? It’s hard to say, but we can increase the confidence of our predicting by taking into account human nature. Given human nature, I think that Barclays is going in the right direction. For me, I wouldn’t want to be a staff member of Fujitsu. 

A final word, from a real estate perspective, I wonder how many of those Covid regional purchases will become a burden as we recover from this pandemic and people find the need or want to divest and return to inner city living.    Not all will, as many will have made a lifestyle change and that’s a whole separate article.  I still think we will see a flux of regional properties on the market in a few years time as people decide to head back to the city, either for schooling or ease of access to their offices again.   The upper north shore will continue to be attractive to families, with good schools and transport readily available.  Not so onerous distance wise as the regional country areas, the upper north shore provides greater opportunity to blend working from home and working in the office. 

(Source of CEO comments: The Australian, 26-27 September 2020 quoting The Wall Street Journal.)