The office of the future: Palace or co-working hive?

[WeWork's new co-working space in Shanghai. WeWork is a leading company providing co-working spaces worldwide]

By Bennett Voyles

My God, Mae thought. It’s heaven. 

The campus was vast and rambling, wild with Pacific colour, and yet the smallest detail had been carefully considered, shaped by the most eloquent hands…soft green hills and a Calatrava fountain. And a picnic area, with tables arranged in concentric circles. And tennis courts, clay and grass. And a volleyball court, where tiny children from the company’s day care centre were running, squealing, weaving like water. Amid all this was a workplace, too, four hundred acres of brushed steel and glass on the headquarters of the most influential company in the world. The sky above was spotless and blue.

- Dave Eggers, The Circle

The opening description of Dave Eggers’ 2013 satirical Silicon Valley novel does a nice summing-up of current visions of what tomorrow’s workplace will be like—at least for a handful of lucky technorati.

Eggers’ send-up is only a slightly exaggerated version of the pleasure and productivity of palaces that the tech giants have already built: Apple, for instance, recently unveiled a new $5 billion headquarters on a 175-acre campus in Cupertino, California, that includes a 10,000-square metre employee gym, a 1,000-seat auditorium, two miles of walking and running paths for employees, an orchard, a meadow, and a pond. Not too far away, in Mountain View, at Google’s headquarters, the Googleplex, Google employees enjoy valet parking, free massages, free restaurants, two organic gardens, two swimming pools, multiple volleyball and tennis courts, soccer fields, a Frisbee golf course, solar-powered electric car charging stations—and a dinosaur skeleton as a subtle reminder that they need to stay innovative.

Designer office spaces are not entirely new; pleasant surroundings have always been a perk of upper-end corporate life—in the US, some of the country’s best private art collections have long hung on company walls—but after a few decades in which companies cut back on creature comforts, the trend is now running in the other direction.

Jacob Morgan, author of The Employee Experience Advantage, says offices are now considered an important part of a corporate brand, and companies try to build office spaces that reaffirm their company values.

“The traditional notion of the office is disappearing—that’s going away—but the physical spaces themselves are being redesigned to be beautiful spaces that employees actually want to come to work in,” explains Morgan.

Further down the ladder, humbler versions of the Silicon Valley spaces are increasingly popular too. Since their invention in Silicon Valley in 2006, the number of co-working spaces and desks in those spaces has more or less doubled every year. This year, about 1 million people will work in a co-working space at some point. In ten years, if this faster-than-Moore’s-Law pace continues, that number will top 1 billion, (though some sceptics argue that the projections are somewhat exaggerated).

The co-working idea reflects two trends: first, companies keep trying to move more of their balance sheet from fixed to variable costs, so their payroll can expand or contract as business warrants. Second, largely as a result of the first trend, the supply of office-less workers keeps rising. Some people estimate that as many as one-third of US workers make at least part of their living as freelancers.

So which vision of the future will win out—the palace or the co-working hive? “I think the future is a mixed bag,” writes Richard Watson, a London-based futurist, in an email. “Some big traditional offices—with possible swings away from open plan and hot desks to avoid digital distractions—but also places like WeWork, where like-minded individuals reclaim the social aspects of work lost to free agency and permanent temporary staffing.”

Watson is not sure that the current trend toward short-term engagements could backfire. “Yes, more companies are being run like movies (crews hired for projects) but this all underestimates the social nature of work,” Watson writes. “It’s not just about the money, it’s about identity, belonging etc. One worries about millions of people living AND working alone.”

Grant McCracken, a cultural anthropologist who specialises in American culture, believes this work pattern will have an impact on the degree of loyalty workers feel towards their employers and each other. “My guess is that younger employees are feeling pretty modular,” he writes. “They have a series of ‘gigs’ in play and the one they may have with a traditional organisation comes and goes. So identification is low…and loyalty shifts to your personal networks. These networks now serve a millennial the way working for IBM did for their parents or better their grandparents.”

WeWork, the largest co-working company, is one firm that has been thinking about ways to satisfy this need for belonging. In addition to its burgeoning co-working business, the company is experimenting now with a business to meet a similar desire for convenient, chummy housing—WeLive. In several cities, the company has built communal apartments not far from their office spaces, housing that combine private studio apartments with shared living and kitchen space. These designer dormitories are reportedly not yet quite the hit that WeWork has been but the model is still in the experimental stage.

But while today’s office workers are very flexible about where their desk is, they are getting less flexible about the address of the office. A number of studies have found that more and more young and educated people want to live downtown—not just in the US, but many cities around the world—to the point where many businesses have followed them. GE, for example, recently relocated to Boston from suburban Connecticut; and McDonalds to downtown Chicago from the suburbs.

These increasingly homogenous offices in increasingly homogenous cities may be having a profound societal impact. In their 2008 book, The Big Sort: Why the Clustering of Like-Minded America is Tearing Us Apart, Bill Bishop and Robert G. Cushing noted that in the US, many places were becoming more and more class-divided.

“We saw this in every measurement we could find,” Bishop recalls, in an email. “At one time, patent production in the US was fairly evenly divided among metro areas. Now it is concentrated. Now in some places people are living longer while in others they are living shorter lives. Education, income, gross domestic product—places are all diverging on these measures.”

In stark contrast to past decades “when prosperity had spread more evenly throughout the nation, the US economy has begun to diverge into regions of winners and losers,” wrote Bishop and Cushing. Increasingly, they wrote, quoting Chris Riley, a Portland, Oregon, marketing expert, “Technology migration, and material abundance all allow people to ‘wrap themselves into cocoons entirely of their own making.’” People are unwilling to live with trade-offs, he said, and are choosing to live in communities that fit their values.

Those differences are big and getting bigger: in the 50 largest metropolitan areas in the US, the population of 25-to-44-year-old college-educated Americans grew three times faster downtown than in the suburbs between 2000 and 2010, according to a 2015 study by scholars at the University of California at Berkeley and the University of Pennsylvania.

This shift will encourage entrepreneurs to keep opening better markets, restaurants, and other urban amenities for the people who can afford them. Poorer residents, however, will face a stark choice: “Either be displaced or have to pay the high housing costs to continue to live in downtown locations where the businesses offer fewer of the consumption amenities that suit their less luxurious tastes,” the authors concluded in their working paper.

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[This article has been reproduced with permission from CKGSB Knowledge, the online research journal of the Cheung Kong Graduate School of Business (CKGSB), China's leading independent business school. For more articles on China business strategy, please visit CKGSB Knowledge.]