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Enough of the Millennials, Gen Z is Now the Forefront of Workplace Design Strategies in Commercial Real Estate

CBRE’s Workplace Strategy, Seattle, CoreNet Global Summit, Washington State Convention Center, Hammel, Green and Abrahamson, HGA Architects & Engineers
Start up team relaxing from work during coffee break in the office. The view through the glass.

By Jack Stubbs

“When people in the new generation say they want a private office, sometimes they just mean that they want private space when they want it. A lot of the tension [in workplace design] is about whether to support people for where they are now or incentivize them into different behaviors,” said Ashley Branca, director for CBRE’s Workplace Strategy in Seattle, highlighting one of the common trends about the impact that Generation Z are having on urban workplace design strategies.

The up-and-coming cohort, generation Z, follows Gen Y (affectionately referred by many as Millennials) and is influencing the commercial real estate market worldwide in more ways than one. At a CoreNet Global Summit held at the Washington State Convention Center in Seattle in early November of 2017, much of the focus was on the emerging generation (those born between 1995 and 2012), and how its members are beginning to impact the commercial real estate market that finds itself in a constant state of evolution.

One panel, “The Gen Z World: Shifts in Urban Design, Architecture and Corporate Workplace,” explored what the new generation is looking for in their work experiences, as well as how today’s emerging workforce is influencing real estate strategies and impacting urban, architectural and workplace design. The panel was comprised of William Hodges Hendrix, associate vice president and principal at Hammel, Green and Abrahamson, Inc. (HGA); Melissa Jancourt, designer and strategist with HGA Architects & Engineers; Celine Larkin, associate vice president with HGA’s Urban Design + Planning department; and David and Jonah Stillman, a father-and-son, Gen X and Gen Z duo and co-authors of Gen Z @ Work. The panel explored a wide range of topics, discussing technology, transportation, uses and new building typologies, as well as the impact the new generation will have in evolving the cultural norms informing workplace environment.

A second panel titled “Gen Z: Influencing the Real Estate Footprint” explored the upcoming generation’s effect on the commercial real estate market, also highlighting some examples of successful redevelopments of industrial assets into work-office space. Moderated by Seth Martindale, managing director at CBRE, the panel was comprised of Robyn Hurrell, licensed senior brokerage assistant with JLL; Ashley Branca, director for CBRE’s workplace strategy; Megan Campbell, senior consultant with HOK architects; Jenna Geigerman, senior manager of real estate & strategy with Citrix Systems, Inc.; and Armen Vartanian, head of global real estate at Okta.

Generation Z—a demographic that has often slipped under the radar in relation to the much-discussed Millennials—is a growing generation to be reckoned with. At over 70 million, the Gen Z generation surpasses its much-analyzed predecessors in size, and by 2020 is expected to represent 40 percent of US consumers, according to market research.

The burgeoning generation is currently influencing workplace design on a large scale. The new generation is utilizing technology to a greater degree than generations before it have; technology has become a real estate tool and recruitment strategy leveraged by employers, according to Jonah Stillman. In an increasingly technological age, an employer’s ability to attract talent to its company often depends on the ability to harness technology. “From a recruitment standpoint, too many leaders try to dazzle our generation with technology. [But] it’s not enough to just have technology; smart leaders need to show that they know how to use it better than the rest,” he said.

While this emphasis on technology plays into companies’ recruitment strategies, it also reflects the specific workplace environment that members of Gen Z look for. Gen Z employees typically prefer space that is more customizable and technologically-oriented, according to Larkin. As office spaces in the urban core continue to grow, the surrounding environment is impacted as well. The new generation prioritizes proximity to mixed uses, clustered amenities between and within workplaces.

In recent times, one of the most important components of urban office spaces has been the degree to which they integrated with their neighborhood through transportation options and other on- and off-site amenities. However, the up-and-coming generation also emphasizes a shift in the dynamic between employee and employer, with the Gen Z workers expecting to play more of an active role in its workplace experience, according to Larkin. “In this age, employees expect to have a say in workplace design…innovation and creativity happen when people are closer together,” she said. Additionally, input from the new workforce means that a diverse array of workplace designs will continue to be implemented, one example being co-mingled private/public spaces and smaller customizable work pods mixed within a larger office setting.

Trends in workplace design are set to continue to evolve, and it’s likely that buildings will be constructed with a keener consideration of future occupants of the space. “For corporate real estate professionals, the challenge is how to make developments relevant for Gen Z traits,” Hodges said. Additionally, Gen Z has spurred developers, architects and designers to produce “hackable buildings,” existing structures that can be changed and modified to further meet the needs of the user. “This is a paradigm shift: we are moving from buildings as objects to defining them as experiences,” Hodges added.

This overarching trend not only influences the physical design of the workplace itself, but also the surrounding neighborhood and environment, a ripple effect that has larger implications for the wider commercial real estate market. According to Hodges, the new generation’s presence has impacted all aspects of real estate development strategies, from site selection through the building process.

Gen Z has spurred tangible shifts in architectural design, development objectives and building typologies in the residential and commercial markets. In the panel, “Gen Z: Influencing the Real Estate Footprint,” the discussion stressed the successful redevelopments of industrial spaces to meet the dynamic needs of the new generation. The panelists touched upon some of their current redevelopment projects, with Citrix System’s conversion of a steel manufacturing facility in Raleigh, NC into office space as one notable example.

Most of the speakers found that both Gen Z and their predecessors value versatile and flexible workspace integrated with technology, but connectivity to people they know is key. “With Millennial and Gen Z [groups], they have certain expectations about the flexibility of the space. We need to ensure that environments are heavily-invested in technology,” Vartanian said. “[However], workplace experience and personal relationships are a differentiating factor. People are most happy to go to work when they have a friend there,” he added.

But even the most up-to-date technology has its limitations. The successful adoption of technology within a space is a lofty objective and presents a challenge often compounded by generational differences between employees. “Recently, JLL and a lot of companies have been pushed to be more technology-focused. [But] the older generations are not going to be as productive with the Cloud. Forcing everyone to use the same technology out there is going to hurt us in some ways,” Hurrell said.

Balancing planned future expansion with increasing densification is important, but it is only one piece of the puzzle. Ultimately, there is no one size-fits all approach when it comes to effectively designing a space through industrial conversions, according to Branca. “Real estate companies care about these efficiencies, but also might have a diverse set of motivations,” she said. The new generation is at the forefront of the evolving workplace ethos and is also contributing to a larger trend. “There’s a shift that’s happening, a reinvestment into experience services to serve people throughout the arc of their work days,” Branca added.

With industrial space at a premium throughout the country, it is unclear whether the conversion of industrial assets is more of a short-term strategy utilized by employers to attract young skilled members from the new generation, or whether it is an established trend that will continue to drive workplace design in the market. Vartanian believes that industrial conversion is a short-term strategy necessitated by the need to provide more workspace for the growing generation. “I do think it’s a fad,” he said. “There will be a shift in the types of buildings in the core urban environments. The reason why certain companies go to particular spaces is to densify within the square footage and rent.”

While workplace design strategies often go in and out of style, it’s possible that Gen Z’s impact on the real estate market is also uniquely determined by social and economic factors. Members of the up-and-coming demographic value stability very highly in the current climate, perhaps more so than their predecessors, according to Campbell. “We think the younger generations want these raw experiences with industrial spaces…but Gen Z wants more stability, given all the socioeconomic challenges happening,” she said. As GenZers become more prevalent in the workforce in relation to their Millennial counterparts, shifts in urban workplace design will continue to occur as the need for densification is balanced with the evolving desires of the emerging workforce.

And this balance is precisely what members of the commercial real estate community need to keep in mind. The preferences of the new generation do not merely replace—but rather build upon—previous workplace design templates, according to Jonah Stillman. The discussion around workplace design remains as dynamic and multifaceted as ever, and there are changes still yet to come. “This generation is about what has worked, and how to make it better through technology, and that’s more about evolution rather than evolution,” he said. “When we think about the workplace…we know that there’s a desire for prototyping, but there’s also high value in individual work and problem-solving…this is the challenge of how we think about the workplace differently.”