Risk and opportunity will shape how we reinvent the workplace

While potential variants could change the status quo, as of this writing the COVID-19 pandemic is, thankfully, at a far more manageable stage in the U.S. and throughout much of the world. Businesses and public spaces have largely been open and accessible for some time, and life is starting to return —albeit slowly — to what we experienced before the outbreak.

But the pandemic sparked a transformation in how we work that seems here to stay. A mass adoption of remote working technology may have been spawned by the need to stop the spread of COVID, but once the practice was in wide use, many workers and some employers saw tremendous advantages not related to the health crisis. Working at home made childcare easier. Not having a daily commute saved money, reduced some environmental impact, and the time saved allowed for a better work-life balance. And many found working remotely provided less distraction and a more comfortable, productive working environment.

This sea change in work practices wasn’t all positive, of course. Beyond significant social and mental health issues for those who thrived being in the office, less-occupied buildings and office spaces created pressing operational, financial, insurance and legal issues for businesses and the cities they call home.

Several industry leaders discussed these issues and the risks and opportunities of workplace transformation during “Investing in Spaces & Building the Future,” an Executives’ Club of Chicago event held March 21 that included a panel discussion and related breakout sessions. Moderated by Eleanor Gorski, Chief Executive Officer of the Chicago Architecture Center, the panel discussion had a Chicago focus, but the challenges tackled are shared across most cities.

Gerald Chiddick, Midwest Regional Executive, Distribution & Regional Management at Zurich North America, was part of the panel and shared insights he gleaned from working through this extraordinary period in our history.

“If we learned anything over the course of the last couple of years, whether you are in the property development ranks, property management, retail, wholesale — you name the industry — where you thought you may have had all the risks figured out, a new risk emerged that none of us had figured out,” Chiddick said. “So, business continuity planning is a critical ongoing activity. It’s not a ‘one-and-done.’ It’s not something to put on the shelf. It’s something to hopefully make part of strategic and operational planning whether it be in the board room or leadership discussions you have within your firms, as well as your insurance brokers and carriers.”

Addressing an audience of many professionals whose businesses involve property or real estate, Chiddick summarized some of the challenges to risk assessment and insurance during this tumultuous time.

“What was interesting about this period during the pandemic, is we still had to insure the risks and the facilities and the buildings within your portfolios,” Chiddick explained, “even when and while — in many instances — they were closed or shuttered due to regulations or otherwise.”

“Now we’ve got to figure out, from an insurability perspective, how to insure the hybrid workplace; not just the remote worker specifically, but how we utilize those spaces during active and inactive times.”

“When assessing insurability, it’s one thing when buildings are actually occupied and you know what the rent rolls and occupancy rates as well as the utilization of the facilities look like. With those insights you can determine the insurability of the facility,” he continued. “It’s another thing when it’s vacant or being used for alternative purposes. New questions emerge. What loss trends from the vacant components can be attributed to prolonged vacancy, prolonged inactivity within facilities, or lack of utilization of some of the core components of the building? Plumbing, sprinkler systems…you name it.”

Chiddick also noted how, in some instances, regular testing of key assets in buildings was not conducted as they sat vacant, leading to certain breakdowns.

“So, where we saw at least a little bit of a drop-off in the liability component because of the lack of foot traffic [during closures] in many of our commercial facilities, we might have seen a slight uptick in some of the other property-related exposures during that time period,” he said. “Now, as we all try and come back, and re-engage and reclaim both our spaces and the city itself, we have to ensure that those components of our buildings, our facilities, are up to par…that they’re actually going to meet the mark for their intended purpose of use, even if you’re going to repurpose those buildings and innovate around them going forward.”

Repurposing and “reinventing” the workplace was a central part of the panel’s discussion. While many companies are embracing a hybrid work model (where employees work remotely for some part of their week and are on-site on other days), there are financial and operational imperatives in ensuring facilities are not under-utilized and under-occupied. And having a significant on-site workforce isn’t just important to businesses, but to cities where workday populations are essential to keeping local businesses afloat.

Another panelist, Dennis Vicchiarelli, Managing Director of Research and Strategy for commercial real estate company JLL (sponsor of the event), said that business and office occupancy continues to be a struggle. Specific to Chicago, he estimated, “We’ve got maybe 50 percent of the people downtown that we had pre-COVID. Maybe 60 percent on a good day. Monday and Friday, probably 25%, depending.”

But Vicchiarelli has seen some successful transitions that led to more workers coming back to the office, and he thinks the key to that success is simply understanding things have changed, and the workplace needs to change, too.

“It is [about] making investments in the amenities and trying to bring your office space up to speed…with a recognition people are not going to be there five days a week,” he said, explaining buildings and facilities with multi-purpose functionality make working on-site a lot more attractive.

And that “mixed use” approach applies not only to workplaces — where adding gyms, cafes, game rooms and other amenities can be a draw for current and prospective employees — but also to the cities where those businesses are located. Vicchiarelli said large blocks of just one type of property won’t cut it when it comes to cultivating a thriving downtown.

“We’ve found that the markets that are growing in major cities have a very high degree of mixed use. People don’t want to work in just a neighborhood of towers anymore.”

Panelist Anastasia Herasimovich, a Partner with the law firm Baker McKenzie LLP, cited an example where adding new amenities helped balance a big negative at one workplace: a lack of sunlight. An architectural firm occupying the lower levels of a high-rise in New York found that employees who had grown accustomed to brighter, warmer environments working at home were reluctant to return to the building. Some off-hours fun and childcare considerations helped turn the tide.

“They built a bowling alley, they built a playground, and then the employer hired nannies and a servicing person for the bowling alley, and 50% more people started to come [back to the office],” Herasimovich said.

Another panelist, Todd Heiser, Managing Director for architecture, design and planning firm Gensler in Chicago, raised an aligned social goal in prioritizing multi-purpose communal workplaces and cities.

“It [a central business district] has to be a vibrant, mixed-use community for everyone,” Heisler said. “That actually means embracing diversity, equity and inclusion…not just saying it. It means living it, and realizing our cities are for everyone.”

Chiddick added that meeting that goal requires more than workplace considerations; it demands opening up cities to more diversified business ownership.

“Bring more of the talent from businesses — women-owned and minority-owned — into the downtown central business district, so that people can see and work and live amongst a diverse group of individuals,” he said.

Chiddick added that attracting talent from a wider circle of potential employees will also help build that diversity. He pointed to the Zurich Apprenticeship Program as a successful example of how to accomplish that.

“We have an apprenticeship program, so people not only get an opportunity to engage with and learn about the insurance industry, but they can also collect a two- or a four-year degree in that process as well,” Chiddick said, “because we recognize how scary-expensive the collegiate education process has become — it’s still  not even an option due to the financial constraints for certain members of our society. Our ability to create diversified educational opportunities and really invest in the financial literacy of this next generation will then give rise to entrepreneurs who will create businesses that will fill the buildings we all have in our portfolios.”

Pictured above, left to right: Dennis Vicchiarelli, JLL; Gerald Chiddick, Zurich North America; Todd Heiser, Gensler; Anastasia Herasimovich, Baker McKenzie; and Eleanor Gorski, Chicago Architecture Center.