Global office markets: Elon Musk, Twitter and shifting workplace dynamics
What the early days of Elon Musk’s time at the social media giant tell us about workstyles, workplace and future office demand.
5 minutes to read
When the world’s richest man makes a statement, the world tends to listen. When the world’s richest man buys a platform which depends on making frequent reverberating statements, the world seems to have little choice but to listen.
So it is that, following Elon Musk’s $44bn acquisition of Twitter, the debate about flexible work and the future role of offices has been reignited with views far exceeding the platforms 280-character restriction.
Mr Musk’s stance has been as consistent as it has been controversial. Back in late May, in his capacity as CEO of Tesla, he mandated a strict return-to-office policy requiring a minimum of forty hours in the office per week and suggesting anything else was ‘phoning it in’.
Soon after he gave those who were designated as remote workers, but could not relocate to be in the office for the required time, until the end of September to move or take severance.
This pattern repeated itself in November following the Twitter acquisition. Mr Musk instantly reversed the company’s permanent ‘work from anywhere’ arrangement, with any exceptions requiring his personal approval.
He restated the Tesla mantra of requiring a minimum of 40 hours per week in the office, whilst cancelling the companywide monthly recurring ‘day of rest’ introduced during the pandemic.
He also reduced headcount, with Twitter laying off about half of its workforce in the first week of November as well as releasing 4,400 of the 5,500 contract workers previously utilised. Furthermore, some 1,200 additional employees resigned after being set a deadline by which they’d have to decide to stay or leave.
Future of the office
What do recent events at Twitter tell us about the wider occupational landscape?
First, business transformation pressures are increasing, even amongst the doyens of the tech sector. Coinciding with the purchase of Twitter have been regular news feeds highlighting the restructuring and repositioning plans of household names following significant market re-evaluations of the tech sector.
For example, Meta (previously Facebook) is under pressure from falling revenues and the bets it has placed on the growth of the Metaverse. This has implications for real estate with the company making a $2bn provision to enable the exit from long-term lease commitments and the closure of some offices. This perhaps signals a more lasting changing of the guard.
Our first edition of (Y)OUR SPACE, published back in 2018, made the point that the tech titans had become important bell-weathers, setting the tone of global office markets.
Over the longer-term, new leading lights may emerge – perhaps the burgeoning life sciences and medtech sector – and bring with them new orthodoxies at a workplace, portfolio and market level.
Second, as these transformation pressures play out, a new tension between employers and employees emerges which will alter global labour market conditions.
Whether it is via the great resignation, (not so) quiet quitting, business leaders cutting back on headcount growth projections or implementing large scale redundancies (since the beginning of November alone, Twitter, Meta, and most recently Amazon have announced 25,000 redundancies collectively) labour markets which seemingly defied gravity during the pandemic are coming under real pressure. This will bring a shift to the power relationship between employer and employee as job insecurity increases.
Office occupancy set to rise
Third, critically, we are now getting to the sharper end of the discussion around future workstyles and the role of the office.
Mr Musk’s position is extreme relative to other business leaders. Few have been prepared to mandate such strict terms on the return to office. Yet as economic conditions remain challenging and labour markets become pressurised some may be encouraged to issue bolder return to office mandates.
But even if more flexible forms of work are accepted by business leaders, wanting hybrid and delivering effective hybrid are very different things.
Bringing order to organisations where people have choice in the where and when of work is a huge challenge and one that might well require levels of investment in technology and support systems that are difficult to secure, or levels of change management that are difficult to sustain, against the challenging economic backdrop.
We therefore anticipate many occupiers moving swiftly to an office first stance and a steady dilution of the shift towards hybrid. This is not to argue against more flexible workstyles – the genie is firmly out of that bottle – but instead to suggest that the pendulum will not swing as far as anticipated a year ago and that work will be more office based than not for the large majority.
Accordingly, office occupancy rates will shift steadily upwards from their current global rates of circa 40% and back towards pre-pandemic levels of around 65%.
This has two implications for global office markets:
- First, occupiers will not attack space held within their portfolios with the gusto perhaps originally foreseen.
- Second, occupiers will focus on reconfiguring and repurposing the space they hold to support productivity, bolster collaboration, galvanise culture and better align to prevailing workstyles.
This will continue occupiers on the well-trodden path towards quality but at a time when economic conditions are bringing downward pressure on the market delivery of quality office supply. Expect, therefore, to see occupiers seeking quality solutions further ahead of lease event and a growing preparedness to pre-commit to those solutions. That, of course, will be music to the ears of many a developer around the world.
Read more or get in contact: Lee Elliott, commercial research
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