The Consequences for Offices of Artificial Intelligence

Midjourney / Antony Slumbers

Introduction

Making predictions is a mugs game, so they say. However, extrapolating out core trends, not fads, isn’t as precarious. Just as with #SpaceasaService, which I first wrote about over a decade ago, there are certain fundamental drivers of change which can only really end up in one direction. Timing might, often is, be a tricky nut to crack but certain inputs really do necessitate certain outputs. And so it is, I think, with the ongoing developments around Artificial intelligence.

Here we are going to look at what the key drivers of change are, and how they ‘will’ manifest themselves across the real estate industry, primarily focussing on the office market. My time focus is 4-7 years, the length of many office development projects. So we’re considering what might be towards the end of this decade.

To be clear, these drivers and consequences are what I believe will apply to the top end of the market. Maybe top 30%. In much of the market, change will come a lot slower, maybe even after complete obsolescence has set in. Of the offices and occupiers.

I am talking about the spaces and places leading companies, from start ups to multinationals, will want to occupy. Buildings that will support companies that are creating the future, that are leaning in to AI and other new technologies. Companies that are early adopters, to early majority. Companies that in 2030 will be where most are in 2040.

So let’s start with the key drivers that will impact the office market.

Key Drivers

1. AI-Enabled Decision Making:

Increasingly we will witness a democratisation of insights and decision-making processes. AI tools, often mediated through natural language interfaces, will provide data-driven insights to employees at all levels, not just top management. This will enable faster, more informed decisions across organisations and raise the potential for more innovative problem-solving as diverse perspectives are empowered by these AI driven insights. This may, nay should, lead to more agile and responsive organisational structures.

2. Automation of Routine Tasks:

AI will take over repetitive and some managerial functions, whilst freeing up, and augmenting, human workers to focus on more complex, creative, and strategic tasks (with an emphasis on those where humans retain primacy). This could lead to significant changes in job roles and required skill sets. There is great potential for increased productivity and efficiency in many business processes, as individuals and teams restructure their work to concentrate on where they truly can add value.

3. Enhanced Data Processing and Analytics:

We will be making more informed, real-time decisions. AI can process and analyse data much faster than humans (which is obvious) but more importantly AI can provide deeper insights and identify patterns that might be missed by human analysis. AI, or at least a major branch of AI, is all about prediction. Everywhere we should be able to raise the quantity, and dramatically lower the cost, of high quality predictions. This will both lead to more data-driven cultures within companies but also significantly raise the value of judgement. Machines are great at prediction - advanced humans likewise with judgement. Though note the caveat - advanced.

4. AI-Powered Collaboration Tools:

Now there is a huge market for them, a great deal of money and attention is being directed at developing improved, often AI powered, collaboration tools. Distributed, remote and hybrid working is only going to get easier, and therefore more effective. Anything done entirely remotely will be easy to distribute globally. Location will be meaningless for these tasks, though in practice most jobs will require meaningful human connection - after all few humans are so skilled that they alone can generate complete sets of value. And jobs that don’t require human connection will ultimately all be done by machines. AI will enable deep virtual connection and then it’ll be about ‘what else do we need’? One should assume that no-one needs to be located three feet apart: why might they want to is the key question?

5. Flattening of Organisational Hierarchies:

We’ll see a large reduction in traditional management layers, as AI takes over some traditional middle management functions like scheduling and performance monitoring. AI should enable more direct communication between top leadership and front-line employees and this could lead to more autonomous, self-managing teams. Ronald Coase wrote ‘The Nature of the Firm’ in 1937, and he focussed on ‘transition costs’, primarily:

• Costs of negotiating and drawing up contracts

• Costs of gathering information

• Costs of monitoring and enforcing agreements

All of these are bullseyes for AI, predictive and generative. If machines can do them, there is no requirement for human managers to do the same. Being in this middle zone is a very dangerous place to be. As it will be done away with, or at least hugely reduced in scale.

6. Reimagining of Business Processes:

The mechanism for point 5 above will be the ‘Unbundling and rebundling’ of work processes. AI will allow us to fundamentally rethink how work is done and value is created. In fact it it won’t be until we undertake this process that real value will be derived from AI. We need to stop iterating on the past, powered as it was by certain technologies, and turn our eyes towards redesigning work around what these new technologies enable. The direct analogy is the introduction of the electric engine which replaced steam power - great productivity gains didn’t manifest themselves until factories were fundamentally redesigned to take advantage of multitudes of standalone electric powered machines. This process took four decades - with AI it’s likely to take one at most. One has to assume and plan for rapid change on this front.

7. Continuous Learning Requirements:

There is going to be a huge need for upskilling and reskilling. AI is developing at such a pace that we all need to over index on continuous learning, with a very strong emphasis on adaptability. Currently organisations are not investing in nearly enough training. For every CEO proclaiming their companies AI initiatives only about a third of them are actually running the necessary training programs. Talk is cheap - training has to be taken seriously. The leading companies do, and this will result in significant competitive advantage.

8. Sustainability Imperatives:

This is already happening but the imperative will only intensify. As each year passes they’ll be an increased focus on energy efficiency and sustainable practices. Predictive AI should be a major influence here as it is very good at optimising resource use, reducing waste and energy consumption. This is a rapidly developing area and we ‘know’ what needs to be done, and largely how to do it. A growing area is generating and accessing renewable energy. Expect to see a lot of investment in energy infrastructure, particularly solar power married to battery storage. Self sufficient buildings has to be the north star being aimed at.

9. Evolving Employee Expectations:

We are changing. Always have of course, but it does seem that the global pandemic did act as a catalyst for many people. Demand for work-life balance and meaningful work environments has definitely grown since 2020.

Employees increasingly seek purposeful work and better integration of work and personal life. There’s a growing importance of company culture, values, and social responsibility and an expectation for more flexible work arrangements and personalised work experiences. Some say ‘wait for the next recession and all of this will disappear’ but that ‘feels’ unlikely. Adapting to this change in zeitgeist is a major requirement for the real estate industry.

Companies need to lead, but work happens within real estate.

10. Balancing Intangible and Tangible Business Aspects:

Not everything is going virtual. Yes much of modern business is focussed on intangibles but there still exists an awful lot of physicality. Life science and biotechnology space is very fashionable an area today, but there are many other areas where physicality is important. Healthcare, advanced manufacturing, aerospace and defence, the creative industries, education, training, personalised hospitality. Key is understanding which industries have these ‘special’ characteristics that demand very bespoke space. Their requirements are particular but at least they do actually ‘need’ office space.

11. Changing Economic Models:

And finally they’ll be a strong driver of change as work becomes ever more atomised. We’re already seeing larger companies make increasing use of ‘contingent’ workers, and a thinning out of full time, fully integrated workers. Tech companies have laid off large numbers over the last few years, with seemingly no impact on productivity and instead rising share prices. Sure they over hired during Covid but nevertheless it does seem like less people are required to maintain a steady state. As early adopters of AI perhaps we are seeing in tech companies the consequences of individually more productive individuals. One simply needs less people when each person operates at 5-10X what their peers did a few years ago.

Consequences - Anticipated Changes and Developments

All of the above is very likely to occur. It will evolve over time, and some companies will operate like this much faster than others, but betting against it happening is surely high risk.

So what will be the consequences of Artificial intelligence for the real estate industry, especially those dealing with still the sectors largest asset class, offices. What will be the nature of demand in the years ahead?

1. Shift to Flexible, Adaptive Spaces:

We simply do not know how space is going to be used in 3, 5, 10 years time. 10 years equates to 100X more powerful computers. How do we design for that? So much depends what becomes possible. People will use space based on that, and that is ….. just guesswork.

So we will definitely need to create spaces that that maximally flexible and adaptable. Reconfigurable with modular furniture and movable partitions. Spaces that can easily transform from individual work areas to collaborative zones. Where exceptional integration of technology allows for quick reconfiguration of digital and physical resources. We will of course be using AI to assist in all this space optimisation, that will create new configurations having learnt from usage patterns.

2. Increase in Collaborative Areas:

Much more space will be dedicated to teamwork and cross-functional collaboration. Which will require a variety of meeting spaces catering to different group sizes and work styles, with integrated technology to support both in-person and virtual collaboration. Informal gathering spaces to encourage spontaneous interactions and idea sharing will be a top focus. Most of the space will be the ‘water cooler’. Every space will be designed to catalyse ‘Human’ skills and capabilities. We are in the office to do what the machines, the AI, cannot.

3. Emphasis on Learning and Development Spaces:

A key ‘want’ in future offices will be exceptional areas dedicated to continuous skill development. In-house learning centres or corporate universities will become common. These will integrate AI-powered learning tools and simulators, and will be flexible spaces that can accommodate various training formats (lectures, workshops, hands-on practice). In many ways our places of work will become places of learning.

4. Enhanced Technology Infrastructure:

Our buildings are going to incorporate a lot of AI. We are moving to a world of intelligent, self monitoring and self optimising assets. All of which requires a lot of data, transmitted at very low latency. So every building will need advanced digital infrastructure to support all of this. Robust, high-speed networks capable of handling increased data loads. Edge computing, where analytics and AI inference (the running of AI applications) is done locally on devices incorporated into the buildings fabric, or attached to it, is likely to become a big thing. For a variety of reasons: Reduced latency, improved privacy, bandwidth savings, reliability and energy efficiency. All of this requires a high spec building.

5. Integration of AI-Human Interaction Spaces:

Our buildings will have dedicated areas for employees to work with AI systems that are designed for privacy and focus. With specialised equipment and interfaces for optimal AI-human collaboration, including immersive AI environments using AR/VR technologies. We’ll see the emergence of new spatial design principles for these AI-human workspaces. All of this will be a key reason to come to the office - to use equipment not available anywhere else.

6. Data-Centric Infrastructure:

Despite, or indeed because of, the focus on human-centricity, we’ll become far more data centric. We might even start to see the Integration of data centres within office developments. Buildings will be designed with enhanced cooling and power capabilities to support data infrastructure. There is potential for data centre heat to be repurposed for office heating, improving energy efficiency and this may lead to new approaches in building design that treat data infrastructure as a core component.

7. Reduction in Traditional Management Spaces:

As discussed above middle management is set to diminish so we will need less offices for this layer. Former executive spaces will be converted into collaborative or multi-purpose areas. With flatter organisational structures companies have the potential to design more open, democratic workplaces.

8. Decentralised Decision-Making Hubs:

Specialised and distributed spaces equipped with AI tools for decision support will emerge. Large companies may have their own but smaller companies will rent them as needed. These will take the form of 'war rooms' or 'decision theatres' with advanced data visualisation capabilities and integrated AI assistants to facilitate rapid, data-driven decision making.

These spaces will be designed to support both in-person and remote participation in decision processes. AI is really good at ‘modelling’ and ‘simulating’ and over time we’ll all become conversant with how to run these operations, but they will require bespoke setup and operational support.

9. Reimagined Workflow Layouts:

Offices will be redesigned reflecting the new realities of unbundled and rebundled work processes. Spaces are likely to be organised around work functions rather than traditional departments with the creation of 'neighbourhoods' for different work modes (focus, collaboration, learning, socialising). As happens today but more so. We will see the integration of AI-powered workflow management systems into the physical environment. Examples being smart meeting rooms, intelligent desks and workstations, AI-assisted collaboration spaces, automated asset tracking, personalised productivity environments and Intelligent wayfinding. Overall, layouts will become much more fluid but much more intelligent.

10. Focus on Employee Experience and Wellbeing:

Enabling people to be as happy, healthy and productive as they are capable of being will be the primary aim of any place of work. What this means is #SpaceasaService - spaces that provide each individual with the best possible environment to do whatever it is that they need to do, whenever they need to do it. Personalised, optimised, customised. Offices are likely to be designed more like hospitality spaces, prioritising user experience.

11. Sustainability-Driven Design:

Obviously sustainability is a non negotiable for offices of the future. Fortunately AI-powered systems will be massively helpful in this area, as they are excellent for predictive management and optimisation, as well as interacting with internal and external data sources. The potential for AI to manage complex sustainability initiatives across entire buildings or campuses is great. We know what needs to be done here and AI is very much our friend in getting it done.

12. Hybrid Work Support:

Everywhere spaces will be designed to integrate in-person and remote workers seamlessly. We will create 'Zoom rooms' and other tech-enabled spaces for virtual collaboration, and provide hot-desking and hoteling systems to manage flexible office usage. AI-powered scheduling and space management tools will be widely adopted and we’ll have enhanced audio-visual technology throughout the office to support impromptu virtual connections. As this form of working becomes deeply embedded we’ll use AI-driven tools to maintain company culture and employee engagement. We’ll spend years thinking about hybrid work but eventually it’ll just become ….. work.

13. Evolution of Urban Office Hubs:

We’re going to see a lot of the transformation of traditional office buildings into mixed-use spaces and the integration of residential, retail, and recreational facilities within office complexes. Some exist already but 'vertical villages' in urban skyscrapers will become commonplace. As will the repurposing of excess office space for other uses (e.g., vertical farming, educational facilities, sports venues, whatever we can imagine).

There is great potential for AI to optimise space usage and transitions between these different functions. This will start to strongly influence urban planning and zoning/planning regulations, leading to much more integrated city designs. CBDs will die off (with very few exceptions) as we gravitate towards more decentralised, polycentric urban development. AI will be at the heart of how we redesign our cities, but the guiding principle will be human centricity.

14. Rise of Mixed-Use Developments:

Everywhere we’ll be integrating office, residential, retail, and recreational facilities with a view to creating self-contained ecosystems that support diverse needs of workers and residents. This blending of work and living spaces to support changing lifestyle preferences will utilise AI for community management and service optimisation as these will be complex environments. There is potential for new types of leasing or ownership models in these mixed-use developments and this may lead to the emergence of new property categories that defy traditional classifications.

15. Location Strategy Shifts:

But where will we work. Yes, still in our newly forming poly centric major cities, but also in areas with strong AI talent pools and research connections. Traditional CBDs will have to compete with these emerging tech hubs or university adjacent areas. At a national level companies will give consideration to locations with advantageous AI and data regulations. There will be a balancing of physical accessibility with digital connectivity in location decisions. All of this may lead to the emergence of new tier-2 city hotspots with good quality of life and strong tech ecosystems and could result in a redistribution of office demand across wider geographic areas. Anywhere that can fulfil the technical and talent requirements, and is a ‘nice place to be’, will thrive. Agglomeration remains important but ultimately the internet is the master agglomerator. We’ll have more optionality and qualitative factors will become increasingly important.

16. Security and Privacy Considerations:

The more AI mediated our world becomes the more vital will be the implementation of advanced cybersecurity measures. Spaces that are designed to ensure privacy for confidential AI-human interactions will be at a premium. There will be pervasive integration of physical security measures with AI-driven surveillance and access control systems. It is likely we’ll see the emergence of new standards and certifications for AI-secure office spaces

17. Globalisation of Workforce:

Today the era of globalisation is receding but this’ll be short lived. Office spaces will need to facilitate international collaborations and virtual team management. The creation of 'global collaboration hubs' with advanced communication technologies and that have 'follow-the-sun' work models will impact on current office usage patterns. Particularly in major cities, where multinationals tend to congregate, offices will become more 24 hour. A 15 minute City, with a 24 hour lifestyle is rather wonderfully local and global at the same time.

Conclusion

The future of the office is a fascinating paradox. As AI automates routine tasks and reshapes traditional work patterns, it simultaneously amplifies the need for spaces that prioritise human connection, creativity, and well-being.

The offices that will thrive in this new era won’t simply be vessels for technology; they'll be vibrant ecosystems designed to cultivate uniquely human capabilities. They will be flexible, adaptable, and deeply integrated with AI, yet always centred around the needs and experiences of their human occupants.

This transformation represents both a challenge and an unprecedented opportunity for the real estate industry. By embracing AI not as a replacement for human-centric design, but as a powerful tool to enhance it, we can create workspaces that are not only more efficient and sustainable, but also more inspiring, engaging, and ultimately, more human.

And, I may add, more valuable.

Agree? Disagree? What have I missed? What have I got wrong? Let me know in the comments.

And thanks for getting this far!

Antony