In the first week of April amid the COVID-19 pandemic, Washington, D.C., had an office occupancy rate of only 14%, according to Kastle Systems. D.C. residents and workers were under... Read More
This blog post references the white paper Office Demand and Remote Work; read the full paper here.
It’s way too soon to know how COVID-19 will shake up or revolutionize the commercial real estate industry. However, while stay-at-home orders are in place across the country, and office spaces sit unoccupied, it has emerged as a hot topic for professionals and business owners everywhere.
There is much speculation around what the ‘new normal’ for the workplace will look like. Most fundamentally at play is the question of which precautions businesses will have to implement to ensure the safe return of their staff to the office? What’s the appropriate number of people you can expect to share an office, and how far apart must their seats be? What percentage of the active workforce can (and should) continue to work from home both on an interim and longer-term basis?
With so many unknowns, organizations are less likely to want to sign the traditional 5-15 year office space leases that are typical in cities such as NYC. Well before the spread of COVID-19, some commercial real estate companies, such as SquareFoot, were thinking differently about the future of office space and negotiating a better way forward. In recent years landlords have started to pay attention to the needs of today’s clients, and their emphasis on short-term leases, and as a result have been increasingly more flexible when it comes to expectations.
As we start to emerge from the stay at home orders that are in place, flexible office space is going to be key for companies adapting to the changes brought about during the COVID-19 crisis. For example, many businesses were forced to lay off a significant number of employees and are left with unused office space and empty desks. Several flexible office space solutions aim to tackle new problems like that one. SquareFoot owns and operates one such solution called PivotDesk, which pairs up a host and a guest to share an office space. There’s no telling yet what the fallout will be from the spread of this highly contagious virus, but tenants have more options than they might realize to keep their bottom lines intact and themselves focused on running their businesses.
With a global shift in office workers reporting for duty from home, employees have had to quickly and seamlessly adjust their lifestyles to this new way of working. As we discuss reopening, every company will have to individually discuss how to best implement some of the lessons and advantages that emanated from their remote working practices. Some companies will inevitably determine that they don’t require office spaces at all, while others will rethink and reimagine what their offices should offer.
In a recent paper, Office Demand and Remote Work, I address how companies today can realistically reduce costs, encourage flexibility, and maintain the positive elements of office spaces of the past in the wake of embarking on a new era. Most notable to accept is that executives and senior members of staff for the most part have had the type of flexibility to work remotely for years. However they have retained their private offices and desktop setups throughout – and they are unlikely to look to give that up any time soon. Many administrative staff have also been working from home for several decades as a generous form of convenience to them and also a means of removing unnecessary business costs. However, these administrative employees tend to take up a relatively small percentage of total office space and their relocation to home has already been felt in office demand.
The most significant population of staffers that could push office demand into a redefined state are the ‘professional staff.’ That category includes employees such as engineers, legal professionals, scientists, and more, the people who are most likely to benefit from workplace flexibility. To make any measurable impact on office space demand, these staff members would have to not only be willing to permanently give up their desks, but also they’d be leading a revolution like we’ve never seen before. As much as some business owners have believed in and have encouraged hot desking policies or hoteling options, there’s no sign yet that people are finally going to welcome floating temporary seating as their desired permanent solution.
It may take some time until we truly know the influence that COVID-19 has had on standard operations. No matter how you cut it, though, flexibility is bound to be a crucial factor in getting the most out of commercial real estate negotiations. Smaller businesses have long struggled with long-term leases, leaving them often shut out from coveted spaces. We anticipate additional demand for private office spaces that also provide flexibility, as companies leave behind coworking offices. Companies will want to be able to maintain stringent cleaning regimes and a controlled focus of the number of employees in the office at one time, both of which are impossible in the current crop of coworking spaces.
Even though companies always look to reduce costs, and see real estate as a fertile area for action, recent history indicates that it’s extremely unlikely we’ll see a sizable reduction in the demand for office space. Unless executives are willing to give up their workspaces permanently, or businesses require their all-important “professionals” to take up shared workspaces, we won’t see a dramatic change in office space demand. Any shift we are likely to see will take place over a longer period of time, as leases expire and new tenants can opt to start over and work with landlords to accommodate their unique needs. And although there hasn’t been much action yet, the trend being described by planners and architects is a trend away from higher density open-plan space. All conversations about the future seem to include one subject: flexibility. Over the ensuing years, we’ll begin to see how the market adjusts to this reality. For right now, office demand will likely remain “business as usual” plus a newly heightened focus on flexible solutions.