For almost a year, we have personally witnessed friends and colleagues sharing pictures of their working-from-home digs. At the onset of the pandemic, we would see shots of a laptop on a bistro table situated on patios, balconies or even poolside. By last summer, we noticed more people converting under-utilised areas of their homes to home offices. Now, after more than 10 months, these setups have become much more sophisticated – usually featuring a dedicated, L-shaped desk fully equipped with external monitors, lighting kits for video-conferencing, plants and other decorative desk items, along with co-ordinated wall decor that promotes hobbies, family members, and even a political viewpoint or two.
If you are like us, we are at our respective desks for at least 10 hours a day. So we like to ask: what does your Pandemic Paradise look like?
Jesting aside, how do these trends affect the future of the traditional office? Many headlines have quipped, predicted and espoused the past, present and future for traditional offices. Can there be any office real estate winners who will benefit from this pandemic? What will the offices market look like a year from now? How will covid-19 shape the environment in 2022 and beyond?
Many office landlords will tell you that the office building is far from dead. They avow that people inherently want to congregate and collaborate. In March 2020, Anthony Malkin, CEO of Empire State Realty Trust, said: “Since covid, we have only had people sign leases, we haven’t had anyone move out… In a post-covid-treatment, vaccine, herd-immunity world, everything’s going to go back to the way it was.”
It is safe to say that office operators have identified a progressively shrinking footprint in office space needs, due mostly to technology, for more than a decade. Law firms that used to have extensive law libraries and file rooms have been able to move a lot of that online. Collaborative work environments with ‘bullpens’ were replacing individual offices, hence reducing the footprint further. The question now is: how much has the pandemic shrunk office space needs going forward?
As office needs continue to evolve, office landlords have been using the pandemic as a time to spruce up their properties and renovate HVAC systems. With cleaner and newer technology becoming available, office landlords should be able to pass on these costs to their tenants so that employees feel ‘safer’ coming to the office every day. Or will they?
Landlords are listening to their tenants in trying to figure out ways to make them feel safer inside the office building
As a result, we hear that office landlords have been working with consultants on ways to improve elevators and elevator banks, enhance air purification, and add new anti-microbial surfaces as well as social distancing features. What was that about collaborative ‘bullpens’? Whether this means adding more express elevator banks, staggering in-office and out-of-office days, upgrading HVAC systems, or speeding up the elevator cars for fewer stops and fewer people occupying those small spaces, office landlords are listening to their tenants in trying to figure out ways to make them feel safer inside the office building.
According to a Reuters story, “It cost an average of $65.19 per square foot to lease space in one of Empire State Realty’s Manhattan buildings pre-covid-19, according to the company, compared with an average of $81.64 across Manhattan as of late May, according to US real estate firm CBRE Group Inc.”
What if employees are uncomfortable about coming into an office due to an underlying health issue that they or someone else in their household suffers? We have a rapidly aging society that is more vulnerable to the virus, and many employees might have a loved one at home who is more at risk. This causes employers to take pause, which translates into reducing space and having a hybrid work-from-home/in-office scenario.
Perhaps this could lead to the revival of the suburban office building, which has historically boasted more square footage per person and less elevator activity. Instead of working in a 50-storey skyscraper downtown, a company could opt to have a satellite office in a suburb in a three-story office building at a fraction of the current prevailing rates. Arguably, employees could opt to use the stairs in such building, rather than risk the close confines of an elevator. Not so much if you are having to walk up 50 flights of stairs. Think about some of the suburban office parks in your own communities – would you prefer to go to one of those offices or a building in the central business district?
For example, if Manhattan rents are approximately $65 per sq. ft for office space in the Empire State Building, a tenant could ostensibly have three office locations for only $45 per sq. ft – estimating about $10 per sq. ft in Stamford, Connecticut, $20 per sq. ft in Darien, Connecticut, and $15 per sq. ft in Long Island. This solution is not only more economical but also makes employees feel safer through not having to take public transportation into the city centre or attempt to distance themselves in a crowded elevator bank and elevators during rush hour. Employers can potentially lower their monthly rental payment while accommodating their employees.
Perhaps this could lead to the revival of the suburban office building, with more square footage per person and less elevator activity
As Jonathan Litt, CEO of Land & Buildings LLC, said: “We’re not putting the work-from-home genie back in the bottle.” Well said, Jon, and probably very true. It is safe to assume that there will always be a segment of the population that wants to work from home. This is not necessarily a bad thing, as the pandemic has proven that we can work from a myriad of home locations – bedrooms, home offices, garages, patios, even poolside – and still get things done.
Many firms on Wall Street used to rent space as ‘disaster recovery’ locations. With the pandemic forcing a WFH platform and employers having to ramp up technological solutions much faster than anticipated, our homes have become the new disaster recovery locations.
Another solution that we found while researching this piece was enterprise-quality phone booths, from suppliers such as Pillar, that resemble something from which a superhero might launch himself sporting a vibrant cape and all-too-revealing tights. Perhaps we are the superheroes of the future – able to obliterate deadly viruses with a single booth! Please do not mistake this witticism as criticism – we believe there are going to be more solutions like this to get people safely back into the office; this is just the tip of the iceberg. Here are some quotes from people that we obtained from the Pillar brochure:
On evolving office environments to assuage covid-19 concerns – “One trend that will continue to accelerate is the idea of having a healthy workplace. Pre-covid, we were just starting to see the forefront of the wellness and healthy workplace movement, and now I think that’s going to be an expectation.” – Margie Baran, senior vice-president of projects at JLL in Chicago.
On best practices for cleaning and sanitising phone booths – “When you talk about the pandemic/post-pandemic environment, clearly cleanability is a big deal. Solid surfaces that can be cleaned on a regular basis between users are critical.” – Russell Frees, president and CEO of Henricksen.
We have looked at the office landscape mostly from the tenant and landlord perspective – but what about the employee perspective? Now that everyone has proven they can work from just about anywhere, why stay in those high-tax draining states? You know who you are! What about companies looking for new employees or employees looking for new jobs? The past 10 months have proven that we are not geographically bound to jobs offered in the cities where we live. You might work in a compliance role in Dallas, Texas, but find a job opening for a firm in Portland, Oregon, that offers a WFH option – think about the number of opportunities that are out there to tap into a job market or talent pool that wasn’t readily available before.
There is no crystal ball that tells us what an office building will look like a decade from now. But if the present is any indication, we know that the office building will prevail in some form or another. These skyscrapers paint our various cities’ skylines and mark their identity – they are the fabric of our country, where some of the greatest products and innovations have occurred. We are not ready to throw in the towel just yet.
