What Will Happen to Office Spaces Now? – Lee Chandler

Due to the pandemic, companies must reimagine ways to support productive, safe, and enjoyable jobs for their employees.

In 4Q19, Wells Fargo & Co. moved part of their New York City team from their midtown location to a brand-new building in an up and coming neighborhood, Hudson Yards. Wells Fargo purchased a half million square feet of office space at 30 Hudson Yards to serve as headquarters for its Corporate & Investment Banking business. The recently appointed CEO, Charles Scharf, also opted to follow the innovative and forward-thinking open floor plan design to “help break down barriers between managers and team members”, as said on Wells Fargo’s website.

 

Months later, the coronavirus pandemic hit, forcing Wells Fargo and millions of other companies to send their employees home and have them work remotely. Now, they are questioning their next steps and whether they should allow their employees to come back to offices and if so, when.

 

CBRE Group, Inc., a commercial real estate services and investment firm, conducted research of 126 senior-level global real estate executives to determine how the COVID-19 pandemic will change the location, design, and use of office space. What did they conclude?

 

  1. Flexible work is to be expected: 70% of respondents indicated that a portion of their workforce will be allowed to work remotely full-time, while 61% of respondents indicated that all employees will be allowed to work outside the office at least part-time.

 

  1. The physical office location will remain important: 41% of respondents said the importance of the office will only decrease slightly and 38% said it will remain as important, if not more.
  2. Cyclical portfolio adjustments are under pursuit: More than 60% of respondents are pursuing lease renewals and more than half have relocation plans on hold. More than 85% are optimizing their portfolios and more than 75% have expansion plans on hold or canceled.
  3. Long-term strategies are under consideration:70% are confident in setting long-term real estate strategies even amid the pandemic; fewer than one in 10 companies are considering leaving high-density urban cores; one-quarter are exploring suburban satellite strategies. 73% of respondents expect flexible office space will play some role in future strategy.
  4. The workplace is quickly changing:Most respondents indicated workplace transformation is still trending away from dedicated private space and toward shared collaborative space. This is critical for workplace efficiency and satisfying a more hybrid workforce (in-office and remote working) but there is some uncertainty given the health and safety impacts of COVID-19.

 

In summary, CBRE’s survey reveals a blend of cautious optimism with pragmatic concerns. Executives recognize that reopening workplaces during an active pandemic is an uncertain endeavor. After rapidly mobilizing and closing their offices, global corporate real estate executives, in close coordination with company leadership, have risen to the challenge of cautiously beginning the reopening process with strict health and safety protocols.

 

In addition, in a recent study on office real estate, UBS predicts some industries are likely to return sooner than others. Technology, securities trading, and government-oriented operations are likely making a quicker comeback while industries in which employees already spent time out of office such as consulting, accounting, real estate, and sales-based organizations are likely to return slowly, and some not at all.

 

The rates of returning are also heavily impacted on geography. Densely populated cities, once the hotbed of office real estate, pose challenges of crowded commutes and increased exposure to people within buildings. Suburban office spaces, on the other hand, tend to be significantly less expensive while more accessible and spacious. It is very possible that the suburban market will see a total revitalization in the new age of office real estate.

 

The only legitimate certainty is that landlords, tenants, and investors all across the board will experience changes. Some seemingly indestructible sectors may be set back significantly, while new suburban markets may rise to the top.

 

by Jenna Rubenchik on July 17, 2020

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