I recently ran into some old friends at dinner, and they asked how the commercial real estate business is going. It is a natural and seemingly benign question that friends often ask when they haven’t seen one another in a while. However, it wasn’t the question that threw me. No, it was how sympathetically they asked it as if the office sector of the commercial real estate market had completely dried up!
Many people believe that the commercial real estate world, especially the office sector, died during Covid and isn’t rebounding. And why wouldn’t they think this given today’s news and surveys…
- A survey conducted by Deloitte said 76% of CEOs believe their businesses will require less space post-Covid
- One Gallup poll said that 45% of full-time employees want to work remotely post Covid, and
- A survey conducted by the National Association of Realtors® said 62% of respondents would consolidate their office space.
While the office market may be a little soft coming out of Covid, it is certainly not dead. It’s actually evolving! And frankly, it’s about time! The pandemic only accelerated existing trends in areas like remote working, e-commerce, and the use of technology.
Global companies have long known the value of remote work using technology to connect employees and customers worldwide. And while remote working will always be necessary for such connectivity, companies also know that 100% remote working is not conducive to creating and sustaining an organization’s culture and innovation for long-term success.
Synergy and creativity are enhanced when employees come together physically. With a “Hybrid Model” – a workplace model where employers rotate, usually in teams, who is in the office and who is working remotely – the best of both worlds can be had. Employees get to work remotely while employers leverage the mental stimulation created when employees collaborate in person. This model is likely here to stay. Employers will shift how they use the office, not eliminate it. As a result, there will be more collaboration and creative areas, more “hoteling”/touchdown areas, etc., to encourage innovation and socialization, something 7 out of 10 Gen Z workers desire, according to a survey by TalentLMS and BambooHR LLC.
We also see a migration to higher-quality workplaces in the office sector. Tenants are rethinking the use of their office spaces, and many are opting for buildings rich with amenities like touchless entries and elevators, on-site cafes, ground floor community areas, etc. Even the more subtle amenities like the increased use of indoor plants to improve air quality, ultraviolet technology, higher quality air handler systems, etc. Whether a new or re-invigorated building, Landlords with these amenities will reap the rewards of such investments.
The office sector is not dead; it is moving forward with a fresh outlook! And employers who embrace these shifts in the office workplace will benefit not only by retaining and engaging their existing workforce but by being more competitive in the war for talent to attract and hire top talent.