The Post-Pandemic Office

The post-pandemic office was a hot topic among real estate and business reporters toward the end of 2020. Many predicted a hybrid model that combines remote and on-site work. Does that model square with what office tenants are telling brokers? According to several SIOR experts, the answer is “yes.” They expect that despite some consolidation and variations across industries and geographies, companies will still want office space, even as flexible working arrangements for employees gain traction.

BENEFITS OF ON-SITE WORK

According to JLL’s latest “Human Experience” report, published in mid-November 2020, employees appreciate the flexibility of remote work, but they “still retain a strong affinity for the office, especially as it relates to providing a sense of community and belonging—where remote work has led to gaps in supporting collaboration, leadership and managerial competencies.”

These findings come as no surprise to James Mulhall, SIOR, managing director of Murphy Mulhall in Dublin, Ireland. He contends that after the early stages of the pandemic, productivity waned as employees started missing in-person interactions and experiencing reductions in mental health. With remote work, “you’re not learning and you’re not helping your colleagues,” he says. “That piece has been really difficult when you put yourself in a room five days a week away from the office.”

Mulhall adds that we’re creatures of habit: “We have been programmed for the vast majority of our lives on Monday to Friday to get out of bed, go somewhere, do something, and then come home in the evening time.” Once vaccinations are readily available, he believes that “we’ll go back to being those creatures of habit because humans crave structure.”

The “sense of community and belonging” mentioned in the JLL survey should resonate with Street Jones, SIOR, partner at Rich Commercial Realty in Raleigh, N.C. In his opinion, “all industries will have a harder time building a company culture when employees do not have the opportunity to interact with one another.”

A further downside of remote work is the interference with “the transformation of institutional knowledge,” says Frank Martin, SIOR, senior associate broker at Hall Associates Inc. in Roanoke, Vir. His definition of institutional knowledge encompasses mentoring and innovation, which, as he notes, are more easily attained through on-site interactions than through Zoom.

Even practical considerations play a role in the survival of the office. Te-Ping Chen of the Wall Street Journal reported in December that some employees who have returned to their offices “say they are thrilled to be reunited with co-workers—as well as previously underappreciated staples of cubicle life, such as abundant Post-its, three-hole punches and other accoutrements.” And Eric Northbrook, SIOR, managing director/partner at Voit Real Estate Services / CORFAC International in La Jolla, Calif., observes that in many cases, the internet connections in the office are far better than those at home.

DRAWBACKS

Even though there are clear benefits to brick-and-mortar offices, there are two strong arguments against them: with remote work, employers can save on rent and employees can save on commuting time. “Office space is expensive,” says Northbrook, noting that it is typically a company’s second highest cost after salaries. As for employee attitudes toward commuting, The Economist sums those up in a Sept. 12 article on the future of work: “Most people hate the hassle and expense of commuting, which eats up over four hours a week for the average American worker.”

Before the pandemic, many companies accepted these drawbacks as part of the status quo. But COVID-19 prompted reevaluations of policies. Respondents to a CoreNet Global survey published in December projected that in the future, employees of their companies would spend nearly an equal amount of time at home and at the office. More than 80% of the respondents also reported that their offices will be used as places for “collaboration and teamwork, as opposed to individual work.”

These findings align with what Mulhall envisions for the future: “blend and blast” arrangements. With blend and blast, employees work partly from home, but they come into the office on certain days for a blast of hours, which could be 7-3 or 11-6 rather than 9-5.

Such hybrid arrangements represent a compromise of sorts. They support collaboration, give employees more flexibility, cut down on commuting time, and reduce space needs and associated rent expenses. For these reasons, they are an attractive choice for the many companies that wish to attain a combination of savings, productivity, and employee satisfaction.

SPACE OF THE FUTURE

Although it’s clear that the need for offices will outlast the pandemic, it’s equally clear that offices of the future will be different in size and layout. “We will see more companies rightsizing their space to become more efficient, as we saw in 2009 and 2010,” predicts Jones. David Mitchell, SIOR, principal, Coldwell Banker Commercial CBS in Billings, Mont., expects smaller footprints, but believes that certain elements of pre-pandemic environments—such as reception areas, lobbies, executive offices, conference rooms, and auditoriums—will persist. He also believes that air quality and sanitation will become paramount concerns, leading to wide adoption of better ventilation and “touchless” technologies.

Density is another concern. Martin forecasts that “people are going to be mindful of at least having the opportunity to create distance in an office environment, should they need to.” In his view, tenants will seek to address requirements for social distancing through reconfiguration rather than through expansion. “Nobody is considering a larger footprint now,” he says.

Outdoor space can complement reconfiguration in enabling social distancing. Mulhall anticipates that tenants will take advantage of heated outdoor spaces, including canopies, courtyards, and rooftops.

VARIABLES

It’s difficult to assess supply and demand for office space without taking two intertwined variables into consideration: the vaccine rollout and the state of the economy. Vaccinations will reduce the need for social distancing, which will, in turn, prompt many businesses to reopen or rehire furloughed employees, promoting economic recovery.

Despite these unknowns, it’s safe to assume that offices of the future will be different post-pandemic and that many companies will adopt the hybrid model of work. Exactly what form the model takes and how quickly it takes root are fascinating topics that lend themselves to lively discussion—ideally, to take place around the water cooler.

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CONTRIBUTING MEMBERS

Street Jones, SIOR

Frank Martin III, SIOR

David Mitchell, SIOR

James Mulhall, SIOR

Eric Northbrook, SIOR