The fate of post-pandemic office space has been one of most discussed real estate topics of the past two years. One executive who has spent a great deal of time and energy contemplating whether the office has as good a future as past — as well as what it will take to bring companies and their people back to office buildings — is Gio Cordoves, western regional president of KBS.
Are companies returning to office buildings?
While the rate of return varies by industry, city and company size, employees are returning to the office, and many have already done so. In fact, a new analysis has a majority of the workforce returning to the office during first quarter 2022. Whether they offer a hybrid option or an in-person plan, firms have always needed and will continue to need office space to successfully maximize their own potential over the long term.
In large and dense cities like Chicago and San Francisco, where many people rely on public transportation, the return to office has been slower. On the flip side, led by earlier return to work protocols, many of the Sun Belt states have seen steady increases in office traffic.
The rate of office return has relied heavily on the tenant’s specific return to work policies, and the level of comfort employees feel about returning to work tends to vary by region. Although large tech, banking and insurance companies have been generally conservative about requiring employees to return to the office, they have increasingly returned to the workplace over the last two months. Barring another large pandemic setback there is a sense that the majority of workers will be back in the office within the next year.
What is bringing them back?
Seasoned, well-established professionals were able to function well working remotely, particularly with the use of available technology. However, younger employees have expressed less satisfaction working from home. They want to be in the office for the training, mentoring and developmental programs that can only be successfully applied in an in-person office environment.
There has also been a return of free lunches and snacks that employees had previously come to expect but lost during the pandemic. For many tenants, it’s been an effective way to help ease employees back into the office and creates natural opportunities to build camaraderie.
What have office operators done to facilitate a speedy return?
Since the pandemic, many office owners have implemented amenities that promote health and wellness such as plants and natural lighting, corporate gardens and outdoor amenities such as water features and landscaping. Inside buildings, upgraded HVAC systems that sanitize indoor air more effectively, configurations that allow for greater social distancing, and all of the protocols that have been encouraged during the pandemic to reduce viral transmission will continue to be in demand for the foreseeable future.
In addition, office users are looking for hospitality inspired amenities that offer convenience and pampering, such as concierge services and onsite gourmet dining options. Forbes has suggested the future of office will evolve to become more of a social club than a workplace — which makes sense as one of the things people miss most about the office is the socializing aspect. Additionally, spec suite programs that address the need for quick move-in-ready office space has been a success. Many of these suites are fully furnished ahead of securing a tenant to better align with what today’s tenants are demanding, including COVID-safe collaboration space and workspace configurations, leading-edge technology capabilities, and flexible design.
Are WeWork and other flexible office purveyors outperforming standard five-year leases at this stage?
No, we haven’t seen this be the case. Most players in the flexible office space are facing the same issues traditional office owners are. On a positive note, overall office leasing activity is increasing as new demand for office space rose to a 15-month high in August and is now just 13 percent below pre-COVID levels.
How do you expect the office market to change post-pandemic?
As was a growing trend pre-pandemic, more companies are utilizing their workspaces as talent recruitment and retention tools that will continue to fuel the need for office space. We haven’t seen many tenants making changes in the way they’re designing their office space, but there is an increased emphasis on outdoor space. This includes incorporating patios and rooftop decks when upgrading buildings.
Right now, it appears that tenants may eventually view the pandemic as a strange blip in the grand scheme of things, but the dependence on high-quality office is here to stay.