Subject Matter Expert: Maureen Ehrenberg, CRE®
The future of what hybrid work looks like is still
playing out with themes of flexibility, agility,
productivity and space reduction. What is clear
is that the pandemic created permanent shifts
in where work is done that is taking a toll on
both the office sector and central business
districts.
At the peak of the pandemic, 62% of all office
workers were working remotely. That
percentage has flipped back the other way.
According to WFH Research, 58% of workers
are now fully back in the office, while 29% are
working hybrid schedules and 13% are fully
work-from-home. In addition, 28% of all U.S.
workdays, on average, are spent working from
home. As the future of hybrid work continues to
unfold, the near-term focus is centering on
calibrating hybrid schedules and setting new
expectations for work that needs to be done in
person.
How many days are people in the office?
There is still some push-pull between employers and
employees on the required number of days in
person. Where that lands is going to depend
on a variety of factors, including the company
culture, the location of the office, the business
and the type of work that is being done.
Employers also are setting expectations
around the type of work that needs to be done
in the office, such as team meetings, training
and key project work.
Destination worthy locations
Employers recognize that they need to pull
people back to the office, which is creating a
bigger battle cry for offices to be “destination
worthy”. That shift is generating some exciting
new properties, such as the new JP Morgan
Chase Tower in New York City and Google’s
new Bay View headquarters in California.
These highly experiential properties allow
people to do different types of work throughout
the building, as well as being net zero carbon,
more automated and digital. Employers also
are curating spaces with amenities that
employees consider worth the commute to
come to the office.
According to BOMA International, property
managers are having to change the way they
work with tenants to facilitate those destination
worthy environments, such as coordinating
activities on higher occupancy days.
If a major occupier is bringing tenants back to
the office three days a week, the management,
for example, can arrange special events to
coincide with those days, such as bringing in
food trucks, hosting an art exhibit creating
patios and outdoor seating.
Battling obsolete office space
The discussion of WFH is not just about a job,
but it is increasingly tied to where people want
to live. Population shifts have resulted in a
resurgence in suburban living and demand for
suburban office properties. Combined, the shift
to hybrid work and migration trends away from
urban CBDs is contributing to a surplus of
vacant office space, and ultimately, a growing
inventory of obsolete office space. Those
buildings in the line of fire that are likely to be
most impacted are older B and C properties in
CBDs, particularly those in poor locations and
those that face costly capital projects for
repositioning and decarbonization
requirements.
It has never been more important for owners
and occupiers to be in lockstep with one
another. Tenants are looking hard at their
occupancy and utilization of space, their rent
costs, carbon footprint and their strategy for
return to office. Owners need to get as close as
possible to those tenants and have
conversations to figure out – together – how
they can work together to help pull people back
to the office. If a tenant is going to be giving up
space or subletting, owners need to know that
sooner rather than later. Owners also need to
know their local market better than anyone
else. Who is in the market? Where are shifts
happening in the market? What steps can be
taken to strengthen relationships with existing
tenants?
Tactically, owners need to act. Now is not the
time to sit back and wait and see how hybrid
work trends play out. If that property doesn’t
check the box in some critical way – location,
access, convenience, tenant amenities, or
even an amazing view – those owners need to
start thinking about alternative strategies.
There is a great opportunity for reuse of
obsolete office buildings with conversions to
residential, seniors housing, healthcare or
hotels. However, such conversions are
challenging for a variety of reasons ranging
from cost to zoning, and cities need to be
proactive and work with owners on new
solutions particularly in large cities where other
factors are also impacting building occupancy
and a decline in RTO.
