If everyone is working from home, why is commercial office space booming? | gene brands
MAll people loved working from home during the pandemic. They could spend more time with their families, adopt more pets, enjoy the magic of delivery services, consume Netflix, swap their suits for sweats, and even start an unprecedented number of businesses. All of these reasons – and many others – are responsible for why so many workers want to keep doing the same things, even as we try to put Covid in the rear-view mirror.
For those employees, here’s a warning: prepare for reality. Employers plan to have you back in the office.
Why else would Facebook lease another 300,000 square feet of New York City office space to add to the 3 million square feet already occupied? Why would Google spend $2.1 billion on a Manhattan office building and expand its “sprawling campus” in the city to house its 12,000+ employees? These are tech companies that run their businesses on the cloud… so why expand offices?
And with CRBE tracking things like this, why would Manhattan’s commercial real estate market “recover” and report that leasing activity was up 100% year over year on March 31? “We just hit 95% occupancy, which is the highest occupancy rate in the history of the building,” enthused a New York landlord.
This isn’t just a New York City thing, either.
In Charleston, South Carolina, commercial vacancy rates are below 2% and nearly 10 million square feet of industrial space is under construction. In Jacksonville, Fla., 2021 was a “great year” for commercial real estate investors, with all product types seeing increases in market rents, occupancy and buyer interest. Northwest Arkansas commercial real estate has its lowest vacancy rate since 2005. Philadelphia, Baltimore, Santa Clara and Chicago are seeing a post-pandemic “boom” in mixed-use commercial and residential real estate under development. Developers in Iowa say industrial space “can’t be built fast enough.” Office vacancies continue to decline in San Diego, Los Angeles and Orange County, California.
If everyone is “working from home” – as we keep hearing in the media – why is the commercial office property market booming? Yes, thanks to all these Amazon orders, there is a greater demand for stocking. But it’s also because of something else: not everyone will be working from home in the coming months. You come back to the office.
Sure, the big companies are still slow to bring their employees back. Larger organizations from Goldman Sachs to KPMG – concerned about poor PR and possible lawsuits – are tentatively allowing employees to make their own arrangements. But that’s changing fast. More than half of business leaders want their employees to be back in the office five days a week, according to a new Microsoft study. Even GenZ members see remote working negatively!
So will these workers return? You will have no choice.
We know that many employees are reluctant to return to the office. Just last week, a study found that more than half of Apple’s workforce would like to quit their job because they prefer to work from home. Other studies — like this one and this one — have shown that workers overwhelmingly prefer to continue working from home rather than commute. Who can blame them?
But as much as employees want to work from home full-time, that’s just not going to happen. The reality is that workers in the country’s small businesses – which employ about half our workforce – have been back in the office for some time. When I visit my customers – almost all of them are small to medium-sized companies – their employees are sitting at their desks. If you don’t believe me, drive through the suburbs of your city and look at the parking lots.
There is no question that work-from-home regulations are a key advantage that companies must offer today. My best clients are rethinking their work culture and doing their best to offer their employees as much flexibility as possible. But there will be a limit. I don’t know of anyone who works entirely virtually and very, very few who allow their employees to work remotely for more than two days a week.
That’s because employers know that real work gets done when teams can come together, face to face and collaborate, innovate and, yes, even connect. They also know that working from home can be difficult for some, leads to loneliness and depression for others, and also offers opportunities to avoid the work they are actually being paid to do instead of running their side jobs.
Working from home is here to stay. But, judging from what we’re seeing in commercial real estate, companies are expanding their offices rather than giving them up. Many employers are doing their best to support their employees when they return. But in the end that’s the deal. And business is done in the workplace, which means stepping into the office — at least most of the time — is a reality workers must face.