Written by: Jenn Allen
It has been almost a full year since the country went into a state of lockdown and declared a national emergency for the COVID-19 pandemic. Work from home orders started across the country in March 2020 and companies scrambled to adjust to an entirely remote workforce. Some companies saw unprecedented success as the economy shifted, while others suffered and will not recover after the pandemic is over.
2020 was undeniably a challenging year, but we also learned some important lessons from the pandemic that will stick around long after the vaccine is widely available. Here are some commercial real estate trends for 2021:
Remote work is here to stay, in some capacity. Prior to the pandemic, remote work was already on the rise, with 43% of the workforce working from home in some capacity. Now, after several months of mandated remote work, some employers are reporting that they are not seeing the drop in productivity that was expected. In fact, 83% of employers in one poll reported that the shift to remote work has been successful for their company. Another study estimates that at least 56% of current non-self-employed roles can be performed remotely, and it is anticipated more companies will make this a permanent option the longer the pandemic continues. Estimates indicate that we will see 25-30% of the workforce working from home multiple days per week by the end of 2021.
Companies are more spread out than ever. With increased remote staffing, many companies have re-evaluated their space needs in 2020 and 2021 and scaled-down their headquarters. Some even eliminated them altogether for a fully remote workforce. Large cities like Manhattan are seeing record available subleases – 18.6M SF, the highest this century. Not all big companies are taking this approach, however – some larger tech firms like Salesforce are moving forward with plans for new office space in anticipation that their employees will prefer the perks of their new office space to work from home. Other trends that we are seeing include decentralizing main headquarters in favor of a “hub and spoke” approach where a smaller headquarters supports numerous satellite offices that are more accessible by a wider-spread workforce. Smaller offices offer flexibility for employees, ensuring that no one is too far from an office space. As a result, 87% of real estate executives are reporting that they will be re-evaluating their portfolio and looking to include more satellite office space. Employees have also started moving away from packed city centers in favor of more room to breathe and cheaper rent. Employers too saw the benefit of not being geographically limited by hiring outside of their region to reach more talented applicants.
Tenant preferences for space have changed. Tenants operating in-person or pursuing new space for the return of their employees are reportedly seeking more flexibility in their office space. The open office trend seems to be rolling back in favor of more separation, privacy, and safety. Companies are looking for buildings that offer comprehensive cleaning and safety protocols and emphasize indoor air quality. Instead of seeking space that will support 100% of their staff in-person at once, tenants are opting for fewer physical desks and “flex space” to accommodate events and shared desk space.
Some changes seem permanent, others will slowly shift back.
Currently, the number of subleases available across the country are as high in some areas as they were during the Great Recession in 2009. While it is likely that some companies will use this time as an opportunity to perfect their remote work culture and commit to a fully remote workforce, we can expect that most companies will develop a return-to-work plan that brings their employees back to the office sometime late 2021/early 2022. The amount of available office space will continue to near record-highs for the next several months, but the rollout of the vaccine means that employers will be eagerly planning a return to office – in some capacity – for the end of the year. Commercial firms are reporting that while their current tenants are operating at an average of 6-20% total in-person capacity, they anticipate more tenants returning this year. Some report that companies are starting with a “staggered shifts” approach that allows employees more elbow room and time to work safely at their desks without having a full office. Buildings are working hard to implement new safety and cleaning protocols to minimize viral spread and build trust with their tenants to return to work.
While this pandemic has taught us a lot about the adaptability of companies and potential for remote work, we still anticipate that a large portion of the workforce will return to the office later this year. Tenants may opt for more flexible space to allow them to adapt to whatever comes next, but we know for sure that companies still place great value in face-to-face interactions and that we can expect the commercial real estate market to bounce back in 2022.
If you want to know more about how the era of return-to-work will affect your company or portfolio, contact us at email@example.com.