Office Space
As COVID-19 shapes our “new normal,” it presents both challenges and opportunities for tenants and landlords in commercial real estate. As we navigate this redefined landscape along with you, we’re sharing insight on the outlook for manufacturing space, office space, shopping centers and other commercial properties. By understanding the forces at work and at play, keeping an open mind, and focusing efforts on growth sectors, commercial real estate can continue to thrive. This series of articles explores issues for tenants and landlords in the three asset classes – industrial, office and retail – that Flaum Management Company Inc., brokers.
“I guess I’ve been working so hard, I forgot what it’s like to be hardly working,” says Michael Scott in The Office – a sitcom, like many others, rooted in the idea of work as a shared space that can be highly distracting.
With this spring’s rapid scramble to contain the spread of COVID-19 by social distancing, most companies in New York State were forced to migrate their workspaces online immediately. In many cases, the shift occurred within a week, with no master plan, protocol or even precedent. Above and beyond email and file-sharing, technology such as Zoom and GoTo Meeting made conferences and meetings feasible, replacing packed conference room with grids of faces.
Notably, but perhaps not surprisingly, a significant number of offices have found their teams can function remotely at least as efficiently and effectively as in their office space. (Imagine the productivity boost if Dunder Mifflin had gone remote!) Though it emerged by necessity, working from home has proven benefits for employees, especially now: reduced risk of exposure (or exposing others) to COVID, reduced commuting times, and enhanced job satisfaction.
As offices prepare to welcome employees back to work, trends in office layout and design may further complicate matters. Over the last 25 years, we’ve seen office space shift from traditional large hard wall offices to workstations, cubicles flex space. The new emphasis on collaboration and transparency has driven this change; but from a health and safety standpoint, the new office layout may not support social distancing a full workforce. As a result, office space faces new pressures and challenges. However, I believe this asset class in a market like Rochester has a viable future, perhaps within a hybrid model of physical work and telecommuting.
On the one hand, offices will embrace the benefit of remote work and flexible work schedules; and continue to function within this framework. Based on my conversations with colleagues and clients, I’ve observed business and investment services have transitioned smoothly to a remote workforce. Many teams haven’t missed a beat in their workflow or client services. On the other hand, office teams need dedicated time and space for true, organic collaboration to arise. In fact, many businesses are using apps and interfaces that replicate their office space online. The Zoom vocabulary of “waiting rooms” and “breakout rooms” speaks to our need for physical areas to organize workflow.
What does this mean for commercial space? Perhaps a shift in size, in both directions: some offices will require more space for each employee; others will need a reduced footprint for a smaller workforce. We may see a decrease in office rent and an increase in available space. Office features such as outdoor areas, open spaces, and markers of distance (for example, colored carpet) may help employees return to “business as usual” with more confidence.
From a local market perspective, one further asset is the potential for business relocation: from major metropolitan markets contending with more COVID cases to places such as Rochester or Monroe County, which are less dense. Just as a wave of relocation occurred after September 11, 2001, employers that struggle with safety concerns in denser markets may feel a greater level of comfort in smaller cities. Due to its size, vacancy, and price, we believe office space in Rochester is well-positioned to provide the backdrop for conferences, coffee breaks, and everything in between.
By R. Scott Burdett