If everyone is working from home, why are commercial office spaces booming? | Genetic marks
Meveryone enjoyed working from home during the pandemic. They’ve been able to spend more time with their families, adopt more pets, enjoy the magic of delivery services, binge Netflix, trade in suits for sweatshirts, and even start an unprecedented number of businesses. All of these reasons – and many more – are why so many workers want to keep doing the same, even as we try to put Covid in the rearview mirror.
For these employees, here is a warning: be prepared for reality. Employers plan to bring you back to the office.
Otherwise, why would Facebook rent an additional 300,000 square feet of office space in New York to add to its already occupied 3 million square feet? Why would Google spend $2.1 billion on an office building in Manhattan and expand its “sprawling campus” in the city to house its more than 12,000 employees? These are tech companies whose business is cloud-based… so why expand the offices?
And why would Manhattan’s commercial real estate market be ‘rebounding’ with CRBE tracking this stuff reporting that rental activity is up 100% year over year? March 31? “We just reached 95% occupancy, which is the highest occupancy in the building’s history,” said a New York landlord.
It’s not just a New York affair, either.
In Charleston, South Carolina, commercial vacancy rates are below 2% and nearly 10 square meters of industrial space is under construction. In Jacksonville, Florida, 2021 has been a “big year” for commercial real estate investors, with all product types showing increases in market rent, occupancy and buyer interest. Northwest Arkansas commercial real estate has its lowest vacancy rate since 2005. In Philadelphia, Baltimore, Santa Clara and Chicago, there is a post-pandemic “boom” in commercial and residential properties mixed use under development. Iowa developers say industrial spaces “can’t be built fast enough.” Office vacancy rates continue to decline in San Diego, Los Angeles and Orange County, California.
If everyone is “working from home” – as we hear over and over again in the media – why is the market for commercial office space booming? Yes, there is more demand for warehousing thanks to all those Amazon orders. But it’s also because of something else: not everyone is going to work from home in the coming months. They come back to the office.
Of course, large companies are still slow to bring their employees back. Large organizations from Goldman Sachs to KPMG – worried about poor public relations and potential lawsuits – are tentatively allowing employees to determine their own arrangements. But that is changing rapidly. According to a new study from Microsoft, more than half of business leaders want their employees to come back to the office five days a week. Even GenZ-ers view remote work negatively!
So, will these workers return? They will have no choice.
We know that many employees are reluctant to come back to the office. Last week, a study revealed that more than half of Apple employees would like to quit their jobs 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 commuting. Who can blame them?
But even if employees want to work from home all the time, that just won’t happen. The reality is that small business workers across the country – who employ about half of our workforce – have been back in the office for some time now. When I visit my clients, which are almost all small and medium-sized businesses, their employees are at their desks. If you don’t believe me, take a drive around the suburbs of your city and look at the parking lots.
There is no doubt that work from home arrangements are now an essential benefit that companies must provide. My best clients are reorienting their work cultures and doing their best to provide as much flexibility as possible to their employees. But there will be a limit. I don’t know of any that are going entirely virtual and very, very few that allow their employees to work remotely more than two days a week.
That’s because employers know the real work is done when teams can be together, face-to-face, and collaborate, innovate, and yes, even socialize. They also know that working from home can be difficult for some, cause loneliness and depression for others, and also provide opportunities to avoid the work they are actually paid to do instead of pursuing their side businesses.
Working from home is here to stay. But – judging by what we’re seeing in commercial real estate – companies are expanding, not abandoning, their offices. Many employers are doing their best to ease the transition for their employees. But in the end, it’s business. And business is done in a workplace, which means coming to the office – at least most of the time – is a reality workers are going to have to deal with.