If everyone’s working from home, why is commercial office space booming? | Gene Marks
(This article originally appeared in The Guardian)
Many people loved working from home during the pandemic. They got to spend more time with their families, adopted more pets, enjoyed the magic of delivery services, binged Netflix, swapped their suits for sweats and even started an unprecedented number of businesses. All these reasons — and plenty of others — are behind why so many workers want to continue doing the same, even as we try to put Covid in the rearview mirror.
For those employees, here’s a warning: prepare for reality. Employers are planning to have you back in the office.
Why else would Facebook lease another 300,000 sq feet of office space in New York City to add to its already 3m sq feet occupied? Why would Google be spending $2.1bn on a Manhattan office building and expand its “sprawling campus” in the city to house its more than 12,000 employees? These are tech companies with businesses built on the cloud … so why expand offices?
And why would Manhattan’s commercial real estate market be “rebounding” with CRBE, which tracks these sorts of things, reporting that leasing activity rose 100% year over year as of 31 March? “We just hit 95% occupancy, which is the highest occupancy number in the history of the building,” gushed one New York City landlord.
This is not just a New York City thing, either.
In Charleston, South Carolina, commercial vacancy rates are below 2% and almost 10m sq feet of industrial space is under construction. In Jacksonville, Florida, 2021 was a “great year” for commercial real estate investors, with all product types posting increases in market rent, occupancy and interest from buyers. Northwest Arkansas commercial real estate has its lowest vacancy rate since 2005. In Philadelphia, Baltimore, Santa Clara and Chicago, there’s a post-pandemic “boom” in mixed-use commercial and residential properties under development. Developers in Iowa say that industrial spaces “cannot be built fast enough”. Office vacancy rates continue to decline in San Diego, Los Angeles and Orange county, California.
If everyone’s “working from home” — as we hear again and again in the media — why is the commercial office space market booming? Yes, there’s more demand for warehousing thanks to all those Amazon orders. But it’s also because of something else: everyone is not going to be working from home in the months to come. They’re coming back to the office.
Sure, the big companies are still slow to bring their employees back. Larger organizations from Goldman Sachs to KPMG — worried about bad PR and potential lawsuits — are tentatively allowing employees to determine their own arrangements. But this is quickly changing. More than half of corporate leaders want their people back in the office five days a week, according to a new study from Microsoft. Even GenZ-ers view remote working negatively!
So will these workers return? They’re not going to have a choice.
We know that many employees are reluctant to come back to the office. Just this past week, a study found that more than half of Apple’s workforce would like to quit their jobs because they prefer working from home. Other studies — like this one and this one — have shown that workers overwhelmingly prefer to keep working from their homes in lieu of commuting. Who can blame them?
But as much as employees want to work from home all the time, that’s just not going to happen. The reality is that workers at the nation’s small businesses — who employ about half of our workforce — have been back to the office for a while now. When I visit my clients — who are almost all small to midsized firms — their employees are at their desks. If you don’t believe me, take a drive around your town’s suburbs and look at the parking lots.
There’s no question that work-from-home arrangements are now a core benefit that businesses must provide. My best clients are re-addressing their work cultures and doing their best to offer as much flexibility for their employees as they can allow. But there will be a limit. I don’t know any who are going fully virtual and very, very few that are allowing 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 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 in others and also provide opportunities to avoid the work they’re actually being paid for in lieu of running their side-gigs.
Working from home is here to stay. But — judging from what we’re seeing in commercial real estate — companies are expanding, not abandoning, their offices. Many employers are doing their best to help transition their employees back. But in the end, this is business. And business gets done in a workplace, which means coming into the office — at least most of the time — is a reality that workers are going to have to face.