The COVID-19 pandemic changed every aspect of our lives, from how we socialize, travel and conduct business. One year has passed since COVID began and its ongoing aftermath has created a “new norm” in society, especially in the workforce. This resulted in more companies extending their work-from-home policies into the new year; an on-going response to protect workers from the virus.
While the work-from-home policies remain in place, most are unsure just how long the pandemic will continue. Tenants are scrambling to find ways to extend their lease and/or are continuing to pay rent, even with the possibility that some offices may not return at all. Giants like Google and Amazon had sought corporate campuses for their employees in cities like Seattle, starting back as early as 2010, according to the President of the Local Building Owners and Managers Association. Therefore, pent up demand for office spaces had gone up to 34 percent. Now, 90 percent of those offices remain empty, an unfortunate result of the pandemic. So, why are these large companies leaving office spaces and what is to become of them; how will they be repurposed in the age of a pandemic?
How Office Work Culture is Changing
These times are tough, and while most white-collar workers may prefer to return to their daily office routines to escape the restrictive confines of their homes. Strict COVID guidelines have kept many businesses from sending their workers back in full force. Zillow, a real estate company that has prided in-person collaboration as a part of their work culture, has chosen to become a more “flexible employer.” Thus, giving its employees the option to either continue working from home, or to come into the office, several days a month, if needed for a specific project.
Another company, REI, has changed their work culture for the better, opting for a more flexible working situation; by letting their employees work from home. Furthermore, the company has taken a much bolder approach to their business strategy, by choosing to sell its corporate headquarters, located in the state of Washington. It turns out drastic changes like this can work as REI was able to successfully transfer 100 percent of its staff to work-from-home before the end of the first quarter in 2020. What’s even more unique about REI’s position, is they’ve decided to create smaller satellite offices for employees who prefer to work in an office setting (much like Zillow’s decision to provide workers the options of returning to the office). Even Facebook, has begun allowing their employees to permanently telework, granted if they decided to forgo their large salaries. This would keep more than 48,000 employees at home, therefore dramatically changing the company’s work culture which is known to promote creativity, innovation and in-person collaboration.
The Impact of COVID on Businesses
Ever since the coronavirus had left the global economy in a state of freefall, there was no doubt major cities throughout the country would eventually come across a real estate crisis. The citywide lockdowns and restrictions had complicated matters more for almost every business across all industries; both large and small. Thus, forcing them to either ride out the storm for as long as possible or to permanently close shop. In fact, a growing number of residents in California are leaving as opposed to moving in. Largely because housing costs and tax rates are so high; strict regulations on businesses haven’t really helped either. This is unfortunate because it’s currently turning away potential business for commercial and residential properties, as interest has shifted to the state of Texas. The decision to move has been in the cards, pre-COVID, for many tech companies in Silicon Valley; favoring cities like Austin, Dallas or Houston which are all prime locations for start-ups and large firms alike. Austin for example, is a great music scene and prides itself as more of an “outdoors city.” Tech firms like Hewlett Packard Enterprises had already announced its departure last December from Silicon Valley to Houston, a sign which further implies that Silicon valley has lost some of its prestige as the center of the tech industry.
What’s Happening to All the Empty Office Spaces?
Now that many businesses are leaving in favor of working-from-home or relocating out of state, what happens to all these empty offices? Some industry analysts predict that employee occupancy is expected to return back to pre-pandemic numbers in about 4 years (once the vaccine has reached everyone around the world), assuming that the recent discoveries of new coronavirus strains are kept under control by that point in time.
Tenants may try to turn empty commercial properties into more traditional offices or medical facilities; yet time will only tell. In most cases, it is very expensive to flip these kinds of spaces, though more cost effective than designing and building something from scratch. However, what is less likely to happen is the process of turning office buildings into residential towers. Aside from the fact that most office spaces take up an entire city block, issues such as plumbing and kitchen fixtures would be too costly. Which is why converting to medical/research facilities would be the more likely option; given the fact that most businesses have already adopted or grown more comfortable with the concept of working-from-home. One thing is for certain, the pandemic has changed how most companies conduct business, and hopefully for the better.