Employers reconsider offices and functions are key

Last August, REI offered its newly built headquarters in Bellevue, Washington, for sale without first moving into the building.

It was a wonderful turnaround. When REI announced plans for the campus in 2016, he said it would create a gathering place to foster creativity and bring thousands of employees together. But because many of the employees work remotely due to the pandemic, the outdoor recreation retailer decided to put the 8-acre complex on the market. It quickly has its plans for office space to take up smaller satellite locations in the suburbs of Seattle.

The Bellevue building was sold to Facebook by September. And in February, REI announced its first satellite office in Issaquah, Washington – a nearly 70,000-square-foot building that can accommodate up to 400 people and is surrounded by hiking trails, lakes and parks. The company is also testing a model that allows employees to work from home up to five days a week.

“We want to create an environment that is very flexible for our employees,” said Chris Putur, REI’s executive vice president for technology and operations. “In 2020, we were amazed at how incredibly agile and innovative and productive the team can be.”

REI’s blueprint for its future workplace is just one story in a major upheaval in the commercial office market.

One year after many companies sent office workers home to prevent the spread of Covid-19, corporate leaders are still grappling with how to safely reopen workspaces. They have even bigger questions about how much office space they really need, and what incentives they need to attract people back. Many have learned over the past twelve months that their employees can work almost anywhere. This means that the office must serve a much more compelling purpose: a center for cooperation that can not be achieved virtually, and a place to retain and train an incoming workforce.

“Looking back a decade or two decades ago, the workplace was a way to achieve a goal,” said Sanjay Rishi, CEO of the JLL Enterprise Corporate Solutions Company. “Now workplaces are just as much a goal in themselves, because … everyone is striving to get something more out of the workplace.”

Although a number of companies are using the health crisis as an opportunity to terminate leases, some are promoting the trend. Technology companies in particular have devoured office space. This despite the fact that many of them are the first to adopt the lifestyle at a distance. They take advantage of repressed rentals and more flexible rental terms. Many of these businesses also view the office as an advantage in attracting top talent in the years to come.

According to a report by CBRE, technology companies were the leaders in signing and renewing office leases last year, accounting for 24% of rental activity per square footage. Amazon, Facebook, Apple and Google all added office space in New York City in 2020, mostly during the pandemic.

“There will be organizations that [office] JLL’s Rishi said. “But we see it as a trend to allocate space dynamically and then manage space better.”

Some employees are more eager to return than others, and they are looking for moments like a cool cooler of the afternoon or happy hours after work. Others have adapted to their work-from-home settings, and do not miss the anxiety-stricken office commuters.

Most drivers agree that there are benefits to both. As Americans return to work at a passing rate, plans may favor a hybrid model.

“Most organizations are realizing that there is a shift in the way work is going to be done,” said Julie Whelan, head of occupational research for the commercial real estate firm CBRE’s America division. “They have acknowledged this, and no matter how traditional they are about their views, they understand that there is going to be a degree of flexibility that they now have to grapple with when it comes to office planning.”

For now, though, Whelan noted that most executives seem to be announcing the plans and detailed timelines to bring people back. However, there are a few outliers, such as Tiffany’s new parent LVMH, who brought two jewelry workers back to the office for two days a week in February.

In January, CBRE surveyed 40 of its office clients, which together cover 245 million square meters of office space worldwide, and found that 9% of businesses were already slowly getting people back to work – using social distance planning, temperature control, booking systems. and other precautions.

Twelve percent planned to do so during the second quarter, and 21 percent during the third quarter. Forty percent of respondents have not planned to return to the office since January, CBRE said.

Many business leaders are still monitoring the vaccination of Covid. President Joe Biden said earlier this month that by the end of May, the United States will have enough vaccines for every adult. They also take into account lifestyle changes that may have taken place in the last twelve months – children still learning from home, new pets, more time outdoors and people moving from the populated urban areas to the suburbs, where there is less access to public transport is. .

“We’re looking at how we can leverage technology so that those who are not physically present can have the same immersive experience as those who are present. [in the office], “Puti said of REI.” We really want to find a way. And we’re going to try different methods, and I’m sure it’s going to evolve. ‘

According to Kastle Systems, an office security firm that collects data from more than 3,500 buildings in the U.S., it currently employs about 25% of employees across the country.

Of course, the number decreased and flowed with the state of the pandemic. Tilt visits cratered last March and into April, Kastle found when the health crisis swept across the country. They have been slowing down ever since, but tumbling around Thanksgiving again, while infections have increased over the winter holidays. Visits have increased since then – especially in Texas, which is likely due to the weakening restrictions on the state pandemic and less confidence in public transportation, Kastle said.

As the shaking progresses, decisions to permanently cut the space will result from many different motivations. Some companies may have to cut costs, or have fewer corporate workers. Others promise to bring teams from different buildings together to encourage cross-cooperation.

Luxury clothing retailer Ralph Lauren announced in February that it would cut as much as 30% of its corporate property in North America to ‘accept new jobs’. Similarly, CVS Health said it would reduce its office space by 30% as part of a cost-saving initiative.

Nordstrom, meanwhile, said he prefers not to extend a lease at one of his downtown Seattle office towers, taking into account the personal preferences of his staff and the state of affairs.

“While we will not be a fully-fledged headquarters, it is clear that remote work can and should play a role in our operations,” the store in Seattle said.

Old Navy is also evacuating the clothing brand’s headquarters in the San Francisco area to move in with its parent, Gap Inc., just a few neighborhoods. According to the company, it should foster a stronger culture of collaboration by mixing employees between clothing brands.

Office owners, eager to get people back to their desks, mostly expect a flurry of businesses to return by late summer. Brokers say they have been doing more tours of office buildings since the beginning of the new year, especially in key markets like Manhattan.

Last year, the transaction activity dried up greatly. JLL, a real estate services firm, found 125.6 million square feet of new office space in the United States last year, a decrease of 47.3% compared to 2019. The total vacancy rate was 17.1% at year-end.

Boston Properties CEO Owen Thomas said he expects there will be a “much more intense return” to the office by the beginning of the summer, and will be even more prominent by Labor Day. Boston Properties is one of the largest owners of so-called Class A office space in the country.

Thomas said not many of the tenants of the investment trust in homes have done a major reform in their spaces. Instead, he said he sees more “cheaper and more interim measures”, such as adding plexiglass barriers and spreading desks, buying contactless machines for hand cleaners, and even sensors that allow doors to open and close automatically.

“There will be more space requirements, especially for employees who are pushed closer and closer to each other,” Thomas said. “I do not think it will work in the future. Even though the virus has been largely eradicated.”

“Employers are also going to have a lot more collaboration space so people can eat and work together because I think there is going to be a lot more in the office,” he added.

Related companies, a real estate developer in New York that uses office, retail and residential spaces, are tracking unique benefits to attract tenants. He is introducing an outdoor workplace program for his four office towers at Hudson Yards, where tenants can book spaces outside with WiFi for meetings and calls. Related is also working with Mount Sinai Health System to give employees weekly on-site Covid tests. It has also started a childcare program on site.

Some workers just want more security.

Last March, Melissa, a 32-year-old employee of a retailer’s e-commerce store, was living in a studio apartment in the New York area with her then-fiancé, also 32, when both of their offices closed their doors. Just as stressful as squeezing with her partner into a 600-square-foot space, the couple successfully worked together from home until June, Melissa said, asking to keep her surname and workplace private.

She and her current husband decided not to renew their studio lease and landed a one-bedroom in Brooklyn during the summer in hopes of a quick return to work in the fall. But that still did not happen, and the one-bedroom also quickly became too small, Melissa said.

“Talks to even go back to the office – who knows?” she said, adding that she had heard little from her employer about the matter.

“What are we doing now? Our lease is up again in June. Should we stay? Or should we just take the plunge and move to the suburbs?” she said. “… If they do not get us back in office soon, I’ll have to make life decisions.”