Where is Office Space Headed?

As the summer of 2020 comes into full swing and COVID's trajectory gets a little bit murkier, the trend for office space becomes clearer.  The way that we use office space is changing and, while this brings some disruption to how you operate as a business, it is also causing new opportunities to come into view.

Less Rent Abatement

One of the largely unspoken trends of the COVID economy is that a meaningful number of office tenants haven't been paying some or all of their rent. While it's common knowledge that the retail industry has been hit hard by the disease-related shutdowns and the attendant economic slowdown, a meaningful number of office tenants have also asked for rent abatements. It appears that this trend is slowing, which means that if you've been dependent on landlord forbearance, it's time to make alternate plans for how you manage cash flows moving forward.

Less People in the Office

As we write this, the pendulum keeps swinging vis-a-vis the desirability of work-from-home situations. In the beginning of the COVID pandemic, companies worried that having their workforces operating remotely would harm productivity and retention. Then, the honeymoon period started. Productivity shot up, traffic decreased, everyone learned about "zoom shirts," and it seemed like working from home was going to become the new forever norm. But, then, we saw another swing, and people started talking about how they missed their coworkers, collaboration, and the positive psychological aspects of having a distinct place for work.

It wouldn't be unlikely if the pendulum keeps shifting back and forth, but the key change is this: virtual work is more in the mix of the modern workplace than ever before. Whether your workforce spends 4 days a week in the office, 2 days or 0, the norm isn't 5 days any more.  This means that you'll have fewer people in the office on any given day, which means that you (theoretically) need fewer workspaces.

Less Density

It appears that some form of social distancing will remain the norm for a long time coming.  And while it's entirely possible that the populace starts returning to less socially distanced activities in their personal life but keeps demanding social distance at work for the simple reason that they aren't the ones paying the rent. For this reason, the trend towards densifying the workspace has hit a wall and started rapidly moving in the opposite direction.

Socially distanced offices are significantly less dense than what many companies had pre-COVID-19. After all, you can't stay six feet away from people if you're sitting at a five-foot desk that touches five other five-foot desks and that is just a three-foot corridor away from another block of desks.  Companies have found two different solutions to this problem -- they can either simply remove every other workstation, turning the office into a checkerboard, or they can be more strategic and space out workstations to create a custom look and feel. 

In addition to moving desks, conference rooms need to be studied, since most don't allow for social distancing. Amenity spaces can be repurposed, since mixing and mingling isn't a socially distanced activity, and corridors need to be revisited to reduce bottlenecks. And all of this is on top of finding ways to improve traffic flow, adding hand washing and sanitizing stations and the like.

The net result of all of these trends is that some offices are finding that a coronavirus-friendly redesign reduces density by 50 percent. That's a huge shift. And, interestingly, while the jury is still out on how all of the numbers will shake out, it looks like this shift will balance out some or all of the savings you thought you'd realize by having more people work from home.

More Opportunity for Tenants

Change brings opportunity.  Landlords are dealing with confusion, tenants not paying rent, and reduced activity from brokers.  This means that they have as much or more space to fill as ever, and fewer people coming in.  This trend makes them more motivated to fill the space they have while also making them more sanguine about the "cost" of free-rent type concessions. After all, space is perishable and if it isn't leased, it's not going to generate any income anyway.  The net effect of all of this is that if your organization is in a position where it can commit to a long-term lease today, it's a great time to be out there looking for office space.