Do We Really Need Offices Anymore?

When we think about how the COVID-19 pandemic has changed the real estate industry one, (frankly huge) question comes to mind: Do we really need offices anymore? And if not, how will the office sector pivot?

The same morning that Amazon revealed it would spend $4.1-billion expanding its office footprint, commercial real estate experts from GlobeSt.com and legal experts from Law.com asked that specific question and more in our first ever co-hosted Twitter chat.

To be sure, GlobeSt.com has been covering the many nuances to this debate ever since the coronavirus upended US life. The beauty of Twitter,  though, is that complex thoughts and arguments are by necessity distilled to their bare essential, streamlining what could be a cumbersome argument into an easy-to-absorb discussion. 

So, to get to the point: are offices necessary? In many cases, according to our participants, the answer is yes.

“All companies will need office space,” wrote Los Angeles-based Martin Pupil, executive managing director of Stream Realty Partners. “The key will be flexibility in use. The evolution is not about remote, but moving away from the traditional lease to a flexible one.”

Still, it is hard to ignore the many signs of companies pulling back, at least psychologically, from the idea of having a brick-and-mortar home base. Companies such as Google and Facebook have extended the amount of time employees can remain working from home, with Google giving its workers another year of this arrangement. This has had a ripple effect through the CRE community from more subletting of space to employees seeking out new homes in the suburbs because they no longer have a long commute. 

Google, along with other large tech companies, have been the major consumers of office space over this past cycle, real estate pro G. Ryan Smith said. “The impact of these firms allowing work from home will likely cause a significant slowdown is space absorption across the country,” he acknowledged. 

From the tenant perspective, though, a scale back — even if it is just a temporary one — makes sense. Employees are worried about getting sick, employers are worried about liability and there is no sense at all of how long the pandemic will last. “We think tenants are primarily anticipating the issue at the heart of our current crisis, which is whether demand will be stable and staffing will need to meet pre-pandemic levels,” tweeted the Kimmerle Group.

With a vaccine not widely expected until mid next year, companies are buckling in for the long haul.  “I think it will be mainstream in that many companies will offer some form of WFH, with the expectation that the office space will remain the primary workplace,” according to Jim Adler, executive vice president in the office services group at NAI Hiffman.

Pupil, though, added that while work from home may well increase, it is unlikely to become the norm. “Most companies and employees surveyed want back in the office,” he said.

Carl Muhlstein, International Director, based in JLL’s Downtown Los Angeles office, tweeted that Prior to COVID, approximately 10% of professional & business services employees worked primarily from home and he suspects the share of white collar employees working primarily from home will more than double to 25% post COVID.

Muhlstein added that while “the office of the future may look like the Admirals Club at the airport but we will need offices.”