Drew Sigfridson, SIOR / November 29, 2021
Drew Sigfridson, SIOR, Managing Director
The world is changing fast and office users are in the forefront of that change. It is no secret that the way companies use office space is facing a transformation. This time last year, uncertainty reigned supreme in the office market. The Boulos Company conducted a survey in their Maine and New Hampshire markets. They asked companies when they intended to re-open their office and the most common response heard was: “I don’t know.” Over the past 18+ months uncertainty has begun to subside, and companies have determined that remote working and hybrid models are here to stay. While plans for the workplace are still shifting, we now have a much better idea of what companies will need from their workplace going forward, how they will incorporate working from home into their work models, and what factors are driving their leasing decisions.
The Boulos Company’s most recent COVID office impact survey, released in October 2021, indicated that while companies are still not 100% certain about their office models, they now have a better idea regarding the future than they did at this time last year. The vast majority (74%) indicated that their offices are open for employees who want to return and half are back in the office full-time. However, it is worth noting that companies with more than 100 employees, these numbers were lower, with only 33% of respondents being back in the office full-time.
This disparity is understandable, as larger companies have additional hurdles to overcome when returning to the office. Many have departments spread across multiple buildings and there are more difficulties in implementing proper COVID protocols. Larger companies are more likely to embrace hybrid work models and require more time to plan for their re-openings, how much space to relinquish, and what the future footprint will look like.
That said, companies do not appear to be jettisoning their offices completely. Close to 65% of respondents to our recent survey indicated no plan to change the size of their office due to COVID or hybrid work models. About 14% said they would be decreasing the size of their office, and 5% were considering upsizing. Interestingly, while last year’s office layout and leasing decisions were largely motivated by health concerns, employee enjoyment has joined the top of the list propelling employers’ decisions.
So, what does all this mean for our commercial office sector? The uncertainty we faced in 2020 resulted in a pause in most commercial office leasing. Many tenants who faced the end of their lease terms opted for short-term renewals, giving them more time to consider options. As uncertainty fades, decisions are being made. More long-term leases are getting signed as companies begin committing to office space despite pandemic difficulties and hybrid work models, albeit with some space reductions. Companies are aiming to secure stability, convenience, and access to great amenities for their employees. This shift includes greater flexibility around remote work.
With reduced demand for conventional office space, alternative uses for office buildings are being planned for hospitality and residential conversions – even self-storage conversions. Owners of office properties will provide new and different amenities to retain tenants and compete in a fast-evolving marketplace. While we see the office sector evolving very quickly; multi-year leases, hybrid models, staggered lease expirations, and alternative use conversions will help soften the impacts. Great change brings great opportunity and creative thinkers among our clients will be there to take advantage as the office sector continues to evolve from the pandemic impact.
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