Commercial office tower future, post pandemic. Who here who doesn’t have a vested interest in towers thinks they will revert to pre 2020 usage?
Hi all. I’ve seen a lot of articles and attended a couple of seminars recently on the future of the office. Nothing that I have read or listened to was terribly convincing to me. 
What I want to ask is if there is anyone out there who doesn’t have a vested interest in commercial office space who genuinely thinks that the office towers as we know them will go back to pre 2020 usage?
[{"id": "gyfdn7l", "text": "I\u2019m in the U.K. so have a slightly different perspective, but I work for a US bank. The trends I\u2019m seeing for London office space, is to have offices as more of a social hub with home working for the most part. This \u2018Hybrid Model\u2019 as the media seem to be calling it. \n\nI see corporates needing less offices in total, but still needed. \n\nMy company has gone from expanding to a second office in London in Feb 2020 to now keeping our single office but ripping out most of the desks and adding more meeting rooms, couches/open meeting spaces, and games (table tennis, pool, etc.). I\u2019ve seen many startup/scaleups take this approach but it seems to be spilling into corporates too. \n\nI see slightly reduced demand in towers, with slightly increased demand in smaller \u2018satellite\u2019 offices. Open plan office space will be preferable. I also see the WeWork model booming too, unfortunately for them given their past 18 months. \n\nWith low rates, subdued prices I could see a bullish case on these. But I do see the risk here as quite high.", "replies": [{"id": "gyfegsf", "text": "I tend to agree. The bullshit that I am hearing along the lines of \u201cteams need the collegiate atmosphere for creativity and inspiration\u201d and \u201ctraining new hires\u201d \u201cdeveloping culture\u201d as arguments for full time office attendance just doesn\u2019t ring true at all to me. The model you are describing seems to be much more realistic, and I suspect that apart from trading floors and ceo space, with all of their associated tech, rents for office space are going to tumble very quickly in 2-3 years as existing leases expire and the space is not taken up.", "replies": [{"id": "gyfgo6q", "text": "I\u2019ve changed jobs twice since the pandemic started. My wife once. We both work for large banks. We\u2019re both working from home. Getting up to speed took me 3weeks instead of my usual 2weeks. A single desk in Canary Wharf costs something like \u00a31500 a day. Me getting up to speed a week quicker is surely not worth \u00a315,000 (I earn six figures, but there\u2019s still no ROI). \n\nI don\u2019t think the office is dead. With \u2018Agile\u2019 being the fotm business term, i see offices changing but still existing. Google style offices not Goldman style offices. But still offices.", "replies": [], "depth": 3}, {"id": "gyfkegb", "text": "LOL", "replies": [], "depth": 3}, {"id": "gyfo3uf", "text": "Middle management will push for a return to the office because the pandemic and working from home hasn't so much rendered them useless as just show the world that they always were.", "replies": [{"id": "gyi38tb", "text": "You mean micromanagers want to see how their employees production is doing?", "replies": [{"id": "gyikiwj", "text": "Precisely", "replies": [], "depth": 5}], "depth": 4}, {"id": "gzhjiqh", "text": "Learning a new job role and having a manager buried with questions from a new team also learning the role showed how useless middle manager was and how face time is needed to train as a group in a new job. Sadly the incentive program meant knowledgeable workers had a disincentive from helping the team at the expense of closing their own loans.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gyih27m", "text": "I agree with you!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gyffd4z", "text": "When Google and a lot of tech firms tried the work at home (all before rona) and never come in the office approach they all began going back to the campus model if they could. Remember in a free market with limited government intervention... typically the best product or idea will win over time. To me the big question to ask is do you think the government will stay involved or go back to not being involved. If the government stays involved doubtful... however I think if they don't you'll see a return to normal. If you want to see the advantages of at home vs in office look up the tech companies that were doing it pre rona", "replies": [], "depth": 1}, {"id": "gyfixkn", "text": "We (the big we) have short memories.  We\u2019ll be substantially back in offices by 1/1/23.", "replies": [{"id": "gyfj8cl", "text": "Go on...", "replies": [], "depth": 2}], "depth": 1}, {"id": "gyfjjc1", "text": "All I know is that the line about companies being able to be just as productive with at home workers is complete bullshit. I deal with all of the banks, large legal, accounting etc regularly and everyone is operating at about 50% efficiency compared to pre pandemic. I believe companies will push to get people together again just to get the productivity again.", "replies": [{"id": "gyg3c7q", "text": "Interesting given the work culture that surrounds banks, the big 4, etc. I work for a large fin tech company and we have been fully remote since March 2020.  We beat our 2020 forecast and crushed Q1 2021 while being full remote. \n\nI note the culture because WFH in fin tech is likely viewed much differently than WFH in those industries.", "replies": [], "depth": 2}, {"id": "gyg5zsi", "text": "I agree, especially with regard to training. Its just not possible to train / transfer knowledge as effectively with a remote team.", "replies": [{"id": "gyge47g", "text": "I disagree with regards to productivity. I was never as productive as I was in 2020 working fully remote in the CRE / Middle Market lending area of a bank. Then again, we never had that many loans looking as if they were going to go bad on us.  \n\nBut I agree 100% on training. It is much more difficult. We brought in a person for our team and although this person has many years of experience, things are always done a little different everywhere and training has been a PITA.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gyhbqmy", "text": "Across the board financial firms saw boosts to their bottom lines because of the increased productivity in Q2 and Q3 in 2020. By Q4, the gains plateaued, but now those firms are not wanting to take the hit of lost productivity that will happen if they transition back to fully in the office.", "replies": [{"id": "gyhl7gf", "text": "It\u2019s what we call a catch 22", "replies": [], "depth": 3}], "depth": 2}, {"id": "gyil3ak", "text": "Can only speak from first hand experience, but overall we have seen productivity go up at our company. Most workers are pulling longer hours, putting out more work product, and are generally more engaged.\n\nNot having to commute lends to a lot of people being willing to put in more time, and the ability to walk away from your computer when you need a break without worrying about your boss creeping on you is a boost for many people.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gyfk6le", "text": "Our CEO said something about this that I found fascinating. He said those that come back in the office will get promotions faster because of the actual face time with their bosses. So there will be an organic motivation to come back to the office once people realize that. I believe this will come true.", "replies": [{"id": "gygectv", "text": "The future is hybrid. Management is looking to have the control. Employees want to work from home (for the most part). Depending on your role, you will have to come in X days.", "replies": [{"id": "gygp5mh", "text": "How much leverage do most employees have though for staying home? I\u2019d imagine most will return to office in similar capacity as before.", "replies": [{"id": "gygpzsu", "text": "Depends on the employer. We are still 100% remote if you want to. The Bank is going to start a hybrid concept in September. I expect they will want those with my role to be at the office a couple of days a week. I am going to ask for one day. In reality, I do not need to be there at all.", "replies": [], "depth": 4}, {"id": "gyh8vmj", "text": "The companies who offer remote/hybrid will get the best employees over time and win their markets. This is going to happen, companies who don't catch up will be left in the dust over time.\n\nCompanies are already seeing this as an opportunity to steal great talent from other companies; if you knew you could get the best talent from your competitor just by offering hybrid/remote work, why wouldn't you?", "replies": [{"id": "gyhsha2", "text": "Exactly, if you are in a high demand industry, remote work will be offered by someone and they will get the best employees. It\u2019s such an advantage.  I will immediately be looking for new employment if my company mentions going back", "replies": [], "depth": 5}, {"id": "gyi8eha", "text": "The Upper Management point of view (i.e. Jaime Dimon) believe the best employees want to get to the office to stay engaged, seek out opportunity and develop culture.  Dimon and others would gladly have their competition take all the employees that want to work from home.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "gyinfsu", "text": "I hope so, do you think you will have a designated work space at the office or open concept where you can set up shop wherever you find a spot open?", "replies": [{"id": "gyjq1l0", "text": "We are a small team and the employer has a long term lease, which I doubt they will renegotiate. The cubicles will remain the same for now. Eventually they might decrease.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gygl7xg", "text": "But the bosses aren\u2019t going into the office either lmao", "replies": [{"id": "gyij25e", "text": "That\u2019s the real issue. I live in an area with a high percentage of decision makers. I haven\u2019t spoken to one that intends to go back to commuting 5 days a week. \n\nI do think the 100% full work-from-home model is unsustainable if you have any desire to create a corporate culture or develop new talent. But I can see 3-days a week becoming the norm.", "replies": [{"id": "gyinnwe", "text": "Seems like a reasonable middle ground.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gyis709", "text": "I do believe the power of face to face interaction is still key...and ZOOM doesn't have the same feeling as sitting across the table from someone.", "replies": [], "depth": 2}, {"id": "gzhj7d2", "text": "It is somewhat motivating for people that aspire to be the next manager or CEO. Similar to how working at the HQ instead of satellite office is more important for climbing that ladder. For many others that are there that want work life balance and work in satellite offices this promotion for face time is not a selling point.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gyfkbzx", "text": "They are reverting to pre 2020 usage now.\n\nAnd because of fear, not facts, usage will increase, from 1 per 175 sf to 1 per 350 sf.\n\nWant convincing? Read up on Amazon...they \"get it\" 100% of their people are coming back because people (in most cases) produce far better when amongst other humans.\n\nEveryone else will \"get that\" soon enough.", "replies": [{"id": "gyi2n8w", "text": "Well...from what I understand of Amazon corporate (office) from employees, Amazon does 'get' how to suck productivity from every possible waking hour.  Churn and Burn is the Amazon way.", "replies": [{"id": "gyik0qx", "text": "I don't work there.  Wouldn't know.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gyfp4ea", "text": "Pretty easy, the major companies who have reported it all saw a massive falloff in efficiency after about 4 months of WFH. So you can bet anyone who isn\u2019t a big tech company that bends the knee to their employees is going to demand asses in chairs. There will be more flex schedules which will lead to more hot desking and a need for more meeting rooms etc. I think there might be a slight lag in CBD assets and growth in the suburban market as companies do satellite offices. I can tell you there is no fucking way I\u2019ll ever do 40 hours in an office again if the commute is over 15 minutes and a LOT of people are taking that mentality now. So I think over time less centralized offices will become the norm to accommodate", "replies": [{"id": "gyg3p9z", "text": "Source for massive fall off in efficiency after 4 months?", "replies": [{"id": "gyg7oyq", "text": "That was a year ago, so no. But you can use google. JP Morgan specifically talked about how both productivity and general creativity were down and how Mondays and Fridays were exceptionally bad.", "replies": [{"id": "gyg9dcv", "text": "\nFunny when I looked it up - the majority of articles referenced an increase in productivity. But that is supposedly \u201cworker reported\u201d so take that with a grain of salt. Also Jamie Dimon basically got the answer he wanted to hear from a consulting firm they hired. Shocker.\n\nhttps://www.google.com/amp/s/fortune.com/2020/09/14/jpmorgan-work-from-home-wfh-worker-productivity/amp/ \n\nCompared to the below article (tons more like this)\n\nhttps://www.pwc.com/us/en/library/covid-19/us-remote-work-survey.html\n\nWho really knows though because one year of data in a pandemic likely doesn\u2019t paint the full picture. Interesting nonetheless.", "replies": [], "depth": 4}], "depth": 3}, {"id": "gyhc2zi", "text": "What they are posting isn't accurate. Those companies didn't see a falloff, they saw the gains from Q2 and Q3 of 2020 plateau. Pretty obviously not the same thing as 'falling off'. They got a huge boost when their workers went remote, but of course they wouldn't continue to see that % boost in every quarter. They will just see the gains evaporate if they transition back.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gyftxgw", "text": "At least in my city there was a trend toward quality of life product (building retail, residential and office together as a sort of mini community) \u201ccool\u201d workspaces, adaptive reuse that tech and financial companies were seeking out. Then COVID hit and I think shared elevators and vertical spaces are even less in demand now. Realistically I think the pricing of these assets in CBD will remain competitive, but there are other, much cooler adaptive reuse projects getting top dollar. Even more than vertical spaces.", "replies": [], "depth": 1}, {"id": "gyg6hf4", "text": "I don't see it ever coming back to the way it was pre 2020. Office was hurting slightly prior to the pandemic due to the organic growth of Zoom, teams, etc. now decision makers are realizing that employees can essentially be just as productive at home which reduces their expense on office space drastically.\n\nI see some industries that rely a bit more heavily on face-to-face business (financial planners, accountants, attorneys, etc.) returning to the office, but so many jobs can be done from home and it saves companies tons of money. If anything I see more of the \"wework\" type spaces popping up as most employees wanting to get out of the house may rent a small desk to have a \"workspace\", but I don't see a full rebound.", "replies": [], "depth": 1}, {"id": "gyga2r0", "text": "Far from an expert, but I think they'll come back to somewhere between 80% and 90% of pre-Covid use.", "replies": [], "depth": 1}, {"id": "gyght16", "text": "I think it will take a few years to stabilize. But companies will still want large blocks of office space for their people. Some companies are expanding right now and signing new leases. Others are moving from smaller towns to downtown areas to attract a younger workforce more likely to live in a city and not want to commute. Some job functions or industries are more efficient in person, while others are fine being virtual.", "replies": [], "depth": 1}, {"id": "gyglj6s", "text": "So many people talking about wfh efficiency going down whereas sooo many companies experienced increased efficiency and record profits. It\u2019s not wfh it\u2019s crappy management and company culture.", "replies": [], "depth": 1}, {"id": "gygsgki", "text": "My guess is that in growing markets we're going to see a shift in the commercial design to fit more meeting spaces, more drop-in/hotdesks, maybe smaller square footage. Older office space that was sitting vacant pre-quarantine is going to continue to sit vacant; they were already undesirable for lack of amenities. Employees don't want to go back fulltime, managers dont want to either.", "replies": [], "depth": 1}, {"id": "gygtkyc", "text": "I think it\u2019ll revert for some industries, particularly where it\u2019s hard to track productivity or train staff remotely. \n\nOthers will have realized they can make the same or more profit with remote workers and less overhead costs.\n\nI think more companies will fall in the first bucket but there will still be a slight decline in overall office space needs.", "replies": [], "depth": 1}, {"id": "gyh46hr", "text": "That New Hybrid Office May Not Be as Flexible as You Hoped For  https://www.bloomberg.com/news/articles/2021-05-17/hybrid-work-may-not-be-flexible-when-you-return-to-office-after-lockdown", "replies": [], "depth": 1}, {"id": "gyhrzg6", "text": "Completely anecdotal but I work for a mid to large size bank and there is a 0% chance it will be going back to normal. I can\u2019t even imagine going back to commuting every day. It\u2019s so inefficient for  both employees and employers to require that. \n\nI\u2019m sure it\u2019s different though for industries that require more face to face interaction.", "replies": [], "depth": 1}, {"id": "gyhth2a", "text": "Disclosure: Have vested interest.\n\nThis is probably fairly obvious but what this is what we are seeing. Ignoring the largest (national) and smallest tenants, those who have near term expirations are more seriously exploring what hybrid models may look like. Those who are locked in for a good number of years trend more toward the side of bringing everyone back. Depending on the market, subleasing may or may not be a viable option.  Industry doesn\u2019t seem to matter as much. I see just as many professional services who want to go hybrid as I see tech.", "replies": [], "depth": 1}, {"id": "gyi32fm", "text": "Work from home revolutionized the way businesses had to re-think about \u201coffice\u201d space.", "replies": [], "depth": 1}, {"id": "gyi3dfk", "text": "Most of the businesses I've interacted with are going for a mixed program after employees have reported a higher quality of life, maintained performance, and expressed situations in which f2f is helpful. What they've not yet decided is the disposition of their current space.  PMs raising NNNs and Cams while the buildings were empty (claiming higher janitorial fees, somehow) did not endear them to their tenants.", "replies": [], "depth": 1}, {"id": "gyiknkg", "text": "My view on it is that we will see a drop in office space long term, but it won\u2019t be nearly as drastic as people are making it out to be. No matter what people say, face time with your boss a couple days a week is important. I see most offices going to a 2/3 day per week work from home system.\n\nWhile that would theoretically enable offices to nearly halve their office space using rotating seating arrangements, I think a lot of the excess will be eaten up by demand for open concept offices, more meeting rooms, lounge areas, etc.", "replies": [], "depth": 1}, {"id": "gyis0dy", "text": "I am not sure if they will revert back to pre 2020 usage or not. I rep some smaller buildings in the 40,000 SF range and they are 98-100% occupied. We are in a 50,000 SF building and they have signed some new leases lately. Personally, while I enjoy working from home, I fell I am more productive in the office. As a commercial broker, I know my clients still would rather meet with me at my office than out somewhere else. \n\nCAP rates have moved up and are in the 5.5 to 6.5% CAP rate here in So Cal for buildings up to 75,000 SF or so. I haven't noticed a big reduction in values since Covid so far.", "replies": [], "depth": 1}, {"id": "gzod4af", "text": "I see the word hybrid thrown around a lot and think this may be difficult to fully achieve.  What surprises me is how some people talk about the home vs. office.  My work has been flexible, I need to get my work done but no standard hours, can work at home/coffee shop etc. when needed/desired.  Not sure why this wasn't standard for most office jobs anyways.  I hear hybrid thrown around that to me just means flexibility.  It isn't flexible if hybrid means you have to be in these exact 2 days.  Also, we've seen pushback from tenants or their employees that realize hey maybe if our people are coming into the office they don't want to share space.  Smaller companies in general aren't making different moves, they have a smaller or possibly tighter culture and aren't making wholesale changes.  Maybe they'll focus on more of a collaborative office.\n\nAs for the office is dead narrative, demand dipped fairly significantly, no question.  That being said, there are still buildings and markets that are thriving or in demand.  It's too broad to say office is dead or rates will drop x because of demand drop off.  In some instances yes, certain sub-markets and certain assets will trail others.  For example, I'd hate to be a LL with one large single tenant office building coming up on lease expiration in next 2-3 years.  At the other end a (currently) suburban or otherwise well located, well capitalized, well maintained building with lots of smaller, quality 3-8k sf tenants I think will prove continually in demand.  Terms may get more flexible in response, etc.\n\nAnother mini-rant but when people talk about rates dropping significantly, I think most people fail to realize how much cost goes into building out a space.  This is not an incredibly high margin business... tenants demand a certain space, it's going to cost X and rents need to be Y to justify and that won't change much from building A to building B.  Tenant's demands for a certain kind of space and cost to build largely dictate rental rate.  Also, if you are the only or one of only that offer what a tenant demands, even in a tenant market there is less competition and less competitive pressure to push rates down.\n\nThere are obsolete assets out there, they will be repurposed, this is healthy.  Landlords will adjust and leases and spaces may look different... we are seeing a ton of different models come online to meet different tenant demands and there will be a whole hierarchy of types of space/tenants in a building which will make it more dynamic.  I don't see the huge sustained demand drop off that grabs the headlines.  Nuance doesn't make good print.", "replies": [], "depth": 1}]