Suddenly Remote

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By 2025, 36.2 million Americans will be working remotely—an 87% increase from pre-COVID levels—according to Upwork. “Our research shows the long-lasting impact that remote work and COVID-19 are likely to have on how hiring managers think about their organizations,” the company said in a new report. “As businesses adapt and learn from this remote work experiment, many are altering their long-term plans to accommodate this way of working.”

With high-profile tech companies like Twitter, Google, and Facebook all operating remotely, and some hinting that this could be a “permanent” option for employees, the impacts of these decisions are rippling through commercial real estate markets nationwide. Add the need for social distancing and ongoing employee health concerns to the list, and it’s clear that this isn’t a trend that’s going to fade anytime soon. In its 2021 Real Estate Market Outlook, CBRE says that “2020 will be remembered in commercial real estate for many things, but perhaps none more so that an acceleration of certain trends that benefitted some sectors but punished others.” Where warehousing, industrial, and logistics were all buoyed by the COVID-driven uptick in e-commerce, for example, office, retail, and hotels have all suffered. “Real estate conditions will start 2021 in a state of flux,” CBRE points out. “Certain sectors will grow strongly, but a full recovery of occupier and investor demand will be held back by the continued influence of COVID-19.”

Adapting to the “New Normal”

Washington’s commercial real estate markets has felt varying degrees of impact from the pandemic and the migration to working from home, versus in an office. And while some industries clearly need onsite workers (e.g., logistics, manufacturing, etc.), others have adapted to the “new normal” working environment.

At Kiemle Hagood in Spokane, Broker Craig Soehren says that the number of larger office tenants looking for space has “basically come to a halt.” Other tenants looking for expansion have put those plans on hold, he adds, with some reducing their space requirements. The latter are evaluating a potential long-term shift to a more agile work option—namely, allowing employees to work from home and visit the office as needed.

“Most tenants with leases coming due this year have either signed shorter renewals or kept their same space size,” says Soehren. On a positive note, he says that a number of smaller tenants are looking for space of their own, away from other remote-working family members or children who are attending school virtually.

To adapt to these evolving conditions, Soehren stays in constant communication with clients who are seeking more counsel on directions to take for their properties, and who need help making the best decisions on tenancies. He remains cautiously optimistic about the future. “I anticipate that by mid-2021, employees will start coming back and the real effects will start to manifest themselves in 2022,” he concludes, “as companies see how a shift to a more work from home environment affects their overall productivity and profitability.”

Leveraging Tech Tools

In Seattle, NAI Puget Sound Properties’ President Scott M. Coombs says office tenants remain hesitant to make long term commitments as they assess the impacts of COVID on their business. “Accordingly, many office users only want to commit to short-term leases in order to maintain flexibility,” Coombs says. “Because employee work-from-home preferences are still unknown, planning an office work environment is difficult.”

Coombs says that while retail and restaurants were both negatively impacted due to the pandemic, the region’s industrial market remains “very strong largely due to distribution of e-commerce products and onshoring of manufacturing and inventory.”

Early in the pandemic, Coombs says NAI developed internal webinars for its agents on how to use virtual meeting technology; create video presentations of vacant spaces, and utilize various technology tools for conducting business remotely (or without being able to meet clients in person). He sees these efforts continuing to pay dividends, even when the threat of COVID officially passes. “Due to the convenience, speed, and quality of virtual tools,” says Coombs, “I believe they will continue to be used heavily even after the pandemic has ended.”

The Crystal Ball

John R. Miller, senior managing director for the Pacific Northwest at CBRE, says the company has been helping its clients navigate the uncertainty caused by COVID-19—from how to shut down and safely reopen their spaces to how to retrofit layouts to accommodate social distancing guidelines to discussions around future space needs. “We’ve also seen many companies delay any long-term decisions regarding office space,” he says, “and instead complete short-term renewals while they reassess which employees will return to work and when that will occur.”

To adapt, CBRE has developed technologies and resources to help its clients evaluate various workplace strategies unique to each portfolio. There’s no doubt the pandemic created disruption, Miller adds, while also accelerating various existing trends (e.g., remote work, grocery and meal delivery, buy online/pick up in store (BOPIS), and e-commerce). “We expect many of these habits to remain popular after the pandemic,” Miller predicts, “although not to the same degree we are seeing now under forced circumstances.”

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