The office space market is being dictated by ONE thing, Culture!
As one of the more active office space brokers in New York City, I can’t help but cringe when reading some of my counterparties’ posts online. The recurring themes titled “NYC Office Life is Finally Bouncing Back”, “How top CEO’s from Elon Musk to Tim Cook tackled the Big Return to Office in 2022“, “Employers will soon have the upper hand when requiring return to office”, “Why Employees NEED to be in the office”, etc., just seem like self-serving narratives that are out of touch with reality- which Is why I am writing this heartfelt post.
First, let’s be clear about a few things…
-I make my living LEASING OFFICE SPACE in Manhattan.
-I’ve had a successful career leasing millions of square feet of office space and representing some of the largest companies in the world with their workplaces.
-The amount of deal volume has diminished though I am still quite active.
-Workplace expectations have changed post-pandemic.
-The type of product you focus on (i.e. Trophy/Class A vs. commodity office space) will greatly impact the demand.
I, myself, have shifted to a semi-remote work schedule. I am in the office four days a week, though on occasion, if there are no in-person meetings or tours, work from my home office overlooking Manhattan’s skyline. As you can imagine, I have every necessity required to complete my tasks from home. From ample supplies, to scanners, printers, and of course a multiple monitor setup. It can even be argued that my home office is BETTER than my office or any other in the industry. It Is important to clarify that from an occupancy standpoint, offices were NEVER actually 100% occupied. According to statistics, most offices hovered at about 91% occupancy because of vacation time, sick days, paid leave, business travel, meetings, various remote functions, etc.
Some might debate that I SHOULD BE in the office. I refute that work has changed and being in the office doesn’t make me any more or less productive. As a matter of fact, the only reason why I go to the office is for the CULTURAL IMPACT of my peers, serendipitous interactions, morale boosts and idea flow.
Which leads me to a couple of key points that I have witnessed during the pandemic.
-Every organization, regardless of industry, has different expectations from their employees when it comes to being in the office.
-The stats you are seeing online from your brokers are 99% skewed and I question all of them. The reason you ask? Data can be manipulated to prove any point. There is A LOT at stake for massive commercial real estate organizations when it comes to appeasing both their corporate accounts and landlords/owners they represent. For example, is it more beneficial to paint a doomsday scenario or to make things a bit rosier than they really are? I know if I was hiring a company to lease up a building I own, I would want a broker and/or company that is bullish on the recovery. At the same time, if I was a massive organization with giant real estate footprints and spending, I would want someone advocating on my behalf to help me justify that spend and get “butts back in seats”.
-Mandating employees to work from an office full-time might lead that organization to lose talent.
-Workers EXPECT, at the very minimum, hybrid work schedules.
-Employees desire highly amenitized workspaces and greater collaboration when they are actually in the office.
-Companies MUST incentivize employees for coming in. I do not necessarily mean monetary compensation. Several ways in particular that workers can be motivated to “show-up” is by providing better mentorship, C-level access for younger workers, company outings, and more opportunities for advancement.
Accordingly, these are not FUNCTIONS of the office market, but rather of a cultural shift that needs to be addressed by employers. Until this happens, there will continue to be a great divide, yielding unparalleled opportunities in the market for tenants that GOT CULTURE RIGHT.