Even before the COVID-19 pandemic hit in the late winter months of 2019, there was a shift in many large and small companies away from a traditional five-day, nine-to-five week. Many companies flirted with or even adopted the idea of a four-day week in the office with one remote work day, or the option to flex times to provide an extra day or half-day off per week.
The dramatic and unplanned change in the workplace for many companies starting in the spring of 2020 escalated this transition. Entire offices literally transitioned overnight to working remotely, with offices remaining largely empty. Today, while some workplaces are transitioning back to a more traditional office presence, other companies are leaning into the idea of a permanent transition to a hybrid or a remote workplace for at least some level of the workforce.
While this shift or transition is now moving to more permanent status for businesses, commercial real estate or CRE is also adjusting. This adjustment includes creating ways to attract new clients and tenants to building space that is designed with this level of flexibility and innovation in mind.
A significant consideration for the CRE industry is the ability to market space, particularly in luxury and high-end properties, to attract tenants at a time of increasing vacancy. Overall, these last two years have seen a drop of about 35% in leasing activity across the country.
Building in technology to leasing agreements is one way that commercial real estate can add value to flexible office space. For example, redesigning conference rooms and meeting facilities to incorporate the ability to hold virtual meetings with ease and comfort is a critical factor for property owners to consider.
Another option to help reduce the cost of office space may be to convert some office space or meeting rooms from dedicated areas to shared work areas or virtual meeting spaces for multiple tenants. This level of flexibility allows a more cost-effective lease arrangement while still offering all of the services and the features that each tenant requires.
The key for any CRE investor is to remember that the C-suite and leadership still want the prestige and recognition of specific, private, luxury office spaces. As more office space is converted into the flexible, semi-shared model, this premier office space will continue to be in demand, particularly in upscale neighborhoods. At the same time, offering a shared workspace and lower costs for tenants that want flexibility and greater accommodation for remote work or shortened work weeks will be essential to maintain low vacancy levels. Understanding what tenants are looking for as we move into 2022 will be a critical factor for CRE. It will be necessary to ensure current tenants renew leases and new tenants actively compete for space in any CRE property.
