There’s something that commercial office building owners and businesses have in common: the question of how, and when, people go back to the office.
“There has always been distributed work and remote work,” says John Arenas, CEO and chairman of Serendipity Labs. “There were ways of supporting mobility and attracting top talent by giving them flexibility. What the pandemic did was accelerate that shift, forcing businesses to give more employees ways to work remotely.”
The pandemic brought opportunities, with companies negotiating leases arrangement with shorter terms, flexibility to exit, use of less space, and support drop-in availability for employees. “The next step in the continuum is to create a plan of hybrid work which includes having a core main office and then flexible policies around remote work,” Arenas says. A set of responses gives companies the chance to work more effectively with better control of lease costs.
Although the benefit may seem to be for businesses, it also offers opportunities for property owners to reinvent their strategies to remain competitive.
Office space markets in urban locations are seeing “a flight to quality,” says Arenas. Landlords with a class-B or -C location will likely see tenants moving out and spending the same money to take less space in higher quality buildings. “That’s going to put pressure on landlords.”
Suburban landlords have faced similar pressures for 10 to 15 years. “They’re really in a position to think in an entrepreneurial way, to try and tackle problems in more aggressive and thoughtful ways. Today and moving forward, suburban owners realized they are in the flexible business.”
As the pandemic ebbs, or possibly does otherwise with new variants always a possibility, flexibility will be the characteristic that lets office tenants and landlords alike thrive.
Larger companies, trying to coordinate a national response “with more risk-averse strategies and approaches,” as Arenas notes, have faced greater challenges. “They’ve been recalibrating their plans over an almost 18-month period. They have mandates to come back to work when the conditions are right.” But those conditions keep changing, with current status of the pandemic, public responses, and worker sentiment. While the availability of vaccines has helped reopen a path to the office, businesses with suburban flex strategies have come back faster by offering their employees professional workplaces closer to home.
This is a time to consider flexible workspace arrangements, even if for only parts of a workforce. “Companies traditionally haven’t had much choice but to go along with the 10-year lease and five-year renewal,” Arenas says. “That doesn’t match with the business planning horizons and revenue opportunity.”