Core Commercial Real Estate
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Below is an interesting article by Ruth Colp-Haber of Wharton Property Advisors Inc.  

Wharton Property Advisors is one of Core Commercial’s US tenant representation partners

 

The Office is Dead; Long Live the Office

 

Some much-needed time off over the holidays has allowed me to reflect on the tumultuous events of the past year, and more specifically on the impact of the pandemic on real estate and the office. In a paradoxical way, the Omicron surge has been the last straw. Even some people who have happily abandoned the office are going stir crazy and are starting to long for a return to some kind of normalcy. To paraphrase Mark Twain, rumors of the demise of the office are greatly exaggerated.

Take my husband and business partner Eric as an example – please. As a refugee from big law, he has happily embraced a work at home lifestyle and has politely declined all business and social invitations for two years, only emerging from self-imposed isolation (some might say confinement) to see friends at the occasional Knick game which he deems as the sole essential indoor activity. But even Eric is starting to long for an escape from our apartment and go somewhere – even an office.

I have been saying since Day One of the pandemic that the return to safety is the fundamental pillar of the return to the office, but we are still not there. Due to the arrival of the Delta and Omicron variants, every predicted inflection point for that long-awaited return has come and gone. Incredibly, despite the twin medical miracles of the vaccines and new treatments which are in the pipeline, people cannot feel completely safe yet on public transit and in the office absent full vaccine mandates including boosters. Until that day comes, we will not be able to fully assess what companies will do with their hybrid work policies and their impact on the office market.

But don’t let the Omicron surge lead you to miss the forest from the trees. We are actually entering a new Golden Age of work with greater flexibility and more agency for workers. Companies that get that delicate alchemy right – which is different for each organization – will be richly rewarded with employee loyalty and access to the largest pool of talent.

The maxim that two things can be true at the same time applies here. First, it is beyond question that remote work has been an unqualified success that saved the economy from disaster when the lockdowns hit. It is also beyond question that although there have been dozens of surveys with varied findings, as a general proposition at least 50 percent of workers prefer to work from home part or all of the time. As we are in a period where talented employees are at a premium, their voices must be heeded by business or they will lose top performers. Further, the flexibility for employees to tailor their work to their specific family situations was long past time.

However, most of those employees who want to stay at home do not have to concern themselves with the big picture of what sustains a knowledge business in the long run, no matter how difficult, sophisticated or important their individual jobs. Culture, collaboration, and training are at the top of the list of what makes any successful business tick.

Below are 4 key questions that CEOs and managers must wrestle with regarding their company’s work arrangements:

1) What makes a business distinct from its competitors from the inside, and how can that be preserved?

2) How will new employees integrate with the old ones to form an effective team? Remote work is fine if you know and have worked with your team for years, but how do you keep the momentum going with the inevitable comings and goings of any organization?

3) How will the employees at the beginning of their careers (and even in the middle and beyond) obtain the vital lessons of learning by watching how successful senior professionals deal with complex issues and negotiations? As a corollary, are there sufficient opportunities to ask questions and even watch how those senior people deal with all types of situations?

4) How will those employees learn the lessons of how to get the clients which are the lifeblood of the knowledge businesses?

As you can see from these questions, in-person work is critical for the training and socialization of younger and new workers. In addition, these are the dilemmas that top management faces when they plan for 2023 and beyond. I predict that without the central grounding of an office, long-term problems that have been bubbling up during the period of remote work will become more noticeable this year as companies change and evolve. Please note that this is not to minimize the importance of the savings that can be achieved from a reduced office footprint. However, it remains to be seen how most businesses will retain their particular strengths as all or mostly remote entities. Studies have generally shown a very modest increase in productivity since the pandemic began, but these can be picked apart to allow for the individual characteristics of each company.

Here’s another way to look at the situation. In-person work is critical for the training and socialization of employees and in particular younger and newer workers in the knowledge industries and the professions. Medical students do multiple-year residencies in the hospital after they complete their schooling. Lawyers, architects, executives and other knowledge professionals also need similar hands-on training, albeit to a lesser degree. The more time passes from March 2020, the worse off those employees and their companies will be if the status quo remains in place.

As I have said many times, we are in the middle of a great work experiment.  The consequences of that experiment will take a decade to play out if not more. Accordingly, I believe that we are headed for a bumpy and unpredictable year. However, once the Omicron tidal wave has passed, I also predict that efforts to return to the office will pick up new momentum as safety permits. With so many holiday vacations cancelled, the office may even seem like a getaway to some of us cooped up at home this year. And here is the good news: forward-looking businesses that develop the right mix of office and remote work that works best for all stakeholders will continue to thrive. 

Many of our friends and clients are currently dealing with the difficult issues and questions raised above. Accordingly, please feel free to tap our expertise on all matters related to office space. We will do our best to apply our experience to your company’s unique needs.

All the best for a happy, healthy and safe New Year!

Ruth Colp-Haber

Partner
Counselor of Real Estate
Fellow of Royal Institution of Chartered Surveyors

Wharton Property Advisors, Inc.
Office Leasing ● Commercial Real Estate
450 Lexington Avenue, 4th Floor
New York, NY 10017
(212) 759-0408 Office
(212) 748-9352 Mobile
ruth@whartonproperties.net
www.whartonproperties.net

 
 

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2020 brought on a fundamental change in the way we work.  Working from home was a perk that seemingly everyone wanted, but as the pandemic wears on the novelty is starting to wear off for many employees, and work-from-home fatigue is setting in. Many employees struggle with a less than ideal home office setup, video conference overload, family distractions and feeling less connected to the workplace.

This week, at the World Economic Forum, Barclays Plc Chief Executive Officer Jes Staley said working from home doesn’t appear sustainable, and JP Morgan Chase & Co.’s asset- and wealth-management boss, Mary Erdoes, agreed “if you ask anyone today, it feels like it is fraying, it’s hard, it takes a lot of inner strength and sustainability every single day to continue to focus and to not have the energy you get from being around other people.” Financial Post January 26, 2021 https://financialpost.com/executive/careers/top-bankers-sound-alarm-that-remote-work-is-starting-to-grate/wcm/e56f232f-e13a-43bf-b4a9-7e9bd3a092d2/amp/

Both executives parrot the concerns we regularly hear from clients that it is a challenge to maintain corporate culture, collaboration and knowledge transfer from a virtual office.

Even though it appears we will be working from home for the foreseeable future, most companies are looking forward to at least a hybrid situation where employees are in the workplace but with some flexibility to work from home.

The deadline to apply has been extended to June 30, 2021

Please read the attestation carefully before you submit your application as you can not have applied for the Regional Relief and Recovery Fund too.  To read more about CEBA, go to https://ceba-cuec.ca/ 

There may be unintentional negative consequences for applying for the additional $20,000. Suggested reading before applying:

 From the  tax website  TaxTips.ca – CEBA – Canada Emergency Business Account

 It important that you know what the $40,000 + the additional $20,000 loan actually means to you before applying:

“Important:  If you’re considering applying for the additional $20,000 CEBA loan, be aware that it can change the requirements for the original $40,000 loan.  If your attestation for the $40,000 said you could use the funds for “without limitation, payroll” etc., that will be changed to use for only Eligible Non-Deferrable Expenses, which includes only non-arm’s length payroll (i.e., not owners’ wages).  See the Crowe Soberman article CEBA Expansion – Think Twice Before Applying for the Additional $20,000.”

 

NOW accepting applications – closes May 31st

  • Alberta organizations that were ordered to close or curtail operations from April 6, 2021 and later AND have experienced a revenue reduction of at least 30%, as a result of the COVID-19 pandemic can apply;
  • The grant is used to support businesses affected by the public health measures introduced in April 2021;
  • The Spring 2021 payment is calculated as 15% of the eligible organization’s revenue from the chosen month to a maximum of $10,000;
  • See webpage for information and how to apply https://www.alberta.ca/sme-relaunch-grant.aspx

The truth is every lease is different. Your lease may have specific provisions for circumstantial deferred rent or rent abatement during times of material business interruption or revenue loss (many companies also have business interruption insurance for this reason, but to date this Covid-19 pandemic is not definitively being covered). If you do have these provisions in your lease, we can help you speak to your landlord about exercising these rights.

If you do not, now is the time to talk to your landlord. Our job as a tenant-only representative is to be part of the process with you and we are happy to work with your Landlord on your behalf.

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