As the national rollout of vaccines continues across the United States, confidence is again returning to the general psyche, and commercial office tenants are finally hanging out shingles that read “Fully Open for Business.”
But that business is a very different animal than it was pre-pandemic, as the Q2 2021 BOMA International COVID-19 Commercial Real Estate Impact Study reveals.
Results from this second in a series of studies commissioned by BOMA International, underwritten by Yardi and developed by Brightline Strategies have been released, revealing an ongoing confidence in management and ownership’s handling of the pandemic. But it also tracks an evolution in what tenants expect from building personnel in order to prevent such a disruption from impacting vital business operations again. And therein lie both challenges and opportunities for property managers.
First, some background: This survey, conducted from March to May of 2021, polled some 3,115 U.S. corporate decision-makers and influencers. The timing is critical, especially when the results are placed side-by-side with those from the first survey, which was conducted in Q4 of 2020 when “uncertainty” was still the watchword and vaccines were still unavailable. (See “The Bigger Picture,” below.)
A MORE COMPLEX RELATIONSHIP
In this go-around, fully 86 percent of respondents expressed approval of how their building teams handled the crisis, an increase of 8 percent over the Q4 results. This includes their ability to communicate with tenants—they’re doing it “just right,” say 88 percent. That rating is a significant factor for the 78 percent who say their office is or will be vital to their continued success.
This confidence directly impacts ownership’s bottom line, with 39 percent of decision-makers reporting that they’re more likely to renew their leases based on their manager/landlord’s proactive performance. And, at 55 percent, the number of respondents reporting a likelihood to reassess space needs has dropped six points since the prior study. So has the number likely to reduce space—from 43 percent to 37 percent.
But here’s where we start to see a more complex relationship between tenant and space than existed before. That 39 percent likely to renew based on manager/landlord performance is actually down from the 48 percent tracked in Q4 of 2020, and that 37 percent of tenants reporting a likelihood to reduce space, while down, is still sizable. It’s also notable that the number of tenants who responded that they are “unsure” if their space reassessment will include a reduction or expansion has doubled since the Q4 study.
While an increasingly “unsure” population of tenants underscores the notion that the relationship between occupiers and space decisions is more complex today than it was late last fall, it also indicates that there is a greater window of opportunity for property professionals to engage with their tenants on the way forward. (We’ll have more on actionable steps property professionals can take to seize this opportunity shortly.)
For those considering space adjustments, where might we expect them to occur? The survey says the top five options are: reducing the number of private offices (38 percent); the addition of hoteling or flexible desks (35 percent); common area cutbacks (32 percent); reductions in the size of private offices (30 percent); and reducing the number of conference rooms (26 percent). This data tells a story, as respondents considering the addition of hoteling or flexible desks has ticked up 10 points since the Q4 2020 survey, while interest in reducing common area space has decreased 4 points—all of which aligns with a growing trend toward hybrid workplace arrangements.
Certainly, leaner staffs and more telework options, as well as changes in business fortunes, are driving the perceived need to reduce space. In fact, 47 percent of respondents have already cut overhead or could still do so as a result of the pandemic’s impact.
Whether the call is for cutbacks or expansions, decision-makers return with specific expectations about building performance. And here lie those challenges and opportunities for property managers. Eighty-eight percent of survey respondents stated that they wanted to see their building teams make investments in “infrastructure and shared spaces.”
Improvements such as HVAC upgrades and more sanitation are perceived as adding value to the office space by 77 percent of respondents. What’s more, upgrades to infrastructure and shared common areas were ranked as either “Must-Haves” or impressive improvements by 44 percent.
This points to an opportunity for building management and landlords to capitalize on perceived needs in the area of amenities, whether they be of the “typical” or traditional type or those geared specifically to health and wellness. While 36 percent of respondents want to see an investment in “typical and/or high-end amenities and good service,” a total of 64 percent of respondents want to see investments in amenities and features that go beyond pre-pandemic “status quo” offerings.
This 64 percent is made up of two essential groups. First are the 37 percent of respondents who want to see investments made in the COVID-19 response category (think: technology, infrastructure, flex space amenities and other items that would ensure they are better prepared for future pandemics). It is also made up of the 27 percent who want to see capital directed toward platforms and programming for professional development, online networking and more health and wellness resources to increase an organization’s overall “culture, connectivity, productivity and well-being.”
The top five accommodations owners and managers can make to support those amenity goals are:
- Availability of well-appointed multi-functional rooms, such as large board rooms with high-end technology and kitchens for regular team meetings (59 percent).
- Reservable health/wellness suites for on-demand services such as physical therapy, meditation, massages and yoga (55 percent).
- Dedicated tenant lounges and multimedia, socializing and work-friendly gathering spaces (54 percent).
- On-site wellness managers connecting tenants to programming, fitness trainers, nutritionists and such (also 54 percent).
- Engaging and entertaining on-site social programming, like happy hours, luncheons and courtyard concerts (53 percent).
A NEW ERA OF WORK OPTIONS
We learned much about the nature of work during 2020, specifically the degree of productivity workers can achieve while working remotely. Pre-COVID, our average respondent reported 70 percent of their employees were in the office full time. Post-pandemic, and projecting as far out as 18 months, that drops to 43 percent.
And while it has become clear that, for reasons of collaboration and socialization, full-time remote work is less than ideal, the measure of productivity while working from home received fair, if not stellar, marks from decision-makers. Thirty-nine percent believe their workers are more productive at home, compared to the 28 percent that still hold reservations about the practice.
Hesitations aside, work-from-home strategies are one of the many drivers that will redefine how we work—and how the office environment will change as a result. To be sure, our understanding of the post-pandemic work environment still has room to grow. But it remains clear that tenants will continue to trust and rely on their property managers to rise to a new set of challenges and adapt right along with them.
The Bigger Picture
The very nature of the pandemic points to issues beyond the confines of the office environment. Nearly three quarters (65 percent) of surveyed corporate decision-makers believe the country is headed in the right direction in terms of COVID-19 as a public health crisis. This is in striking contrast to the Q4 2020 survey, when only 37 percent of respondents held out that sort of hope.
Of course, we didn’t have vaccines then. Today, 79 percent of corporate leaders are “personally comfortable” with getting the shot(s), as are most of their employees (say 67 percent of respondents). And while 70 percent see the vaccines as hastening a return to work by this summer (and 43 percent already have a vaccine policy in place), a little more than half (54 percent) would revert to remote working if a new strain popped up. The good news here, of course, is that, if the worst should happen, at least they’ll be prepared this time.