The COVID-19 pandemic has had an impact on every aspect of our lives. As businesses across Houston begin the phased approach to reopening, it is important to note the implications the current environment will have on the region's commercial office space.   Jon Lee, Executive Vice President of Advisory & Transaction Services with CBRE, spoke on the pandemic’s impact on Houston’s commercial real estate market. Below are key takeaways from his presentation: Legal Implications Uncertainties When it comes to returning to the workplace, safety is everyone’s primary concern. From an employer's standpoint, the responsibility companies have to their employees and customers adds additional liability concerns.  It is important that plans are made now to prepare for reopening the workplace. Individual companies will determine their reopen timeline based on the comfort level with their plan and an assessment of risk tolerance. “This is going to be widely varied,” said Lee. “We are hearing companies starting to bring folks back [into the office] on June 1 and other companies no earlier than early 2021.”  Lease Restructuring When the pandemic first surfaced, the conversations with landlords and tenants were largely focused on whether there were stipulations in a lease that would protect the tenant during this situation. Unfortunately, there simply is not a lot within traditional office lease agreements that would protect tenants from a government-mandated stay at home order or the fallout from a pandemic.  “The provisions that one might naturally assume would help protect the tenant [casualties, interruption of services] really stem from the idea that the office is inaccessible, or something prevents the entity from occupying the space,” said Lee. This is something that he sees changing as a result of the current situation. Companies should discuss individual circumstances with their landlord and see if they would be willing to work with them on rent abatement, rent deferment or lease restructuring.  Future of Office Space Configuration The future of what an office space looks like will certainly change. Most notable, particularly in the near term, will be the need to adopt physical distancing guidelines, which includes defining both the required distance between individuals as well as adjusting maximum occupancy rates. This could happen in several ways including: Spacing—physically separating workstations Shifting—Alternating shift schedules for employees is the easiest way to accomplish physical distancing without the need for an extensive office redesign, which can often be capital intensive. Assigned Seating—the trend around unassigned “open” seating will cease, at least in the short term. Conference Rooms and Collaboration Areas—these will largely be closed or reconfigured.  Cost Implications or Redesigning Office—with the capital-intensive nature of fully redesigning an office, companies will embrace other means or appropriately social distancing in the office.   Mobility Moving Forward There is a huge variance in sentiment about employees permanently, or even partially, working from home. “I don’t think office space is going away,” Lee said. “There is a small percentage of job functions who could permanently work from home.” CBRE is encouraging their clients to consider what would be the optimal way for their specific company in that given industry to function.  Building System Changes Across the board, we will see significant systems changes happening at the building level, and not just inside the physical tenant space. This will include: Heightened interest in air filtration systems to decrease the risk of these airborne bacteria and viruses to affect tenants and their employees, including the use of new technology.   Increase in janitorial services, with common and personal areas being regularly cleaned.  Common areas and casual seating will likely be temporarily removed. The most disruptive shift will be in increased elevator protocols. In most cases, the average capacity will be 3-4 people. Many companies will also implement and elevator queue system. There will also be a shift to touchless entry, as well as limiting the exit and re-entry to reduce burden on these protocols.  Role of Technology The use of technology in an office setting has increased due to the current situation, and we will continue to see this trend increase in the future. While these technologies are effective, a growing concern with executives is the important role physical interaction can have when it comes to attracting/retaining talent and building a corporate culture.  Trends in Work Activity Performance With a vast majority of individuals across the country working remotely, there has been an increased interest from employers to measure employee sentiment. “There is no surprise that coaching, mentoring, managing and collaborating with others is easier in person,” said Lee. But on the flip side, creative thinking, as well as managing distractions and interruptions, is easier at home.  While the office market will not go away, employers will likely offer a range of additional options to their employees. A trend discussed recently in the national media involves employers embracing the idea of satellite offices in suburban locations. “This kind of suburban migration could be a trend we see moving forward,” said Lee.   Return to Work John and his team at CBRE see the re-entry to the office as a three-phase approach: Rethink: Planning and actions to consider now in preparation for return to work.  Reopen: Getting back in this “pre-vaccine” reopen phase will be the most disruptive. Significant steps will need to be taken by companies to create a safe and productive environment for their employees.  Reoccupy: There will be great lessons learned from the previous phase.  A safe return to the office for most companies will largely center around effective space and occupancy planning. This includes determining new occupancy plans and layouts, addressing social distancing with furniture and path-of-travel policies, planning for the moving and storage of furniture, and effectively communicating new sanitation, food and beverage and cleanliness policies.        Lastly, it will be important to do a thorough assessment of environmental systems including air quality, plumbing and electrical. While this will largely be led at the building level, individual tenants will need to be involved in determining that those systems are in line with what they expect.    Click here for additional COVID-19 resources for small businesses. Visit the Partnership's COVID-19 Resource page for updates, guidance for employers and more information. And sign up for email alerts from the Partnership as the situation develops.   

The painful and significant disruption to Houston’s labor economy caused by COVID-19 has been a “shock to the system” but will not effectively change the economy’s fundamental makeup. So says Parker Harvey, principal economist for the Gulf Coast Workforce Board.  Harvey shared that and other insights into the changing labor market during a virtual UpSkill Works Forum hosted by Greater Houston Partnership Senior Vice President of Regional Workforce Development Peter Beard. Harvey and Beard discussed some observed unprecedented unemployment figures, employment indicators and ways in which the region’s workforce can set itself up for recovery. Disruptions to the labor market are unprecedented  From February to March, the region’s unemployment rate jumped from roughly 3.9 percent to 5.1 percent, an increase on par with that of May of 2009, and one of the biggest one-month jumps ever seen. These figures only account for the first half of March, before the region’s Stay Home – Work Safe orders were made. This roughly 30% growth in the number of unemployed individuals outpaces the national increase of about 20%. Houston, Harvey noted, is experiencing the dual effects of COVID-19 and the downturn in the oil industry. Between the beginning of March and mid-April, around 314,000 individuals filed initial claims for unemployment insurance, cumulatively; about 10 times the number of claims made during a typical six-week period when the economy functions normally. Using this figure, Harvey projects unemployment rates to be closer to 12%-12.5% in the next couple months. This would reflect record unemployment, Harvey said.  Unemployment claims data by industry and by county from the Texas Workforce Commission can be found here. Employment losses have been widespread across industries, though notably large within construction, manufacturing and the leisure and hospitality sector. The leisure and hospitality losses break the long-time trend of unbroken job gains in those areas between the months of February and June. Moving forward, Harvey expects to see layoffs shift from the service sector to the white-collar workforce. Job posting data as market indicator and seeing hopeful signs Specific, localized data around which industries and occupational types are contracting or growing takes time to gather and analyze, and data that exist do not yet reflect the climate of the last several weeks. Analyzing online job postings can provide a proxy. And although the number of active job postings are down by about one-third from this time last year, there are still about 90,000 active jobs posted across the region. Based on an analysis of job postings, Harvey has seen a surge in demand for editors, producers and translators (he noted the tremendous amount of news and other media content that has been created around the crisis). Public education systems are also hiring. Selective hiring is occurring within the health care sector.  Workforce Solutions posts active job openings on its website here. Harvey has started seeing some good news more generally in these postings: The number of employers removing job postings has started to decrease. The point at which more employers are increasing their number of job postings than are decreasing it can be seen as an indicator of some recovery, but Harvey believes that point is still in the distance. Sequencing of recovery is unclear Harvey expressed uncertainty around whether the service sector would recover before the professional sector, or vice versa, but he believes businesses that instill a sense of confidence in consumers around delivery of service and safety and health will recover more quickly as they re-open than those that do not. He predicts the economy in Houston will recover in a sort of “W” shape, with starts and stops before a full recovery begins, especially if there is a second wave of COVID-19 infections, thus rocking consumer confidence. Harvey expects industries that rely on a density of customers, like mass transportation and entertainment, will be slow to recover. The Greater Houston Partnership has developed 15 principles to help businesses develop plans to protect the health of their employees and customers by reducing the risk of transmission of the COVID-19 virus. Learn more about this Safe Work Program here.  Reskilling should help workforce recovery COVID-19 could have long-term effects on the types of skills Houston’s workforce needs. New types of trainings and skill development programs may be needed to manage hygiene protocols to keep workers and customer safe. Digital skills, which were already becoming increasingly important in many industries and sectors, could become even more important if jobs that could have been done in person become a little more remote more often. Preferences for online shopping habits could increase – or decrease -  Harvey is concerned that young workers who relied upon entry-level jobs as a pathway into higher-level employment and older workers approaching retirement could face challenges returning to the labor market and said the Gulf Coast Workforce Board will explore how to address these needs through reskilling. Harvey believes individuals who have been acquiring skills over the last several weeks will have an employability advantage over those who have not.   The UpSkill Works Forum Series brings you interviews with business and community leaders, policy makers, and leading thinkers on the key workforce issues our region confronts. This week’s webinar will take place on Wednesday, May 6 and focus on “Understanding Skills to Navigate the Changing Nature of Work.”  Learn more about UpSkill Houston here.