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Commercial Real Estate Impact - Office Space Trends and Implications Post-COVID-19

Published May 20, 2020 by Javier Vargas

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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. 
 

Executive Partners