Enticing Reluctant Workers Back To The Office Will Test Companies' Leadership
With vaccines widely available, cities largely back up and running and office buildings open for business, people are starting to question what will bring workers back to their desks in big numbers — aside from forcing them.
“Leadership is going to be essential to driving people back to work,” Cushman & Wakefield Global Brokerage Chairman Bruce Mosler said at Bisnow’s Workplace of the Future event Thursday. “Because to mentor, to innovate — at the end of the day, to collaborate — you have to be in an office environment. Leaders have to take that step.”
Many landlords had pinned their hopes on a significant return to the office post-Labor Day, but offices are still largely empty in major cities. In New York City, office occupancy was at 31% as of Wednesday, Oct. 13, according to security firm Kastle Systems, 1.6% higher than the week before.
Many employers, and the landlords they rent office space from, are now considering how workplaces may have to evolve to lure people back. A real estate footprint that supports a strong company culture, amenities and tech offerings that actually improve people's lives and workday, as well as a commitment to keeping people safe and healthy, are emerging as crucial aspects.
"Enticing people back into work has been extraordinarily hard,” said Shri Madhusudhan, the vice president of property service at National Grid. “Our employees no longer really care for the free coffees or the free lunches. They're looking for something more, they're looking for collaboration in a different kind of way … The single biggest question that employees ask me is, 'What are you doing to keep me safe?'"
Many landlords have invested serious capital trying to make their office buildings safer for occupants. In summer 2020, as government closure orders lifted, companies installed temperature checks, plexiglass and increased cleaning efforts across buildings. As the pandemic has worn on, apps to monitor capacity in rooms, maintain social distancing and trace outbreaks have become more prolific.
But the major pressure landlords are now facing extends beyond general safety — it is now about making the workplace a better option than working from home.
"We need to understand how technology is improving both hardware and software, because it is creeping on this office place,” Oxford Properties Group Vice President Adam Frazier told the audience. “And I don't think that's a bad thing. I think they can actually coexist and compliment one another, we just both have to evolve."
Oxford is developing St. John’s Terminal as an office campus for Google, which has agreed to buy it for $2.1B. Frazier said many of the tools we had all been using in the workplace before the coronavirus pandemic are now antiquated, and the focus is now shifting to making employees' lives easier.
Removing the frustrations of daily life through apps and better technology has become a key part of the return to office experience, many panelists said.
“We're working much more with HR because the workplace isn't all in the workplace, it’s in the workplace or at home,” said Bruce MacAffer, the head of Americas real estate at public relations and advertising conglomerate WPP. "Both of our jobs are to get our people back together, either physically or virtually and to keep these cohesive groups, build communities."
He said flexibility is going to be key going forward, because there is still so much uncertainty.
“Whenever we acquire space now, we're trying to acquire spaces in buildings that have flexible options ... [and] even have a retainer with WeWork or Industrious."
But even as the world of the office evolves over the long term, most office owners and brokers are confronted with an immediate set of challenges.
Manhattan office availability is now at 18.4%, well above the market’s five-year average of 10.8% before the crisis. There were 39 blocks of office space 250K SF or larger available to lease at the end of September, which combined account for nearly 16.5M SF of availability in the market, according to Colliers data provided to Bisnow.
Brokers at the event said that, despite the bleak data, the leasing market is stirring back to life.
"I think we're in a lot better place today than we were 12 or 18 months ago, certainly all the reports would bear that out,” SL Green Director of Leasing and Real Property Steve Durels said. “From our own 28M SF portfolio, what we see is a lot more velocity in tours proposals and there seems to be a lot of activity on large tenants. That’s different to what we’ve seen in prior disruptions in the market.”
He said he is dealing with the highest number of large leases than at any point in his career, with around 10 proposals or leases out that are between 100K and 600K SF.
Mosler, of Cushman & Wakefield, agreed that the big-space users are still very active in the market.
“The big-space user is the dominant player in the market right now, and they are looking to go longer-term. There's probably 10M to 15M SF of those players right now, making long-term decisions," he said. "As those dominoes fall, we will see where they go and what that does to our marketplace.”
CORRECTION, OCT. 25, 11 A.M. ET: An earlier version of this story misidentified Rachel Wachtel. This story has been updated.