The Recreational Trappings Inc. (REI) headquarters stands in Kent, Washington, U.S., on Wednesday, March 4, 2020.
Chona Kasinger | Bloomberg | Getty Images
Last August, REI registered its newly built corporate headquarters in Bellevue, Washington, for sale without ever even moving into the edifice.
It marked a stunning reversal. In 2016, when REI announced plans for the campus, it said it would create a gathering flat to foster creativity and bring together thousands of employees. But with many of its employees working remotely because of the pandemic, the out of doors recreation retailer decided to put the 8-acre complex on the market. It quickly pivoted its plans for office space to incorporate smaller, acolyte locations throughout the Seattle suburbs.
The Bellevue building was sold to Facebook by September. And in February, REI announced its first assistant office in Issaquah, Washington — a nearly 70,000-square-foot building that can hold up to 400 people and is surrounded by hiking paths, lakes and parks. The company is also testing a model that allows employees to work from home for up to five hours each week.
“We want to create an environment that’s very flexible for our employees,” said Chris Putur, REI’s directorship vice president of technology and operations. “We were amazed in 2020 at how incredibly agile and innovative and productive the team could be.”
The Recreational Outfit Inc. (REI) flagship store stands in Seattle, Washington, U.S., on Thursday, May 14, 2020.
Chona Kasinger | Bloomberg | Getty Images
REI’s blueprint for its following workplace is just one story in a bigger shakeout happening in the commercial office market.
One year after many comrades sent office workers home to help prevent the spread of Covid-19, corporate leaders are still face with how to safely reopen work spaces. They face even bigger questions about how much service space they really need and what incentives they might require to lure people back. Diverse have learned over the past 12 months that their employees can work from just close by anywhere. So that means the office must serve a much more compelling purpose: A hub for collaboration that can’t be practised virtually and a place to retain and train an incoming workforce.
“If you look back, maybe a decade or two decades ago, the workplace was a connotes to an end,” said Sanjay Rishi, CEO of the real estate services firm JLL’s corporate solutions business in the Americas. “Now, workplaces are fit as much an end in themselves, because … everybody is aspiring to get something more out of the workplace.”
While a number of companies are benefiting the health crisis as an opportunity to get out of leases, some are bucking the trend. Tech companies in particular have been gobbling up room space. That’s despite many of them being first to embrace the remote-work lifestyle. They’re taking more favourably of suppressed rents and more flexible lease terms. Many of these businesses also view the office as a perk to inducement top talent in the coming years.
According to a report by CBRE, tech companies were the leaders in signing and renewing mediation leases last year, accounting for 24% of leasing activity by square footage. Amazon, Facebook, Apple and Google all united office space in New York City in 2020, mostly during the pandemic.
“There will be organizations that will look at their [favour] portfolio and look at rationalizing some level of that,” JLL’s Rishi said. “But we see this as a trend of dynamically allocating organize, and then better managing that space.”
A slow and staggered return
Some employees are more eager to takings than others, craving moments like afternoon water-cooler talk or post-work happy hours. Others prepare adjusted to their work-from-home setups and don’t miss the anxiety-ridden office commutes.
Most executives agree there are gains to both. As Americans return to work at a staggered pace, plans may favor a hybrid model.
“Most organizations appreciation that there is a shift in the way work is going to get done,” said Julie Whelan, head of occupier research for the commercial tangible estate firm CBRE’s Americas division. “They have recognized it, and no matter how traditional they are about their examinations, they understand that there is going to be a level of flexibility that they now have to contend with, in labels of office planning.”
For now, though, Whelan noted that most executives seem to be holding off on announcing sweeping arrangements and detailed timelines to bring people back. There are a few outliers, however, such as Tiffany’s new parent LVMH, which in February started causing the jeweler’s workers in the U.S. back to the office for two days per week.
In January, CBRE polled 40 of its office clients, which collectively go over 245 million square feet of office space globally and found 9% of businesses had already, slowly started bringing people uphold to work — using socially distanced floor plans, temperature checks, reservation systems and other precautionary into the bargains.
Twelve percent planned to do so during the second quarter, and 21% during the third quarter. Forty percent of respondents inert had no plans to return to the office, as of January, CBRE said.
Many business leaders are still monitoring the rollout of Covid vaccinations. President Joe Biden symbolized earlier this month that the United States is “on track” to have enough vaccines for every adult by the end of May. They also are bewitching into account lifestyle changes that might have transpired over the past 12 months — youths still learning from home, new pets, more time spent outdoors, and people relocating from teeming urban areas to the suburbs, where there’s less access to public transportation.
“We’re looking at how we can leverage technology, so that those who are physically not these days can have the same immersive experience as those who are present [in the office],” REI’s Putur said. “We really want to discover a way. And we’re going to try different methods, and I’m sure it’s going to evolve.”
Currently, about 25% of employees across the country are customary into offices, according to Kastle Systems, an office security firm that pulls data from diverse than 3,500 buildings in the U.S.
Employees wear protective masks at a JLL office in Menlo Park, California, U.S., on Tuesday, Sept. 15, 2020.
David Paul Morris | Bloomberg | Getty Ikons
Of course, that number has ebbed and flowed with the state of the pandemic. Office visits cratered last Demonstration and into April, Kastle found, as the health crisis took hold all over the country. They slowly inched up from then, but captured another tumble around Thanksgiving, as infections surged over the winter holidays. This year, visits partake of since been ticking back up — particularly so in Texas, which is likely due to the eased pandemic-related restrictions in the state and scant reliance on public transportation, Kastle said.
When less is more
As the shakeout progresses, decisions to permanently curtail space will stem from many different motivations. Some companies may need to cut costs, or will maintain fewer corporate workers. Others are pledging to merge teams from different buildings to encourage cross-collaboration.
The upscale clothing retailer Ralph Lauren heralded in February it will be cutting as much as 30% of its corporate real estate in North America, to “embrace new ways of detail.” Similarly, CVS Health said it will slash its office space by 30%, as part of a cost-saving initiative.
Nordstrom powered it chose not to extend a lease at one of its office towers in downtown Seattle, taking into account the personal preferences of its workforce and the status of its business.
“While we will not be a fully remote headquarters, it’s clear remote work can and should continue to play a take a part in in how we operate,” the Seattle-based department store chain said.
Old Navy is also vacating the apparel brand’s headquarters in the San Francisco breadth to move in with its parent, Gap Inc., just a few neighborhoods over. The company said the move should allow it to foster a stronger suavity of collaboration, by mixing employees across its clothing brands.
Office owners coax tenants back
Office possessors, eager to get people back to their desks, mostly expect a wave of businesses to return by late summer. Stockjobbers say they have conducted more tours of office buildings since the new year started, especially in key markets such as Manhattan.
At length year, transaction activity largely dried up. JLL Making tough choices
Some workers just want varied certainty.
Last March, Melissa, a 32-year-old employee for a retailer’s e-commerce arm, was living in a studio apartment in the New York close with her then fiance, also 32, when both of their offices closed their doors. As stressful as cram into a 600-square-foot space with her partner was, the couple successfully worked from home together until June, judged Melissa, who asked to keep her last name and place of work private.
She and her now-husband opted not to renew their studio rent out and landed a one-bedroom in Brooklyn over the summer, hoping for a swift return to work in the fall. But that still hasn’t stumble oned, and the one-bedroom has quickly grown to be too small, too, Melissa said.
“Talks of even going back to the office — who knows?” she articulate, adding that she’s heard little from her employer on the issue.
“What do we do now? Our lease is up again in June. Should we obstruct? Or should we just take the plunge and move to the suburbs?” she said. “If they don’t get us back in the office soon, I’m going to obtain to make life decisions.”