Will Teleworking Change the Future of the Office?

The COVID-19 pandemic might not have a massive economic effect on the office sector, but it could spark big new ideas on the use of space.

The office sector appears to be less vulnerable to disruptions associated with the coronavirus pandemic than retail or hospitality, but it’s not entirely immune to an economic downturn — or the acceleration of changes in the ways people have been working  during the crisis.

The open-office concept, which is used in about 70% of  U.S. offices, could decline in the aftermath of the coronavirus pandemic. Getty Images

Mandatory closures and other social distancing measures have taken a toll on firms that are closely tied to the consumer economy, such as the British airline Flybe, which went bankrupt in March after travel bookings plummeted in the wake of the coronavirus pandemic. Businesses that cannot conduct most of their business remotely are also in peril. On the other hand, many companies have learned that they can run their operations without anyone physically in the office, a trend that has the potential to depress demand for traditional office leases.

“High-priced office space, and new construction in particular, is going to see a hit,” said Anirban Basu, CEO of Baltimore-based economic consulting firm the Sage Policy Group, during a recent webinar with NAIOP D.C.-Maryland. “People are going to be thinking about what kinds of commitments they’re going to make, and cash is king right now. If you’re trying to preserve cash, that doesn’t take you into A-plus office space necessarily. And if you do use A-plus office space, you’ll probably try to rent less of it. You’ll have more people telework if possible.”

A Turn to Teleworking?

Remote work got a prominent plug in April when Morgan Stanley CEO James Gorman told Bloomberg Television that he believed the $60 billion investment bank could operate with “much less real estate” in the aftermath of the coronavirus pandemic.

“We’ve proven we can operate with effectively no footprint,” he said of the firm, which has more than 500 locations around the world. “Can I see a future where part of every week, certainly part of every month, a lot of our employees will be at home? Absolutely.”

CNBC reports that Nationwide is permanently transitioning to a hybrid work model following its positive experience with remote work arrangements. Food and beverage company Mondelez is also exploring transitioning more employees to alternative work arrangements as a way to reduce costs in a recession. And Jes Staley, CEO of Barclays, believes companies may permanently move away from centralizing large numbers of staff in a single building: “The notion of putting 7,000 people in a building may be a thing of the past.”

The pandemic has led to a huge rise in teleworking, which could reduce demand for office space. Getty Images

Many office workers and managers would welcome these changes. A March 30 poll by Gartner of 317 finance leaders and CFOs indicated that 74% of them plan to permanently shift some of their workforce to teleworking. Additionally, a recent poll by career planning site Zippia.com shows that 51% of workers would prefer a full-time work-from-home arrangement.

However, the same Zippia.com survey found that nearly 60% of those workers didn’t think teleworking would become permanent. Many commercial real estate professionals tend to agree.

“I think the office is here to stay,” said Gregory May, executive vice president and West Region market leader for Newmark Knight Frank, during a recent NAIOP webinar. “But I also think there’s definitely going to be a percentage of people who will work remotely permanently.”

Prior to the pandemic, about 4% of U.S. workers were able to work from home at least half the time, according to a Global Workplace Analytics analysis of 2018 American Community Survey data from the U.S. Census Bureau. A national survey by MIT during the first week of April showed that 34% of former commuters were working from home.

Al Pontius, national director of office and industrial for Marcus & Millichap, believes there is a real appeal to telework, but he doesn’t see demand for offfice space falling off a cliff in the near future.

In China, many office elevators now have tape on the floor to ensure that passengers follow social-distancing guidelines. Getty Images

“I see a counterpoint that’s equally strong,” he said during a recent NAIOP webinar. “While we might want the flexibility of telecommuting, we’re all learning that we miss our communities of colleagues. There is a very strong counterweight to the idea that we’re all going to work from home. Certainly the flexibility to do so is increasing, but it’s a little early to say.”

Spencer Levy, chairman of Americas research and senior economic advisor for CBRE, also doesn’t see a secular shift after the pandemic is over in which most workers abandon their offices.

“Even though we believe that more people now see that working from home is doable, every survey we had done prior to the coronavirus crisis showed that working in the officee is much more productive,” he said during a recent webinar for NAIOP Maryland. “We think that’s not going to change.”

New Designs for Offices?

May says that when people do return to the office, the spaces might look a little different for reasons related to health and safety.

“There might be some density issues where they want to be separated a little more,” he said. “That could change the layout of offices.”

Levy also sees office densification changing in the wake of social distancing.

“The average square footage for an average person in an office, which had gone so dense, we believe that pendulum will swing back to adding more square footage,” he said. “That comes directly out of my conversations with some of the largest occupiers in the world.”

According to Robin, a Boston-based office technology company, North American offices average about 150-175 square feet per person. Open office spaces, which have grown in popularity in recent years, average roughly 125-175 square feet per worker. (Christian Beaudoin of JLL told the New York Times in February that 70% of U.S. offices have some form of open plan.)

While popular, open office designs can allow viruses to spread more easily than traditional office layouts. Without walls or a cubicle divider, droplets from a sneeze or cough can spread farther. Offices that use unassigned desks — a common practice in coworking — can also make it easier for a virus to spread as new desk occupants come into contact with infected surfaces. In the face of the coronavirus outbreak, these design features are now a concern, as was demonstrated by an outbreak in March at a crowded open-floorplan call center in South Korea. According to a study published by the U.S. Centers for Disease Control and Prevention, 94 of 216 workers came down with the coronavirus. Almost all of them sat in close proximity to each other.

Offices in China, where COVID-19 first struck, are coming back online, but many of the social distancing and hygiene measures that began at the height of the pandemic are still in place. Masks, hand sanitizer stands and spot temperature checks with handheld digital thermometers are ubiquitous. Some commercial facilities use infrared cameras to scan people for fevers before entering. Eunice Yoon, CNBC’s Beijing bureau chief, reported in March that elevators in China’s capital use tape to mark where passengers should stand for proper spacing.

However, limiting the number of passengers on elevators in high-rise offices with thousands of workers could create long waits in lobbies. For example, global marketing company Interpublic Group told the Wall Street Journal in May that if only two or three of its staff at one of its locations could ride an elevator at one time, it would take two or three hours for them all to reach their offices.

“How many people can work in the building if you limit the number of people in an elevator to two at a time?” Staley asked in a recent interview with the Financial Times.

What’s Ahead?

As restrictions lift across the country, look for a gradual phase-in of workers, possibly with staggered schedules or shifts.

“There could be A teams and B teams working different days,” Scott Rechler, the chief executive and chairman of RXR Realty, told the New York Times in April.

Concerns about clean surfaces could lead to the deployment of new technologies. For example, the South China Morning Post reported in March about Easpeed, a company in China that has developed “no-touch” hologram buttons for elevators. Existing “no-touch” technologies could be put into greater use in common areas. These include voice- or motion-activated doors and dispensers in bathrooms, kitchens and common areas.

Another change could involve antimicrobial materials in interior design elements, such as door hardware. These coatings are made of materials such as silver, copper or chitosan, which is derived from shellfish. Many are already in use in health care settings.

Longer term, Dror Poleg, a former real estate and technology executive, thinks office space will evolve to serve dual purposes.

“Companies will need offices to build culture or to train people or to allow them to interact for specifc tasks,” he said during a recent online discussion between real estate professionals in the U.S., the U.K. and France. “At the same time, employees don’t have to be in the office all day long. That means companies will need to attract people to come to the office and offer them something they don’t have at home.”

To draw workers to a building, it will be critical to make the offce experience richer and more convenient, said Ronen Journo, senior vice president-enterprise at WeWork.

“I think we’re going to see people question the purpose of the office,” he said during Poleg’s panel discussion. “Not just workers but employers as well. Placemaking developed in the last decade. I think it’s going to continue, and I think it’s going to bring the relationship between occupiers, landlords and operators a lot closer. People are going to question why they commute when they can do what they need to do at home. We will see companies begin to offload space, and we will see people working from multiple places — not just from home.”

Shawn Moura, Ph.D., is research director at NAIOP. Trey Barrineau is managing editor, publications, for NAIOP.

The Six-Feet Office

In response to the coronavirus pandemic, Cushman & Wakefield recently unveiled a new office setup called the Six-Feet Office. It’s based on the social-distancing rule to keep six feet of space between yourself and other people to prevent the spread of the coronavirus.

Cushman & Wakefield’s Six-Feet Office features concentric circles on the carpeting around desks, a visual reminder to stay six feet away from other workers. Cushman & Wakefield

In a Six-Feet Office, “transparent shields divide desks, markers direct foot traffic and disposable desk pads catch germs and can be discarded when a worker leaves for the day,” according to an April article in the Wall Street Journal.

Here are the elements of the Six-Feet Office, according to a post on
Cushman & Wakefield’s website.

6 Feet Quick Scan: “A concise but thorough analysis of the current working environment in the field of virus safety and any other opportunities for improvement.”

6 Feet Rules: “A set of simple and clear workable agreements and rules of conduct that put the safety of everyone first.”

6 Feet Routing: “A visually displayed and unique routing for each office, making traffic flows completely safe.”

6 Feet Workstation: “An adapted and fully equipped workplace at which the user can work safely.”

6 Feet Facility: “A trained employee who advises on and operationally ensures an optimally functioning and safe facility environment.”

6 Feet Certificate: “A certificate stating that measures have been taken to implement a virus-safe working environment.”