According to investment banking firms, including Keefe, Bruyette & Woods there are warning signs on the horizon, especially for the office sector. CNN reports that despite nearly three years after the pandemic began, offices are just halfway filled as workers reluctantly return to the office. Meanwhile, workplace experience professionals are working hard at magnetizing the office whilst at the same time accommodating people wherever they may be.
Workers still aren't coming back consistently or every day: Data shows that Friday is the lowest day of occupancy and Tuesday the highest. Of the top 10 cities in the U.S. occupancy rates are on average just 40% since many offices sent workers home because of COVID.
The Return to Office
Some major companies are beginning to crack down on employees who are reluctant to return. Disney is ordering corporate employees to return to offices four days a week. Starbucks also recently instituted a three-days-a-week office schedule. Apple has also called for its corporate workers to be in the office at least three days a week. Snapchat recently asked workers to return to the office 80% of the time, or the equivalent of four days a week.
Meanwhile, Amazon isn't looking to force workers back into the office anytime soon, saying that it doesn't have a plan to require people to come back. Other corporations are varying from "the mandate" to the "come when you wish" approach, and everything in between.
There is a perspective that both organizations and employees have a civic responsibility to return to the office - to support the micro economies that exist around the workplace - transportation, the caterers, the bars, restaurants.
Bigger Issues Loom
Although for many in the work experience business return to office is top of mind as we try and magnetize the experience and create places where people choose to be, its not the only concern.
With corporate real estate assets totaling $33 trillion globally ($20 trillion in the U.S.), and a potential decline in valuations of up to 30%+, then the potential crisis could prove to be of seismic proportions.
Some recent headlines could be an early indicator of things to come:
Evergrande, Chinas second largest developer carrying $300 billion in liabilities
Brookfield defaults on two Los Angeles office towers, $784 million
Blackstone defaults on €531 million Nordic property
PIMCO saddled with $1.7 billion default in office market meltdown
What would be the impact on the global economy if such a massive sector be hit by such a potential large write down in valuations?
Latent Real Estate
We have all witnessed an increase of the shuttered storefronts as the pandemic accelerated impact on retail continues. Shopping malls and high streets emptying as Amazon deliveries increase at our doors seemingly every day, as corporations mothball or withdraw from real estate - the issue becomes what becomes of that latent real estate.
The question of latent real estate is an issue and what will become of it as organizations review and reduce their real estate footprints, whilst at the same time, the retail real estate market remains under pre-pandemic pressure also.
As reduced footprints remain in, or migrate to premium Class A real estate, then the latency could result in empty buildings which has a societal impact as those spaces attract and become a magnate of negative social behavior and crime.
Alternative Uses
Converting offices to residential in often high demand metro housing markets could be one answer, as could multi use buildings that not only accommodate workers but have retail, food, community, education, even hotels. Imagine a building (or campus) where everything you need is there in one place - could the principles of the Quaker work towns be returning? Could there be a resurgence of boutique, smaller retailers filling the voids created by absent big box stores?
Some time ago, in an article with WORKTECH Academy, we painted a picture of Waterford Oaks and what the work/life experience of 2040 might look like - this was intended as a futuristic look into the future but maybe recent events might accelerate this faster than we anticipated.
We'd love to get your thoughts on this subject, leave a comment, or email simonelliot@4xiconsulting.com
How do you think the future of work will impact corporate real estate and vice versa?
Simon Elliot is Managing Partner and co-founder of 4xi Global Consulting & Solutions and is focused on a people-first approach to enable optimum Human Experiences for people away from home: at work, in education, at rest, or at leisure.
Simon believes that Experience Matters! applies in many different ways and is the fundamental foundation of a successful business, no matter the business.
Simon is a global citizen, having lived, worked, and traveled to over 45 countries and six continents, and believes in the power of human potential. He is a Fellow of the Institute of Directors, a Member of the Institute of Leadership & Management, and the North America Chair of the WORKTECH Academy. Simon lives in the San Francisco Bay Area.
4xi Global Consulting & Solutions is a team of talented leaders from both the client-side and service provider side, impacting the Human Experience (HX) for people at work, in education, rest, and at leisure.
We believe in a people-first, experience-led philosophy. Whether client, employee, or guest – their experience is the fundamental foundation of success.
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