“Marty, we’re going back to the future.” I don’t think that when Doc Brown made that memorable and iconic statement in the 1985 movie Back to the Future, the writers could have predicted the coronavirus pandemic 35 years hence. Those words will define some aspects of how businesses will utilize office space, how it will be designed, and how it will operate in a post-coronavirus world.
Over the past 20+ years, many businesses have focused on similar operational themes related to their office space planning and design — centralization, personnel density, and shared communal spaces. In practice, these elements took the form of leasing a single facility in the urban center, decreasing the amount of space leased per employee, reducing private offices, increasing workstations, and creating group and meeting spaces. Many companies also encouraged employees to be at work despite being sick (as a badge of honor) and realized they could reduce certain fixed costs by permitting employees to work from home.
Since coronavirus invaded our homes, stores, offices, and communities, businesses have had to adapt and rethink nearly every aspect of how they approach business, why they perform certain processes, and how their operations will function in the future. We are witnessing a historically rapid transformation related to business operations, and its impact will be profound for the foreseeable future. We believe that some old designs will become popular once again, previously abandoned ideas will be modified for modern times, and some new operational concepts will emerge that will influence our business workplaces and environments. These changes will focus on improving worker health and safety, increasing employee satisfaction, addressing commuting issues, recognizing newfound threats to a business’s operations and survival, improving creativity, nurturing the organic generation of new ideas, and offering new ways to service customers.
Decentralizing will become a major theme for change resulting from coronavirus. The primary goal behind this shift will be to move the business closer to where employees want to live. But, in fact, it offers many benefits to both businesses and their employees. It can reduce fixed costs, such as rent and parking fees. It can shorten employee commuting time. It offers better lifestyle opportunities for staff. And it enables companies to provide a creative work environment where employees meet face-to-face more effectively than via a Zoom call. According to Hessam Nadij, CEO of Marcus and Millichap, “while there will be a short-term reduction in interest in city-based offices, suburban offices may become more popular”. (Source: Yahoo!)
Envision a medium-sized law firm, architectural partnership, or sales company that occupies 10,000 square feet in Washington, D.C. Their rent likely ranges from $60-$80/square foot plus parking charges of $200/month per space. Their monthly fixed costs would be approximately $68,000/month based on a 10,000-square-foot suite at $70/square foot plus 50 parking spaces at $200/month. According to the National Association of Office Parks (NAIOP), the average monthly cost for an office building parking space was up 6.45% in 2017 over 2016. (Source: NAIOP)
Compare this to their leasing three separate 3,500-square-foot suburban office spaces in Laurel, Gaithersburg, and Fairfax City. All suburban locations offer free parking, and based on a rental rate of $25/square foot on 10,500 square feet, brings the total fixed costs to only $21,875. A monthly reduction of about 66%! In addition, employees’ commute times are significantly reduced because the office has shifted closer to employees’ homes. Employee satisfaction increases. Further, by moving the office to the employees, full-time remote working is reduced. Staff can return to conveniently located offices that enhance creativity, build trust among co-workers, and improve overall morale. CMS Wire reports that 67% of managers believe their organization would be more productive if employees communicated face-to-face more frequently. (Source: CMSWire)
A recent Washington Post article entitled “The pandemic is making people reconsider city living, trading traffic for chickens” made the following point, “people in cities hit hard by the pandemic — New York, San Francisco, and Seattle — are searching for remote work opportunities significantly more than the rest of the country, LinkedIn data shows. Some real estate data suggests many are already considering or making a move to smaller towns or suburbs. Real estate company Redfin said page views of homes in small towns more than doubled during the last week of April compared to last year.” (Source: Washington Post)
From 2009 to 2019, the amount of office space per employee has decreased by 8.3%, according to NAIOP. In some urban markets, like Washington, D.C, NAIOP reports that density is only 135 square feet per employee. (Source: NAIOP) We have witnessed this phenomenon as individual private offices have disappeared and been replaced by workstations or cubicles. For privacy, employers built additional meeting rooms, break-out areas, and even “phone booths” for employees to utilize for private calls. Shared common areas were constructed which featured comfy sofas and coffee bars in an effort to create a different vibe away from cubicles. These design elements now conflict with the social distancing that people require in a post-coronavirus world. New office designs will include more private offices. Large banks of workstations will be reduced and transformed into shared semi-private offices with two or three cubes. Office “hoteling” where any employee can utilize any cubical on any particular day will cease to exist unless the work surfaces are sanitized daily.
According to a CNBC article entitled “Too early to write the epitaph for office real estate,” Diana Olick points out that, “As regular offices do open though, one newer, supposedly more efficient and cost-effective element of the space could disappear – that is, so-called hot desking or hotel desking. This is where employees do not have assigned desks, but instead share workstations in open seating areas.” (Source: CNBC)
Common shared areas will still be utilized but with more single chairs that are spaced out. Ultimately, this will mean that businesses will require additional office space, not less. The same CNBC report noted that “[m]ore offices may move from higher density downtowns to the suburbs, as jobs move closer to where employees live. Companies may also seek more space, not less, as they reconfigure to accommodate for social distancing.” (Source: CNBC)
With employers decentralizing to accommodate employee’s demands to reduce commute times and improve their lifestyle, businesses will seek to have staff return to the office, but not 5 days per week. The pendulum of remote working has peaked and will slowly start to swing back towards working at an office more frequently.
“We’ve seen from many companies, including IBM, that experimented heavily with telecommuting, that they eventually want to bring people back at least a few times a week to work in groups and be in person and have collaborative functions that bring people together in office locations,” Nadji added. (Source: Yahoo!)
Schedules will transform into working at home one to two days per week and in the office three to four days per week. Businesses recognize that creativity, organic development of new ideas, and developing trust amongst its staff cannot be accomplished when they are scheduled every Tuesday from 3-4 pm on a Zoom call. The most creative ideas often occur from an impromptu encounter, not from structured meetings. It is often these ideas that create new business opportunities, new connections, new sources of customers, and new insights that can rapidly grow revenues.
Steve Jobs recognized a long time ago that his iPhone would not replace face-to-face meetings. He said, “There’s a temptation in our networked age to think that ideas can be developed by email and iChat. That’s crazy. Creativity comes from spontaneous meetings, from random discussions.” (Source: Medium)
This perspective hasn’t changed since Job’s passing. According to a study by Fact Tank, “80% of Millennials say they prefer meeting face-to-face when communicating with colleagues, versus 78% of Gen X.” (Source: Medium)
America was built on new ideas, new processes, and new relationships. It’s in our DNA. Would it have been possible for Henry Ford to conceive and design the automobile, for NASA to build the Apollo rocket and the space shuttle, for Maurice Hilleman to develop the medical vaccine for measles, or for Steve Jobs to create Apple Computer without human-to-human, face-to-face interactions?
For decades, some employees felt empowered if they came to work when they were sick. They felt like warriors, fighting through the illness, and coming to work. Their actions showed employers how dedicated and committed they were. And employers were complicit in accepting this behavior. Those days are over. Now businesses will realize that sick employees are a direct threat to the well-being of other employees. If one employee can easily infect multiple employees, then a sick employee is a direct threat to the business’s well-being, to its primary resource — its people, to its revenue, and to its ability to provide responsive customer service. The new mantra will be — sick employees are not welcome at the office and should stay at home.
With the acceptance of Zoom calls and remote working resulting from the forced behavioral modification during the pandemic, some forecasters have commented that future office space needs will be reduced. Video calls eliminate the need to leave your home office (sometimes known as the closet) and the hassle of commuting. Missing from that prognostication is the fundamental need for people to meet, converse, share, and interact and how vital that is to our psyche, our mental health, and our basic need to connect with people in a face-to-face manner. The need for office space and a place for employees to see their extended work “families” will live on; however, it will adjust as our desire for health, safety, and employee satisfaction change, but our need to have human interaction remains the same.
In discussing these issues with our staff and with various tenants within the Kenwood Community, we have heard a consensus agreeing with the sentiment expressed by the experts noted above and their collective ideas. Many businesses have a strong desire to be in suburban office locations due to their proximity to both the principals’ and the employees’ residences. For example, the majority of tenants who lease space at the Kenwood Building, chose it because either the principal or key employees live within a few miles of the property. We have experienced similar viewpoints from tenants in our other suburban office projects in Fairfax City, North Silver Spring, Largo, and White Marsh.
We see office designs changing to enhance social distancing. When we designed our offices, we created semi-private offices with cubes for privacy. Although this design decision was determined before coronavirus, we did believe that our staff wanted some level of privacy and the semi-private office option was better than a row of multiple cubes. Our staff feedback has been very positive.
We plan to strictly enforce our sick policy. For small businesses, where every person’s role is important to the overall effectiveness of the company, keeping people not only well-trained, but also healthy is critical. For Kenwood, our ability to respond timely to our tenants' needs is directly correlated to the right people being present. We need our staff to be healthy to make our tenants feel welcome and to deliver the best customer service in the industry.
We have heard from many in the Kenwood Community that Zoom calls, although more effective than a telephone call, are not as effective as meeting in person. We repeatedly have heard how stiff and unexpressive people are on a Zoom call. We also agree. A significant amount of communication occurs in a non-verbal form. Body movements, posture, hand gestures, eye contact, touch, and space are ever-present in face-to-face meetings but are lacking on Zoom calls. We hear repeatedly that it’s very difficult to establish a real “connection” on Zoom and connecting with people — whether they are our customers, our tenants, our friends, or our community — is vital to our business and to being human.
As many of our tenants have experienced, Kenwood’s goal is to expand the landlord-tenant relationship to be more collaborative, more inclusive, more effective, and more multi-dimensional. We recently initiated a Lunch-and-Learn program to enhance our tenants’ knowledge on certain timely topics and to provide new resources. We have also invited all tenants in our portfolio to participate with us in hearing and learning from top-rated national speakers through our membership in Accelerent. As members of the Kenwood Community, we would love to hear your feedback.