News The Coronavirus Is About To Test The Benefits, And Limits, Of Teleworking18 Mar 2020
Steve Dils - Bisnow
Bisnow - The coronavirus pandemic is having corporations and office landlords scrambling like the average consumer. But instead of toilet paper, they are now scrambling with how to maintain a cohesive office environment while everyone works from home.
While not yet demanded on a national scale, San Francisco is the first city to have instituted a shelter-in-place policy, and many companies are requiring employees to work remotely while the coronavirus continues to spread in the U.S.
“Everybody is trying to figure out what their remote work policy should be. This is like a forced dry run for a lot of companies,” said Kay Sargent, the director of workplace for design firm HOK.
The spread of the coronavirus will force companies to fast-track the adoption of remote working practices, JLL wrote in a report this week. Many international companies that were distancing themselves from the practice in recent years likely will be flocking back to it.
“We are in the middle of the largest test of home-working in history, and corporates are adopting, refining and testing policies, processes and infrastructure to make it work,” JLL officials wrote in the report.
HOK already has been fielding calls from clients on how they can set up audiovisual and IT systems to handle holding conferences and meetings remotely, more often and with more participants, Sargent said.
“I was on a call the other day with a bunch of AV/IT integrators whose clients were saying, 'We need this stuff, and we need it now,'” she said.
“I think you're going to have companies who have never embraced mobile work-from-home or folks working in today's mobile economy, so they'll probably have some changes,” Colliers International Atlanta President Bob Mathews said.
But few office real estate executives see this have a long-term drain on office demand, especially since many companies are already operating on the lean side when it comes to corporate real estate, having spent the past decade bleeding out space efficiencies. As of last year, the average square feet of office per employee was 194, down 8.3% from a decade earlier.
Since 2005, the number of full-time employees who regularly work from home has grown by 173%, to 4.7 million people, according to consulting firm Global Workplace Analytics.
“I think that there will be a lot of questions regarding hoteling and other open-environment type setups,” CBRE Vice Chairman John Shlesinger said. "Do I see people switching because of this? Not really."
JLL researchers wrote that even an increase of work-from-home policies will have limited impact since most portfolios have been optimized. When the economy normalizes, new employment should outweigh any drain from home-working shifts, and companies ultimately still value having people together physically.
“I still believe that companies are fighting churn, which is a big issue. It's hard to create a company morale, a sense of identity, culture, with people working from home,” Shlesinger said. “Can you train a new worker from home?”
Before the pandemic, employees in open offices across the globe were finding it had drawbacks, including distracting background noise and a lack of privacy.
Sargent said this pandemic will also likely show companies that remote work has its limitations as well, especially when home offices will now be filled with school-aged children as well for many workers.
“Their kids are going to be bored and they're going to be restless. So it's not the ideal situation for this to be tested,” Sargent said. “This is trial-by-fire.”
What could be a more radical impact for office landlords will be how and who responds to emergencies to close buildings. Right now, typical office leases leave control of closing office spaces to the tenants themselves. This pandemic could have some landlords revisiting that relationship and adding new clauses into leases that could give landlords control of those decisions.
“I think those clauses will get changed moving forward,” JLL Managing Director Adam Viente said. "I imagine building owners and lenders will want to have more control over that in the case of a pandemic."
Avison Young Managing Director Steve Dils said such clauses could become the new norm because, for landlords, the issue is with property management. Property managers have a harder time working from home. In the case of this pandemic, if tenants remain open, staff have to report to the office.
“Accounting, brokers … [they] can work from home. Property management is a more tricky subject,” Dils said.
But others say such a clause could create more problems than they solve. The most obvious response to such a lease change will be tenants demanding that landlords then waive rent payments during the affected periods, Childress Klein partner Connie Engel said.
“Nor do I want that power, to be honest with you. Why should we do that? I don't want to be responsible for their business, and I think it's up to the businesses to make that choice,” Engel said.
It may be too early to determine just how much the industry will change from the coronavirus. There are still a lot of unknowns — the extent of government-mandated lockdowns, the duration of the pandemic and the general fear factor that is resulting from living during this time.
But there will be changes, said Mathews, who leads Colliers' Atlanta operations. After all, the commercial real estate industry responded with changes after other major events in history, such as the Sept. 11, 2001, terrorist attacks and the financial meltdown of 2009.
“I think most people are keeping the perspective that this too shall pass. It may take a month or several months before we really know the real impact,” Mathews said. “However, I think we can make a pretty simple judgment that everyone's life for at least this year will remember the fact that there was the virus.”