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hybrid arrangements.
This article will discuss options office owners and tenants may need to consider in light of increased vacancies as a result of the pandemic and the uncertainty it has created and will delve into lease provisions that may take on heightened importance going forward.
As more workers become vaccinated and return to work, many companies are rethinking their office design and space needs. For those companies that have kept a more traditional office layout with segregated private offices, conference rooms for meetings and “break-out” rooms for eating and socializing, their existing space plan may not need significant changes. For those companies that have opted for “open concept” offices where people sit side by side in an effort to maximize space usage and encourage collaboration, they may consider whether they want to revise their space plan to provide room for social distancing and other safety measures arising from the pandemic.
For many industries, the experiment about whether work from home could be productive and not negatively impact the bottom line has been proven successful. Nonetheless, business leaders across the country are readying their workforce to return to the office on a regular basis. Despite the optimism among many office owners, brokers and company leaders, many others – including a large percentage of employees – do not necessarily want to return to the office full time. The forced lockdowns and other impacts of the pandemic have created significant changes to our behavior, lifestyles, and ideas of work, with many believing they are more productive and happy working from home.
In larger cities like New York, many companies recognize that employees with less space at home, roommates, or families with young children, will likely embrace coming back to the office as a quiet place where they can be more productive. For others, reclaiming hours previously spent on a long commute and the flexibility that comes from working from home may be too difficult for them to give up. With concern about losing good employees who prefer to work from home, many companies are rethinking office design to allow for a hybrid style of working with flexible space at the office to allow those who wish to be in the office an ability to do so, and to convene in-person meetings and collaboration sessions.
The commercial office sector is experiencing a sea change in the way people think about their work.
This does not mean that high-rise office buildings are doomed, or that downtowns will be deserted, but it does mean that significant change is happening in the office building sector and landlords and tenants will be adjusting to those changes for years to come.
From an owner’s perspective, there is concern about rising vacancies now and in the future as tenants shed space to allow a more flexible work environment. Owners of office buildings may need to embrace repurposing some office space to other uses. In most urban centers in the United States and beyond, commercial buildings (particularly warehouses and factories) have been converting to residential and mixed use for some time. An owner facing an empty or soon-to-be-empty office building can explore the possibilities of converting the building to a condominium or rental building if such reconfiguration is architecturally feasible and zoning compliant (putting aside issues of affordable housing mandates). As many cities were and remain adherent to a single-use zoning plan, conversions may be difficult. Although mixed-use buildings and developments are not new and are popular in cities such as Toronto, this popularity may increase considerably going forward, particularly if local governments take a more flexible approach to zoning, which they should do in an effort to expand and diversify the tax base. The day may soon be near when the urban dwellers can take care of all their basic needs – work, home, medical, retail, grocery, dining, entertainment, religion – under one large roof. The dependence of building owners on an office-only building in downtown areas may become unsustainable.
TENANT PERSPECTIVE
For those tenants with office space that does not allow for social distancing, the tenant will need to evaluate the practicality and cost of reorganizing the space. Many tenants nearing the end of their lease term will want to consider whether their current building, location and amenities are compatible with the company’s preferred working style. Buildings that are not as dependent upon elevator use and those that provide more open space, natural light, windows that open, easy food and beverage options, green spaces, and COVID-19 protections (touchless features in the restrooms, flexi-glass dividers, hand sanitizers, air filtering systems, etc.) will likely be in higher demand after the pandemic. There is also an increased focus on making the workplace a comfortable and exciting place to go.
Some employees may still be working from home most of the time. A tenant needs to consider what
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