How Do You Eat the Office Vacancy Elephant?

It’s no secret that the entire concept and market for #cre and office space has changed, nor that the outlook for traditional leases and massive cubicle farms is dismal - we’ve experienced a paradigm shift in workspace, work-time, and work itself. Commercial Edge published their Feb 23 report, showing many major cities hovering around 20% vacancy https://bit.ly/3JbkiSG. That means one in five commercial real estate spaces is empty. Startling enough, but it still doesn’t reflect the fact that most of the offices which are leased are each themselves grossly underutilized space.? Add to this the fact that as leases come up for renewal in the next couple of years, overall occupancy is expected to go down. The situation is dire for the reactive, but a potential opportunity for the proactive.

Let’s look at the #WFH vs. return-to-office landscape: Many companies are looking at hybrid work arrangements, but few are successfully staggering work days. The net effect of having “everyone in the office on Tuesdays, Wednesdays and Thursdays” is to reduce the overall value of the office by 40%, making it an even less appealing expense post-plague. So called “hotdesking”, where workers come in on certain (rotating and/or pre-scheduled) days seems like a flexible alternative, but it’s turned out that employees actually see it as complex, rigid and unappealing, with many recent studies and researched articles going so far as to say they “Hate It!” https://bit.ly/3LdgqDx

But, saying “employees” doesn’t paint the full picture, because employees are, obviously, individuals. Some people like to work in a quiet space, some like to work in a boisterous environment. Some like their children near, and some need to get away. Some want to work at 2am, some want to work at 7pm, and some want to work a bit here and a bit there. Most people want some combination of the above, and to be able to mix and match as their life and work allow or require. Treating everyone the same is not allowing them the opportunity to do their best work. Plus in many cases, where or when in the day someone does the work is not important, as long as the work gets done. After all, there are an average of a billion people working somewhere at any time, around the world and around the clock.?

So, let’s say that on a broad scale, employees want flexibility, and smart companies want to provide that. At the same time, landlords want low vacancy while leaseholders want utilized space. Some of these concepts are obviously in opposition. Thus, we are in this state of flux, with everyone tugging a bit in the direction which benefits them most, while watching and?waiting to see what will happen next.

#Employers are asking “Will we renew our lease to keep almost empty offices?” or “Will we force people back in the office simply to justify the expense?”

#Landlords and #leaseholders are asking “Will the HQ offices and urban business hubs ever return?” and/or “Do we redesign our entire campuses or buildings to attract individuals and companies who want smaller coworking offices, co-living, or open flex-space?”

And of course #employees - the #workforce - are asking things like “Can I come into HQ twice a month, work from home half time, and use an office space nearer to me the rest of the time?” and if not, “Do I change jobs and work for a company that respects my lifestyle and wants my best work?”

Again, it’s a new world, and it’s all in flux. Therefore, the answer to each of these questions comes with great potential cost and risk of revenue loss, be it for the company, the landlord or the employee. With so many taking a wait-and-see approach, many landlords, leaders, decision-makers and talent are feeling like they’re on the brink of disaster as they learn which way the herd is going to move, and how best to invest their time, their money, and themselves. Additionally, they’re all blaming each other - causing needless strife within the traditional structure. Needless, because where there is risk there is also potential reward.

The answer, again, seems to lead toward “flexibility”. While many throw around the term these days, what does that actually look like? A landlord investing $250,000 to turn 10,000 square feet into a serviced office space? An employer renewing a lease on two floors of empty cubicles just so people can drop by now and then? Employees disrupting their most productive times and hauling themselves and their "work bags" to HQ three days a week just so they can be seen by management (who often don’t show up themselves)? Those are the opposite of flexibility! That’s thinking in the old way.

Clearly the answer doesn’t exist by force-fitting the old way of doing things into the new landscape. When you look at advancements in technology, they move in a series of leaps. Nobody chipped bronze arrowheads as if they were stone. Nobody wanted a transitional electronic abacus. While you can’t forget all about the past while you move forward, you also can’t move forward while clinging stubbornly to the past. New solutions need to be, well… new! Advice from anyone in an established industry which has been disrupted should come with many caveats and a large grain of salt. To quote Succession, nobody wants to be “the biggest horse trader in Detroit, 1909.”

This is not to say that there isn’t a lot of good and useful information out there, but we need to consider the source, and realize that to a hammer, everything will look like a nail. The people who demand a full return to the office are losing talent. Landlords and brokers who believe that the 10-year-lease will be rebounding are sitting on empty space. And big, serviced office and coworking spaces are hit-and-miss at best, requiring huge investment and entirely dependent on location and demographics in a brittle and rapidly changing landscape.?

In the real world, advances in technology typically and historically move toward the smaller, leaner, less expensive and more flexible option. As an easy example, our “phones” are hardly phones now - they’re computers, cameras, communication devices and personal assistants. When was the last time you jotted down a note or got out a digital camera? Where’s your calendar? How long are you willing to go without an answer to a question that Siri, Google or Alexa can provide in seconds? Once we have bigger screens and keyboards we can easily connect (and we soon will), our phones will replace our laptops as well. That’s how technology works, and what “flexibility” really looks like!

We need to stop thinking of “Work” as a place or a time. Work is a verb. Work is a key component to lifestyle, and the so-called work/life balance is a concept based on the idea that we’re factory workers who walk off the floor when the whistle blows - that’s not how most of us work anymore, especially post-COVID. We come up with new strategies while walking in the woods. We learn new perspectives while chatting with people in the market. We’re struck by an idea when playing with our kids. Work is just part of what we do as humans. It’s integral. If you had a billion dollars, would you stare at a wall? Of course not. You’d do something you enjoy, but you’d do something!

So now, with all that in mind, let’s answer the original question:? How do we eat the elephant? One bite at a time, obviously. What does that mean? We adapt, and the best way to do that is to try new things. An organization is an organism - it evolves and adapts to new threats, new sources of energy, and new opportunities. We need to try new things, and we need to try them in the lowest risk settings we can. Lucky for us, COVID created an opportunity to test out a decentralized office and asymmetric workforce. We know it works, and that a large number of highly productive employees want “work” to be different.

The rational way to accommodate that is through technology. Not the technology of 10 years ago, nor even the technology of COVID. We need new solutions, and new ways for people to work together. We need small, lean offices that can be dropped in anywhere and expanded easily, so that landlords, leaseholders, employers and employees can experiment and adapt without risk. New home-office and coworking technologies that allow fast, secure connections and can be operated as plug-and-play #OPEX solutions instead of installed as massive #CAPEX commitments. Most people don’t want to drive to a city center to sit in a cubicle or serviced office, and they don’t want to work on the kitchen table either - at least not every day.?

What we need are simple, flexible micro-offices - even offices within other businesses. Someplace right around the corner where people can sit down, log in and get to work. Where employees can be around other professionals at times, and behind closed doors at other times. Where employers can glean the best work and most productivity while promoting #lifestyle and #diversity. Where landlords and leaseholders can dip their toes in the #coworking market and open (and expand) a new revenue stream nearly instantly, with low risk and high reward.?

That's the solution to office vacancy - and how we can eat it one bite at a time.

Brad Hampton helped launch the internet revolution last century by opening one of the world's first digital media agencies and authoring Creating Commercial Web Sites, and has been a leader in remote working technology since 2006. He is the founder of Coworking Technologies (cowork-tech.com), which offers consulting services as well as coworking infrastructure as a service (#CIaaS) solutions. Grab your fork here!