Is teleworking baked in the cake?

So it seems the current mindset and trend is that more people will be #teleworking, working remotely from home, as companies decide to downsize their office space footprint. This seems to be baked in the cake as we emerge from the Covid-19 lockdown.

I'm reading in numerous articles in trade publications that skirt the issues. One such headline from Bisnow.com went: A New Work-From-Home Movement Is Gaining Steam. Why Aren't Office Landlords More Worried? The inference being less demand for office space will result in more vacancies and cheaper rents. Another article in The Real Deal was also alarming, Office owners brace for competition — from their tenants as the latter sub-lease excess space below market rates. Hence, #officespace is going down the same dead end road as we have witnessed in the retail sector, perhaps at a slower pace. We’ve all seen the pace of bankruptcies in box retailers pick up since 2018 and really accelerate with the onslaught of the #Coronavirus and now the speculation is Office will follow.

So is the future of office space really dire? Perhaps, but I'm not as convinced yet. I've been in the business for three decades and it is true that after every recession cycle, we have had many, we have seen a decline in demand as companies have downsized over the last 30 years. Was #covid-19 the final nail in the coffin? Are companies re-thinking their offices needs to the point of going virtual altogether? The honest answer is the jury will be out for a while on this one.

Many of us in this industry questioned the open plan office but employers went with it because it was a cheaper way forward. The sexy open plan look was in reality, crude as it sounds, more bodies in less space. However, the last couple of years it became evident it wasn't as favorable a trend as many once promoted because productivity declined and there was a yearning for privacy. Now the coronavirus trend is pushing for working remotely and ironically once again the underlying driving force is companies see it as a cost saver, and at face value it seems so. 

A closer examination reveals different consequences. We are all reading and hearing the same stories in print and broadcast media about how employers have discovered teleworking as being more efficient and productive. Before the pandemic there was a clear romance in favor of teleworking by employees. Commuting five days a week can take its toll so the idea of working from home a few days a week was attractive. Employers were skeptical because they feared the loss of control and supervision was a real issue for them. The #lockdown effectively imposed teleworking on employers and to their surprise they’re were elated by the results. Conversely not all employees are so excited as teleworking during the pandemic has blurred the lines between work and leisure. Moreover, many are working harder from home because they are fearful of losing their job. "You're lucky to be working and getting paid" so to speak as many have been laid off or furloughed during the lockdown. Clearly the productivity employers have enjoyed is not going to be sustainable in the long run? How will they measure productivity of teleworkers in the future? Clearly, the lost time and cost of commuting to work is a huge plus but what is the future with respect to working hours, team work, mental health if teleworking becomes full time? These are factors that are difficult to quantify and will only become apparent in time.

What we are not hearing is what are the other ramifications? Who will pay for the new "office space" at home? What about the office provisions (printers, stationary, technology, wear and tear, electric, etc.)?  Interestingly Google announced it will allow workers to expense $1000 worth of furniture. How will this affect the square footage size of the remote employees' residential real estate needs? What are the tax incentives and consequences of "home offices"? There’s much more to consider than meets the eye.

What employers really need is to drill down. A complete "cost benefit analysis" that addresses the issues between working in an office vs. home. Clearly the thrust of the current trend is to go with teleworking because companies believe they will save bundles of money. But will they really? For now, it seems like a forgone conclusion. 

Having said all this I personally believe there will be a healthy mix of office use and teleworking for the larger users, and depending on the industry the ratios between them will vary considerably. The downside is there will be a clean out as many older, class “C” buildings will be challenged and become dis-functional because of low occupancy numbers.

Christopher Jerjian is the man behind CJ's #CRE Blog. He was a co-founder, principal and former managing member of Ibis Plaza Office Suites in Hamilton, NJ. Since selling Ibis Plaza, Jerjian founded Kiwi Offices based in Mount Laurel, NJ. He is responsible for development and leasing of office space, and the promotion of the Kiwi brand.