The commercial real estate industry has experienced massive shifts over the past year as companies adjusted their approaches to office space amidst a raging pandemic. Following the city’s shut down in March 2020, landlords navigated a period of renegotiation on tenant spaces and leases while companies sought to reduce their carrying costs in an uncertain era. Now, the ramp-up of vaccine distribution is making a return-to-office, albeit in an arguably different capacity, much more real. Companies are reexamining where they need office space and how workspaces should be designed to reinvigorate corporate culture while providing a safe, comfortable and magnetizing work environment, in many cases through flexible, hybrid office and work-from-home models.
The ideation of office space is reforming along three themes and accelerating those ideas with the lessons learned from working during Covid. Space is being analyzed on its ability to foster learning, performing and connecting, according to Tom Vecchione, principal of leading New York-based architectural firm Vocon, on a recent Anchin-hosted office panel.
“Clients are looking at a back to business model in two years. When I am working on space for an office tenant, the programming of spaces has changed. There is more focus on learning areas, more focus on content areas in every office we strategize and design, such as Zoom rooms, production rooms, content areas,” said Vecchione. Companies are thinking deeply about how they will function and grow in a space during the years following Covid and need flexibility built into design. Vocon is increasingly designing offices under the mantra that every space must have three functions because CEOs haven’t decided exactly what each space will do and become. It’s about how an office space can manage the firm’s needs over time.
“In terms of design, we’re thinking about for buildings not just in terms of who is out there and who can we put in but how are we creating a community and an ecosystem that makes the office that much more essential to business plans. A lot of tenants and potential tenants we speak with are still in the process of determining what their needs are down the line.”
Jonathan Ratner, managing director of Madison Capital
The building, space and business support infrastructure inside, including flexible floorplates to accommodate diverse layouts and modern wiring for high-speed connectivity, are necessary demands for these firms as they look to emphasizing the exceptional quality of their commercial space for employees and clients alike, and channel the space as means to leverage their business.
Other amenities that are in major demand right now with tenants are operable windows and modernized HVAC systems, to alleviate concerns around air quality, noted Ratner. The option of private entrances and lobbies, which allow tenants to reduce their contact with people outside of the organization, have also proven attractive in space selection.
“We are seeing a preference toward larger floorplates and buildings that can spread employees out further as part of their design. The collaboration aspect of the design is becoming that much more important,” said Ratner. “Being able to spread out and having that flexibility of design is critical to how these companies are thinking. Some of the smaller floorplate buildings may end up being repurposed. We saw that in the financial district over the course of many years with those old office buildings turning residential.”
By all counts, technology will play a key role in reshaping the future workplace as it upends traditional office norms. But to feel comfortable returning to an office setting, employees must feel safe. New technologies are being developed for deployment through building infrastructure that will reduce the need for social distancing by maintaining a high level of indoor air quality (IAQ).
“Every building is looking at those technologies, which run the gamut from lighting levels that kill virus particles in the air and surface with UVC, new filtration technologies and systems offering antimicrobial and antiviral properties,” said Mitch Simpler, partner at New York-based mechanical and engineering firm JB&B. Implementing an IAQ system that significantly reduces viral exposure and viral loading is integral.
Another trend being accelerated is designing for employee wellbeing, especially following a pandemic, added Linda Foggie, senior vice president at consultancy firm Turner & Townsend. “We are starting to see more focus on employee wellbeing as clients assess spaces to attract people back into the office at some point, six months or nine months out. So there is a big focus on what is the air quality, how is it measured, what types of spaces allow people to take a mental break during the day.”
Larger corporations and multinationals are reassessing who in their workforce needs a desk in an expensive office like New York City, added Foggie. These multinational firms are opting to prioritize desk space in Manhattan for client-facing roles while basing other teams in less expensive real estate markets across the country.
Getting employees back to the building is one issue, and keeping them engaged to remain there is another. Tenants today are getting smarter, so buildings are getting smarter to attract them.
One short-term trend is a push to hands-free everything, from not having to touch doors or elevators, to using personal devices to control office and furniture settings. In the long term, a hybrid model is here to stay. “The key is to make the office a place that employees want to go, so it is experiential, with a touch of work, play and relax so people can feel comfortable and collaborate. A key factor to that success is technology. Seamless technology will change everything; the whole experience of going to work will be different” said Simpler, pointing to the evolution of smart buildings. The future smart building will recognize every employee who walks in, knows what individual employees like to eat, where they like to sit and offer personalized environment settings.
In addition to the fallout from the health crisis, another major point of agreement was the desperately needed improvements to infrastructure.
“I think we are in the environment where the best thing the city can do is cheerlead for New York. I think people forget what New York really is because we haven’t been experiencing it for a year. I think the city took a big step in some companies returning to their offices in May and that was an incredibly positive sign,” said Ratner. Reminding people that New York always rebounds thanks to its creative energy will also be integral to recovery as companies in New York explore new uses for commercial buildings and adapt their space expectations and needs over the next year.
Another avenue to explore should be further use of public-private partnerships in the improvement of infrastructure and related projects.
“The city has to invest in infrastructure to ensure that the platforms that move people in, out and through the city are safe. Partnering with developers when investing in infrastructure and increasing P3 will be critical to the comeback,” Foggie noted.
The lasting effects of learning how to live and work in a pandemic state have drastically accelerated workspace decisions and approaches, as companies were forced to make in one year the types of decisions that would typically take five. Over the coming year, one thing that developers and tenants alike can be sure of is that a more sophisticated approach to office space is in the works, one that is likely to completely reshape fundamentals and perceptions of the New York City commercial real estate scene.
Written by Phillip Ross, CPA, CGMA, Partner & Leader, A&E and Construction Industry Groups, Anchin
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