The Transformation of Offices and Transition to Suburbia

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In the face of the current market uncertainty, we wanted to provide our users with insights into trends we’ve observed in our marketplace and property database. We hope these insights will provide value and context as we navigate the changing landscape of commercial real estate together.

As the world shuttered its doors, so too were corporations forced to adapt in the wake of COVID-19 quickly. Companies that had a week prior filled open-space offices sent employees home en masse to comply with social distancing mandates, working swiftly to create business continuity plans in the face of unprecedented times.

Organizations quickly adopted technologies to facilitate working from home. Zoom meetings have become the norm, while teams employed Slack or Teams to communicate and file-sharing tools to collaborate. Companies are supporting employees with technology equipment, child care assistance, and well-being support programs. And as quarantine nears its third month in the US, some companies have opted to maintain remote work practices even as states slowly ease restrictions. Why? It’s working, and the workforce is getting used to it.

The coronavirus pandemic may yield a transition of office workers from crowded city properties to smaller suburban offices, per a report by NuWire. However, this trend existed before the arrival of COVID-19: companies were already adopting flexible work policies to reduce costs and offer employees improved work-life balance. The coronavirus accelerated widespread adoption of these policies, but many may choose to keep flexible practices in place once they’re no longer required. 

City offices — once considered essential — may yield their dominance to suburban offices with more privacy, health-and-safety-enabled, and flexible leasing options. These suburb office units are closer to employees’ homes and separate from their more cloistered city counterparts. One element of this is the geographic departure of populations from dense urban areas, mainly due to their higher risk amidst a pandemic. The cultural centers and services that make cities so popular are precisely what predispose them to higher infection risk. 

Many employees are reporting improved creativity and productivity when working from a home office, free from the distractions of sidebar chats and noisy floor plans. A reduction in commute hours also equates to more hours available to work. Yet companies don’t want to fully relinquish the unique collaborative creativity that in-person social interactions inspire. In this way, the coronavirus highlights the benefits of flexible work policy and the benefits of well-designed work environments. 

Safety and well-being will be of utmost priority for employees, per a report by CBRE, and employers have a responsibility to maintain specific standards of hygiene as offices open. As such, owners of office buildings will need to make tenants and employees feel secure with processes like improved air filtering, enhanced cleaning, and additional security measures relating to health.

It’s likely that suburban satellite offices will play a vital role in this adoption, as may larger units with the square footage to accommodate social distancing. Spacing out desks, assigned work seats, cohort scheduling, and other physical office redesigns to increase physical distance will be needed in office settings. Newer, more environmentally friendly buildings may see increased demand, while older units may have to shoulder the cost to update and meet tenants’ safety demands.

Internally, data from Crexi’s user activity shows a 5% increase in office searches with over 34k queries in May. We suspect investors are looking to capitalize on the transition and provide alternative office solutions to businesses, while tenants nearing the end of their leases are seeking safer cost-effective options. In particular, office sectors such as medical offices may migrate to smaller neighborhoods as demand for medical services and a backlog of patients swell post-COVID.

The transition from workplaces and the adaptation work-from-home policies will cause the office asset class to suffer slightly in the economic toil of coronavirus. Still, it’s far from spelling death for the sector, and it’s far too early to tell the long-term changes. In time, positive growth opportunities will emerge in the space for investors who observe and capitalize on workplace trends as they reveal themselves.

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Shanti Ryle
Shanti Ryle

Content Marketing Manager

Shanti leads Crexi's content marketing strategies with 7+ years of content development experience, creating everything from blog posts to award-winning podcasts. Previously, she worked on content teams at Snapchat, Weedmaps, and HopSkipDrive as well as developed copy, articles, and media for freelance publications.

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