Shifting Office Trends in a Post-Pandemic World

By Gary Tasman

Earlier this month, the World Health Organization declared an official end to the coronavirus public health emergency. Although most traces of the pandemic have faded, its societal impact still lingers. COVID-19 has irreversibly changed the way we shop, communicate, visit the doctor, and even enjoy our meals. We are spending more time at home and online than ever before—and this trend is certainly also reflected in our workspaces.

Three years ago, as the majority of offices across the country remained shuttered because of the coronavirus pandemic, analysts and property owners began pondering the long-term fate of the commercial office. Prior to the pandemic, fewer than 6% of the American workforce primarily worked from home, according to the U.S. Census Bureau.  In May 2020, two months into the coronavirus shutdowns, the U.S Bureau of Labor Statistics found that 35% of employees were completing their job duties from home, proving that remote work models could indeed be productive, while also providing a glimpse into the future of the changing American office.

At the time, Cushman & Wakefield |Commercial Property Southwest Florida (CPSWFL) predicted how workspaces would change, not only as the product of ongoing pandemic-related caution, but also as a result of employees’ embrace of the work-from-home model. In a July 2020  News-Press article, CPSWFL forecasted that the change in work trends would ultimately lead businesses to utilize less private space for individual offices and instead dedicate more room to public and social spaces.

The Importance of Collaborative Workspace

Why are open, collaborative workspaces important in a time when many of us complete our job responsibilities away from the office? There are two primary reasons: social capital and company culture.

While technology affords us many opportunities to remain connected, our chat rooms, virtual meetings, and cloud-based collaboration deprives us of cultural connections. A 2022 report by Microsoft noted that our social connections are suffering because of hybrid and remote work. Employees who feel connected with their teammates report higher productivity, lower stress, stronger wellbeing and job fulfillment, and have less interest in pursuing jobs with other employers. While it’s certainly possible for remote and hybrid team members to feel connected with their coworkers, it is an uphill battle. The same report notes that the majority of remote and hybrid employees have fewer work friendships, and feel more lonely than they did as in-office workers.

Maintaining a cultural connection is also challenging in remote and hybrid work environments. Harvard Business Review notes that “…just 25% of remote and hybrid knowledge workers feel connected to their company’s culture.” However, that same article notes that mandating team members to return to work has an even more negative impact on cultural connectedness.

One way to promote connectedness to both teammates and company culture is providing collaborative workspace where employees aren’t forced to meet, but instead want to meet. Social space should provide enough room for your whole team, and ideally is used not only for meetings but for special events and activities that promote cultural connection.

An increase in public and social space also offers another benefit to employers: a reduced need for total office area, and decreased facility costs. But there may be a hitch in that theory.

Hybrid Work and Office Productivity

From a business perspective, remote and hybrid work can afford businesses the ability to lease less space, offering potential savings. However, many fear that those savings will be offset by a reduction in productivity. Although remote office workers regularly report that they feel more productive without workplace interruptions, supervisors are growing increasingly skeptical.

The term “productivity paranoia” is an apt description for this emerging trend. In a Microsoft survey, 87% of employees report that they are productive at work, and productivity signals produced by Microsoft 365 use indicate this is indeed the case.  The number of hours worked are on the rise, as are virtual meetings and other activity metrics.

However, hybrid managers say they are struggling to trust their employees because of less visibility into their team members’ day-to-day work. In many ways, providing collaborative workspaces can help solve this dilemma. Employees receive the benefit of increased connectivity and managers can maintain their desired touchpoints with their teams, all while still reducing their organization’s total space needs.

Post-Pandemic Office Trends

The report Obsolescence Equals Opportunity, produced by Cushman & Wakefield, observes that “the office sector is facing a critical chapter of necessary adaptation, evolution, and recalibration.” As offices work to either relocate or reconfigure to adapt to the needs of a hybrid work model, employers are discovering the need for newer, or higher-quality space that offers more adaptable structure and a stronger in-person experience for employees. This creates a rift between supply and demand.

Entering the pandemic, Southwest Florida had balance in the commercial office market. With few employers in the region offering remote or hybrid work opportunities, the office real estate sector was right-sized.  Coming out of the pandemic, however, the balance has skewed.  While business in our region is booming thanks to a population explosion, the need for space is shrinking because employers now need less space per employee.

This trend is evident when looking at leasing data in the Southwest Florida office market.  Vacancy rates in leased office space have climbed by 130 basis points, from 13.6% to 14.9% year over year. This comes despite a 4.7% increase locally in non-farm employment, and a 6.3% jump in professional and business services employment over the same period, according to the Florida Department of Economic Opportunity.

Southwest Florida is not alone in this trend. Nationally, the once-common equilibrium between job growth and office demand has disappeared. Cushman & Wakefield data notes that for the first two decades of the 2000s, office demand and employment growth had an 85% correlation. However, since Q2 of 2020, the economy added 1.4 million office workers, while the amount of commercial office space in use has dropped more than 180 million square feet.

Could this shift be long term or even permanent?  Potentially, yes. Cushman & Wakefield’s Experience Per Square Foot survey notes that the vast majority of American office employees (83%) still prefer to work either remotely or hybrid, even as pandemic-related concerns have subsided.

Learning From the Past

This certainly isn’t the first time that we’ve seen dramatic shifts in the need for office space. The proliferation of mobile internet access and online capabilities created similar shifts in the early 2000s.  Law offices, for example, once needed significant space to house law libraries that can now be accessed digitally. Financial institutions have closed branches because of the proliferation of online banking. Even more recently, telehealth trends are changing the need for medical offices, and as noted in previous articles, retail establishments such as grocers and restaurants are reconfiguring their locations to accommodate online shopping and fulfillment demands after pandemic-related shifts. In each case the market has adjusted to the changing environment.

The experts at Cushman & Wakefield |Commercial Property Southwest Florida are attuned to our quickly transforming office sector. Whether you are an owner or user, the CPSWFL team is an excellent resource as you make strategic business decisions. Our commercial property brokers have best-in-class data, analytics, and local market knowledge to guide your decision-making. Contact us by calling 239-489-3600 or contact us.

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