How We See The Office Industry Shaping Up

Thu, 17 Jun 2021 11:00:00 -0500

It’s an understatement to say that COVID caught everyone off guard. Households, businesses, enterprises, and even governments failed almost equally at estimating the best practices during the onset.

Thankfully, it feels like the worst period might have finished now. Now, we just need to get used to living with the current safety measures and business practices. Most importantly, we should take note of which practices might be here to stay.

The office industry is most likely going to change. It’s already shifting rapidly, and many of the new measures companies have taken will most likely remain for long after COVID is gone.

What are office investors focusing on?

Office investors are one of the best ways to assess where the industry is headed. They monitor current situations for the ideal investment. That means spotting opportunities that can provide the best returns in today’s context.

CREOnline has an interesting article on office space trends, and we can highlight their most important observations.

Locations

Choosing the right location is critical if you want to survive the market during danger. That’s even more truthful for real estate companies, as location is paramount. Office buildings need to be located conveniently if you want profitable rents.

As the real estate sector calms down, you might be able to find better offers, but also stronger competition. Additionally, social distancing and cities’ propensity to outbreaks can play a big role determining ideal locations.

Infrastructure

Naturally, solid infrastructure also plays a huge role in your property’s profitability. Maintenance and CapEx are vital factors to consider, so infrastructure condition is paramount to keep in mind when investing.

Office space usually requires specific metrics, like room space, power outlets, and proper insulation. Ideally, you want to stick with low-maintenance design, like metal and glass instead of wood.

Credit

With today’s looming recession, any company or lender should think twice about who they’re leasing to. You should always aim for A-grade occupancy in your properties. These occupants guarantee responsibility with their rent payments regardless of the times.

That doesn’t mean going for large firms. It’s easy to assess a tenant’s quality with their track record. Your priority should be having people who can pay when they’re supposed to. There aren’t many reasons to assess their occupations. It’s harder to find good tenants with the pandemic, so you should take the ones that do show up.

Timing

Timing is a crucial factor to keep in mind for any investment, and real estate isn’t the exception. Timing matters because it plays a vital role in your property’s value and your returns. Right now, buying might be difficult because of the reduced supply, so you should be mindful of when this will change.

The best way to assess whether or not you should buy is to consider cap rates. Office property should have a 7% cap rate in the market. You should never buy when the cap rate dips below that percentage.

Spreads

Closely related to cap rates, we also have to consider spreads. If you’re not an expert investor, it’s okay. Your spread is basically the difference between the aforementioned cap rate and your loan’s interest rate.

Your spread’s values can vary quite wildly. It’s measured in points, and more points mean better returns. For simplicity’s sake, you should aim for a two points minimum, which often translates into around 15% returns.

How could offices look post-pandemic?

The coronavirus crisis has reshaped countless industries differently, but there’s always one thing in common. Every firm has implemented modern strategies and software to enable remote work and customer service.

The World Economic Forum compiled several innovations that could make it into our office spaces for long after the pandemic is gone. You might see several of these coming already: co-working and hygiene are easy predictions.

That said, other solutions, like Facebook’s, could change the world forever.

AR Stations

Let’s dive into the most surprising one. Several sites have reported Facebook’s experiments with augmented reality and futuristic desks. There’s already footage of how these “mixed reality” desks work.

That’s because Facebook is planning to make remote work a free choice for its employees. Their technology is an early implementation of a new platform that can merge virtual and augmented reality to develop virtual rooms for coworker collaboration and meetings.

Just like you’d expect from sci-fi, this hub would assign avatars to every worker. We still have to wait, but it’s a great example of how the pandemic is changing office spaces.

Distanced offices

To keep things balanced, we need to remind you that office life isn’t really going to disappear. Office spaces face their own adaptation challenges, and what’s called the “six feet office” is one of the many possibilities.

Distancing guidelines will likely stay for a while as vaccine development and testing goes one. Even after we overcome the pandemic, it’ll be awhile until we can feel safe enough to forget about it.

Some of the most interesting opinions suggest a reversal. For instance, larger desks might be necessary, and simple changes like desk placemats could become standard. Similarly, office density might switch as well, opting for less open layouts.

Signs (more)

Another interesting development we might see is more markings within office spaces. If you’ve been to a grocery store lately, you’ve probably seen distance markers on the floor. These kinds of signs help people keep the recommended distance in lobbies or even elevators.

These visuals instructions might remain for office spaces as time goes on. That’s because reopening operations doesn’t mean COVID is completely gone just yet. Proper circulation is vital to ensure minimal contact, and thus risk.

Less contact

Contactless technology is a relatively new trend that’s gained lots of traction with the COVID crisis. The WEF article points towards Zaha Hadid Architects as a great example of how this technology can change our office spaces.

Their main example comes as pathways, which enable employees to walk around without coming into contact with the building itself. For simplicity’s sake, that includes automatic doors using sensors and similar commodities.

Naturally, it also includes social distancing features, like movement tracking within the building using employees’ mobile phones and notifications. More traditional approaches include wider corridors, more department divisions, and alternative pathways.

Better ventilation

Fresh air is paramount to minimize COVID’s spread. We get reminded of that every day: keeping the windows open, avoiding crowding in the elevator, and more. Given how many offices’ windows can’t open, that’s likely going to change.

If you’re stuck with filtered air, then climate control systems will become vital for any office. Improving air quality and flow can make a world of difference, and it might be easier to access as they become standard.

Larger renovations might also be possible. Open cafeterias and lobbies are possible but more expensive investments.

Dawn of co-working

Many people have experienced co-working spaces during the coronavirus crisis. Co-working spaces need to provide better hygiene and distancing, but co-working might become even more popular.

Co-working has been booming as companies adapt to remote working. As remote work becomes more accepted after the pandemic, co-working spaces could keep their increased footfalls.

What does the Center for Disease Control and Prevention have to say?

Naturally, one of the best information and advice sources is the official CDC website. Thankfully, it’s filled with guidelines for office buildings. Focusing on slowing the spread of the virus, it offers expert insight into what you can do on different areas to help your employees stay healthy.

Their advice splits into three sections, each one focusing on a specific aspect of your office space and different strategies you can take.

Protecting your staff

The first step before resuming operation is to ensure your buildings are actually safe to occupy. Of course, it doesn’t relate directly to coronavirus, yet it’s still a significant change brought by lockdown.

Building maintenance and health assessment services will see greater demand. Back to COVID, the most important evaluation is for the HVAC system to ensure better ventilation. The same is true for outdoor air circulation.

Then, you need to ensure your workplace is safe. You should assess the more hazardous areas of your workplace, where COVID is more likely to spread. Evaluate areas prone to crowding and close contact. Solutions include tightening schedules and improving communications.

The last tip in this section includes applying the control hierarchy. As a summary, you need to assess the ideal way to reduce exposure:

Isolating workers from potential hazards. For safety, use general isolation whenever possible.
Be versatile with how your resources work: remote work, providing face masks, offering daily health checks, adapting shifts, and more.

Worker education

Educating your employees is the best way to help them stay safe. You should provide expert training and resources to provide accurate and actionable information. Focus points should include signs and symptoms, hygiene practices, how to reduce contact, and other safety measures.

You can find excellent posters and signs for download on the internet. Daily notifications and emails are excellent ways to keep everyone on the same page. You should also encourage face covering, and consider remote work for workers who have trouble using the accessory.

Social distancing for elevators/escalators

These two areas are the most common areas for significant crowding, especially elevators. You should promote using stairs as often as possible, and regulate how many people can enter the elevator. Additionally, consider indicating which stairwells and sides are for going up and down.

Make extensive use of signs and indicators for pathways to make proper pathways easier to understand and indicate proper distancing. The same is true for minimizing contact with surfaces and other employees.

Additional inclusions for these areas include hand sanitizer at the entrance of the elevator, or inside, depending on the size. You can also use stanchions on your lobbies to mark your pathways.

Additional advice

The UK government also has extensive documentation filled with tips for offices. It’s definitely worth taking a look if you want more insight than what’s provided in the CDC page. It’s part of their winter plan for COVID suppression while helping the economy.

It’s basically another guide on how to build a healthier workspace, but it offers a few additional tips you can apply regardless of your location.

It’s also worth noting that it’s a bit more than a guide for office spaces. It focuses on indoor environment management, which includes offices as well as operation rooms and contact centers.

Not everyone should go to work

The most important advice there is that you should assess who really needs to go to the office. As a good rule of thumb, you should keep as many people away from the office as you can.

The public sector is more dependent on worker presence. Education and essential services are usually less effective (or simply don’t function) with remote work. Outside of their tasks, you should consult with your employees to assess whether or not they need to be in the office.

Keep in mind that some departments might work from home effectively. However, individual employees might not have the right equipment (a modern computer or good internet) to perform accordingly.

Short-term lease becoming the norm

Fool’s Millionacres also has interesting insight into upcoming trends. Mainly, there seems to be significant chances for short-term leases to become more popular than their long-term counterparts.

The main reason is the pandemic’s effects on familiar and individual income. Job insecurity is unfortunately common these days, and short-term leases provide more versatility in case something goes wrong.

These leases will likely include monthly arrangements instead of yearly ones. Even commercial tenants could join this trend, as many businesses haven’t been able to keep up with the fall in client volume.

Conclusion

COVID is definitely shaping the world as we speak, but it doesn’t have to be something bad. As long as you can plan ahead, you could even take advantage of how the industry is shifting.

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