Imagining Office Space in a Post-COVID-19 World

Cubicles had been on the way out during pre-coronavirus times. Open office designs were en vogue. Businesses wanted to see employees mingling in open spaces. Knock down the walls and foster collaboration. That was the thought then. Now, cubicles and enclosed personal spaces don’t seem so bad. 

COVID-19 has changed many things in a short amount of time, including the acceptance of work-from-home arrangements. Companies that had a dim view of remote working policies have warmed to the concept. Others, including Twitter, have gone all in and are letting employees work from home permanently.

The pandemic’s immediate impact on office environments is relatively clear. But figuring out what happens next and predicting how offices will look and operate in a post-COVID-19 world is tricky. 

At the moment, the office space real estate market is bleak. During the second quarter of this year, there was 13.6 million square feet of unoccupied office space, causing the net absorption rate to drop into the red for the first time in a decade. The national office vacancy rate was nearly 12%,  according to Colliers International. 

The global commercial real estate services firm recently issued a report that looks at how the pandemic might leave its mark on the future US office market. Colliers predicts, in part, that tenants will be seeking more flexible lease arrangements while also looking to diversify their office spaces. 

For instance, a business might shrink the size of its downtown headquarters, open suburban hubs and lease more flexible or shared office spaces. Meanwhile, firms that offer shared offices, such as WeWork, are reducing the capacity of their workspaces and altering the layouts in response to coronavirus concerns. 

As for flexibility, a recent Colliers survey showed that 44.5% of respondents said they would seek more flexibility built into traditional leases, but without material changes to lease term lengths. More than 26% expected to rely more on flexible workspaces. 

“Tenants are evaluating their options for space with a lens for reducing long-term obligations while generating cost savings,” Kevin Morgan, northwest regional president for USA Brokerage, stated in the Colliers report. 

The firm also anticipates that the market could see growth as a result of companies relocating overseas operations stateside in response to the pandemic. It also believes that the sharp downturn in the office space market won’t last as long as it did during the global financial crisis, assuming that the US dodges a second coronavirus wave. 

“The pieces of data suggest that the nation is already past the low point of economic activity and things are beginning to rebound,” stated Chris Thornberg, founding partner of research and consulting firm Beacon Economics.

Of course, demand for office space hinges largely on the timing of the economic recovery. Colliers predicts that a turnaround in the office market will begin slowly in the fourth quarter of this year or early 2021. But the firm cautions that the sector probably won’t gain real strength until late next year or “well into 2022.” 

“With businesses taking a wait-and-see approach to how the reentry into the office plays out, the impact on office sector metrics will take some time to fully emerge,” the report states. “It may take several quarters, and multiple phases of reopening, before firms can fully assess their space needs.”