Coronavirus to Accelerate Office Space Evolution

Uncertainty in most commercial real estate asset classes and especially office will continue at least until next year’s spring and it’s unclear exactly what things will look like once market recovery sets in, said an author and guest on CBRE Group Inc.’s The Weekly Take podcast.

Dror Poleg — whose new book, Rethinking Real Estate, published last October and is about technology’s influence on real estate — spoke with CBRE Americas research and senior economic advisor Spencer Levy on the Weekly Take.

The coronavirus pandemic will accelerate the trends Poleg forecast in his book, including the reinvention of offices in a way that not all employees work full time at companies’ headquarters but demand different types of space depending on what they are doing and when they are doing it, he said.

Poleg isn’t forecasting a disappearance of traditional office space but more flexibility driven by customers who want offices tailored to their needs, an evolving trend for the past five years.

Employees may be going into their company headquarters sporadically but for the rest of the time work from suburban, satellite offices or their homes. Others may often be requiring different types of offices, from creative space one day to clean-cut office the next.

“So, you know, I want to access a different space every day based on what I’m supposed to do that day. So now I’m recording a podcast. I want to access to a space that is good for that tomorrow,” he said. “I’m doing focused work. Give me access to that the next day. I have to impress the clients.”

Poleg has had ventures in both real estate and technology as he was a developer in China for a decade, and before and after that a partner in a digital design agency. He also runs his own company Real Innovation Academy, which offers courses.

Long-term office leases are becoming a thing of the past. Tenants are now demanding flexibility such as short-term leases, similar to what coworking groups such as WeWork offer, and are refusing to settle for anything less than what they need and want. In that, tenants are gaining more power in the office market over landlords and lenders who are having to succumb to what customers want.

“I think that traditional capital markets have much less power than they did before. Landlords kind of saying, ‘OK, I’m just gonna keep doing what I’m doing and the bankers have my back.’” Poleg said. “I wouldn’t count on that because the money will flow very quickly to other people that know how to give customers what they actually want.”