Office Tenants Expect Post-Pandemic Space Changes. Landlords? Not So Much

Landlords and occupiers aren’t exactly on the same page when it comes to future space usage.

While 71% percent of commercial occupiers say the shift to remote work has fundamentally changed their long-term approach to space usage, 69% of landlords see no lasting impact from COVID-19, according to a survey of 200 tenants and 50 landlords from MRI Software and CoreNet Global.

Driving these changes will be the widespread adoption of remote working. More companies (89%) say they will be allowing remote working after the pandemic than before (66%). However, most respondents (more than 40%) still don’t know how many tenants will be required to come to the office. 

As remote work becomes more popular, 54% of occupiers say they will convert to or expand their use of hot-desking. Only 20% plan to keep assigned workstations. More than 25% expect to add space between desks or cubicles, while more than 15% plan to add breakout rooms.

As space needs change, 63% of occupiers plan to negotiate new terms, and 50% anticipate breaking leases. Forty-four percent will seek shorter renewal periods, and 29% will let leases lapse.

As they adjust to having fewer employees onsite simultaneously, 56% of occupiers say they will need less space, according to the survey report. No tenants said they would need more space to enable a lower workplace density, while 3% anticipate needing extra capacity to allow for additional collaborative areas.

Sixty percent of landlords think their tenants will need the same amount of space, while 33% expect a decline. Seventy-seven percent of landlords say tenants have not asked for changes or reconfigurations to their space.

Despite the differences, landlords and tenants are talking more. Seventy-seven percent said they increased communication during the pandemic, while 19% said it remained the same. Still, landlords overestimate the people back to work in their buildings. While 72% of tenants reported having fewer than 25% of their staff onsite, landlords believe this percentage is much higher.

Landlords and tenants also see the timing of the return differently. While most landlords say their employees will be back in Q3, most tenants see a Q4 return.

Occupiers and landlords agree about the need to adopt new technologies, with 83% of occupiers and 64% of landlords anticipate adopting new technologies. Seventy-seven percent of tenants and 68% of building owners and operators plan to expand their current solutions.

Like landlords, investors seem to be optimistic about the office asset class. That is showing up in sales figures.

April’s sale prices reached an all-time high of $304 per square foot on average—and since the beginning of 2021, 520 transactions totaling $17.8 billion have closed coast to coast, according to data from Commercial Edge. Deals in the Bay Area accounted for nearly $3 billion of the nationwide total, followed by San Francisco ($2.6 billion).