How Office Use Is Evolving the Urban Core

The pandemic has catalyzed an undeniable change in office use, but many companies still have questions and uncertainties about how these changes will take shape and how to plan workplace strategy for the future. Urban centers have, perhaps, been the most disrupted by these changes, with the majority of office space located in the urban core. Data from Dr. Tracy Loh, a fellow with the Brookings Institution, shows that 71% of US office space is located in a downtown market. This is going to be among the biggest challenges for office users and office owners going forward.

“That represents a lot of eggs in one basket for a CRE industry that’s adapting to greater telework and hybrid work environments.  The question that this raised for me is how resilient is a city center that is dominated by one form of real estate that is vulnerable to disruption,” Jamie Henderson, head of commercial real estate at Capital One, tells GlobeSt.com.

First, companies will need to outline the true meaning of “hybrid” work, according to Henderson, but this can mean different things based on the industry and geography. “The trend line may be different in New York where the industrial composition of the sub-markets is dominated by finance (a sector with high remote viability) than it might be in a place like Washington, D.C., where the industry composition is primarily dominated by the public sector, wherein more workers would historically go to the office more often,” Dr. Loh says, adding that other jobs might find that the benefits of flexibility outweigh better productivity of an in-house environment.

To determine the format that best suited for your company, Dr Loh says that CRE leaders should be proactive in supporting inclusive and diverse social outcomes. There is a three-pronged approach to achieving this strategy: listening, engagement and measurement. Companies should begin by finding out what employees need and value in an office environment. This might include gyms, mindfulness spaces and outdoor areas, in addition to enhanced safety and cleanliness standards,” according to Henderson.

For engagement, Henderson adds that companies should “become part of the conversation from a civic perspective, engaging with community stakeholders to understand residents’ and visitors’ needs, and plan with those preferences in mind.”

Finally, measurement comes by reverse-engineering traditional stakeholder questions that address needs in underserved communities. Dr. Loh says that these include, “How big is the valuation gap between the richest census tract and the poorest tract within my region?”

“The industry can start to make strides by creatively disrupting and shifting long-standing mindsets, and continuing to develop downtowns and city centers that are dense, lively and diverse,” explains Henderson. “Our strategies must be informed by the impact the pandemic has already had on the workers who were telecommuting in 2020-21. For them, their homes evolved into multi-functional spaces, becoming not only their home and their office, but often also a classroom, gym, cafeteria and daycare facility.”

Answering these questions and developing a strategy the serves workers and the community are the first steps toward addressing this marked change in the workplace. “We arrived at the current state of downtown areas through necessary change, and it’s going through yet another evolution,” says Henderson. “Commercial real estate, even in its so-called ‘normal’ pre-COVID-19 state, was already going through multiple structural revolutions such as the increase in mixed-use development and a focus on sustainability. Today, COVID-19 is simply accelerating some of those trends as we come to the realization that ‘normal’ is something that has always been up for renegotiation.”