Work from home has shifted a majority of knowledge workers–people whose work mainly places them in front of a computer and by a phone–from the city to the suburban and outer city dwellings where they are most likely to live. From the start of the pandemic, and past governmental approval for limited return to work, work from home has remained the primary setup for knowledge workers. As was reported earlier this week, 85% of these types of workers at large corporations and firms are still working from home. [1] 

To make matters worse for the mid-sized to large office landlords in NYC, while midtown lessors continue to see their tenants vacate in the midst of this crisis, Connecticut office real estate has surged, according to Bloomberg reporting. [2] Deals for office space in NYC have dropped dramatically–at least 30%–while deals for small to mid-sized office spaces in Connecticut surged more than 40%. The short-term office provider, IWG, publicized early in October that it would be closing up to 20% of its flex office spaces as many of its subsidiary locations under its Regus and Spaces brands continue to file for Chapter 11 bankruptcy. [3]

This bodes poorly for the immediate future of large commercial landlords in the short term, and could signal a great windfall in the long run for smaller commercial landlords in the less dense areas of the tri-state. Perhaps indicative of this is the fact that IWG CEO Mark Dixon called the pandemic “a black swan event,” noting that “it has severely impacted our business and presented us with unforeseen challenges.” [2] While this may be the case for many, it has certainly not been the case for all, indicating that a serious change in the office real estate market may be around the corner if it isn’t already here.

Midtown, which was once the hub of knowledge work in the tri-state area, has suddenly taken a back seat to the likes of Terrytown and Southport. Big office buildings, if they haven’t already been completely vacated due to work-from-home, are seeing tenants shift to smaller offices. More than ever, buyers want space. They want safe offices comparable to their home setups. They want access to parks and quiet, unpopulated outdoor spaces, as packed city spaces still hold significant potential for infection and spread. Along with security and a higher potential for a calmer work environment, these areas also appear to offer employees and employers work arounds for social distancing measures restricting collaboration imposed specifically in NYC.

In London–which is under lockdown yet again–similar shifts have been reported, significantly affecting their office real estate market. As these shifts begin to occur internationally–across the pond and around the world–they seem to indicate that this pandemic is shifting the way we think about work and work spaces on an international scale. What we may begin to see when we eventually return to work is a newer, smaller, and more localized feel to the office space, a change which will certainly be welcomed by small to mid-sized office lessors looking to capitalize on a post-pandemic real estate market.

Sources: 

[1] – “Return to Office Survey Results Released – October,” The Partnership for New York City, 30 Oct. 2020, https://pfnyc.org/news/return-to-office-survey-results-released-october/, accessed 2 Nov. 2020.

[2] – Sidders, J. and Konotey-Ahulu, O., “New Yorkers and Londoners Are Ditching Cities for Suburbs,” Bloomberg, 3 Nov. 2020, https://www.bloomberg.com/news/articles/2020-11-03/new-yorkers-and-londoners-are-ditching-cities-for-the-suburbs?sref=u4bIpjiR, accessed 4 Nov. 2020.

[3] – Bockmann, Rich, “IWG looking to close 20% of flex-office NYC portfolio,” The Real Deal New York, 5 Oct. 2020, https://therealdeal.com/2020/10/05/iwg-looking-to-close-20-of-flex-office-nyc-portfolio/, accessed 4 Nov. 2020.